Globalisation is the key to our prosperity

By Phil O'Reilly, March 2018

Open economies tend to be built on global value chains and global investment, and encourage the mobility of innovative ideas and people.

Yet, there is currently a resounding debate going on across many countries about the value and impact of globalisation.

Unfortunately, an increasingly negative perception of globalisation is starting to define the business and political environment.

New Zealand too has joined the rhetoric. Traditionally we have been a reasonably positive nation around foreign trade and our connectedness to the rest of the world, but in this new political climate we need to be careful.

We need to make sure we don't ignore that which creates prosperity and inclusion – that is, economic competition, business growth, diversity, foreign trade, immigration – in favour of protectionism.

Governments have the most important role here. Any government that wants to promote an inclusive society must first recognise the part that business and a competitive economy play in creating prosperity and inclusion.

Otherwise we will all be less well off.

With strong evidence suggesting that open and competitive economies are the best drivers of inclusion, governments need to create the right environment for businesses to start-up, grow easily and become flexible in how they go about doing business.

This includes being able to attract investment and include talent from the most appropriate source (be it domestic or international), and being able to select a workforce from a diverse population.

Without the right economic conditions, society cannot benefit from trade and investment.

Fortunately, in New Zealand some good work has already gone in towards achieving this. A good example is the very large investment in high speed broadband infrastructure undertaken by government and the private sector over the last few years.

This vital infrastructure allows large and small businesses to benefit from global connectedness and competition almost no matter where they operate from in New Zealand.

Governments also need to ensure that the way they interact with business and society is as efficient, effective and fair as possible. This means business needs good corporate governance, including fair and equitable tax systems.

There has been criticism over the last few years of some businesses appearing not to pay their fair share of tax.

While the OECD has been working on possible solutions to the issue, it is still important for governments to ensure that domestic tax systems are conducive to businesses paying their fair share of tax.

Any government keen for diversity must also implement domestic policies that prepare people for change and disruption by equipping them with better skills and providing them with better opportunities for inclusion.

Business needs increased participation. This implies that the social welfare system must play an important role in enabling people who lose their jobs or go through difficult circumstances to have a real opportunity to participate in the workforce again – and the sooner the better.

It also suggests that the way in which skills are acquired should be as relevant and focused as it can be.

For example, we increasingly need to make sure that digital skills are of a high standard. Not just amongst our young people in our schools but also amongst those currently in the workforce.

In any plausible scenario about the future of work it is not the loss of jobs that will matter so much as the change in existing jobs.

Much of that change will involve digital and this suggests we need to do a much better job of ensuring that today's workers, including those who are older, have the skills and resilience to move forward in a new digital world.

We need to ensure that we are not struck with the digital divide that is so prevalent in other countries.

For example, women, older Kiwis and those living in rural and regional areas need to be given the same digital literacy opportunities as everyone else, so that they can play their part in our digital future. 

Finally we know that young, small businesses are the key engines of job growth in any economy. This suggests that we really need to turn our minds to the possibilities of entrepreneurship.

New Zealand is doing a good job in many areas here, including through a large range of tech incubators and good work coming out of our business schools, but more can be done – particularly with our young Maori and Pacifica population.  

Those who argue that inclusion can only be improved through making it harder to do business – such as restricting access to capital, making it harder to employ people, or increasing taxes on whoever in society someone feels like blaming for the negative impacts of globalisation – need to think again about the real role of business, not just as a driver of economic growth, but also of inclusion in our country.