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Globalization and the challenges of our youth
Sunday, 14 October 2012 12:23

This is the text of a speech that I delivered to a group of students at Tokyo's Keio University on 13 October, 2012.

When I started my international career in 1986 at the Organisation for Economic Cooperation and Development (OECD), the word globalization was never used, for the simple reason that the global economy was not yet globalized.

It was divided into three distinct groups -- advanced, communist and developing countries -- which were very weakly integrated, even if Korea, Taiwan, Singapore and Hong Kong had already started their dramatic rise.

And when my mother visited West Berlin in 1988, a tourist guide told her that the Berlin Wall would not last forever.  It might come down in some 30 or 40 years time.  To the surprise of most, the Wall did come down, just one year later, in 1989, and allowed much of the former communist world to join the global economy.

Somewhat curiously, it was around this time that a whole series of events would occur to lay the foundations for the creation of a truly global economy, "economic globalization".  Many Latin American countries emerged from their debt crisis, opened markets and stablized their economies.  South Africa abolished apartheid.  Following the 1989 Tiannamen Square events, Deng Xiaoping relaunched China's reform with his 1992 "Southern Tour".  The euro is also a child of the post-Cold War period.  It was driven by the desire of European countries to firmly anchor the enlarged Germany into the Europe Union.

This progressive creation of a global market, together with the information technology revolution, laid the foundation for a almost two decades of strong economic growth and poverty reduction.  This was especially the case in Asia where good education systems, and strong and effective governance were also key elements.  And the strong demand for natural resources provided an historic boost to growth in Africa and Latin America.  At the same time, blind faith in free markets drove deregulation in financial markets, especially in the United States and the United Kingdom.

US Chairman of the Federal Reserve once called this period as "The Great Moderation" and OECD Secretary-General Donald Johnston referred to it as the "Age of Globalization".  And amidst the many debates over globalization, we came to realize that globalization was multidimensional.  In addition to economic globalization, a global society was emerging together with a globalization of culture.  Moreover, we became aware that we all shared a global environment, and the management of the world depended more than ever on "global governance" through international organizations like the United Nations, International Monetary Fund, World Bank, World Trade Organisation and the OECD.

But this heady period of rapid economic growth came to a crash landing.  In the US, excessive borrowing along with weak financial regulation led to the global financial crisis.  In the European Union, a sovereign debt crisis was the result of a poorly designed European Monetary Union, which lacked the necessary fiscal and banking unions, and included some countries which were not ready to share a common currency.

And while some Asian countries may have initially adopted a tone of superiority vis-a-vis the plight of the West, the crisis has also exposed deep flaws in Asia's economic development model.  There has been too much reliance on US and EU export markets.  Income gaps are widening between rich and poor.  There has been immense environmental damage, and a deterioration in corruption and quality of governance.  And the weaknesses in regional cooperation have only been highlighted by recent territorial disputes.

Was globalization responsible for these crises?  Many argue that excessive international borrowing by the US fuelled its debt-driven growth.  But what is certain is that while globalization had been good for everyone on the upside, it is now dragging everyone down, including Asia.  The effect on international trade, investment and finance has been strong.

A better managed globalization must be part of the solution to these crises -- the wealth-creating potential of globalization is undeniable.  Thus, governments must do a better job at resisting protectionist pressures, and restarting trade liberalization.  They must also make more progress on developing rules for global finance.  Unfortunately, there is much work to do at home to digest the effects of the crisis, and make the necessary reforms for the future.  Both the US and the EU have been sluggish in responding to the immense challenges they face.

In these circumstances, the world economy may not return to normal conditions for another decade or more.  We have seen a global financial and economic crisis transform into an employment and social crisis.

So this is the world that you, our youth, are inheriting today.  My generation should have left you a world in which you could live better than me.  But you are inheriting a world with poor job prospects, massive levels of debts in many countries, and large burdens of supporting the health and retirement costs of ageing populations.

This is also a world where the global climate may be changing faster than most think, and where the international community is making little serious progress in tackling the challenges of mitigation and adaptation.  And here in Asia, we have a region whose economic growth and poverty reduction has beaten all world records, but which is bristling with tensions between neighbors.

What are my recommendations for you in the face of this bleak outlook?

Obviously, your studies are of critical importance.  All the evidence shows that the quality of your education is key to your future success -- all the more so given the very challenging context of today.

In addition to your education, you must aspire to becoming a global citizen.  Globalization will not go away, and you will need to be globally operational.  We all live in a global society and your future work -- whether it be in government, business or civil society -- will no doubt work in some area of the global economy.  This means that you will need to know foreign languages, understand foreign cultures, and develop cross-cultural skills, especially for negotiation.  In short, you will need a global mindset.

In this context, you have already made a good start by choosing to study at the distinguished Keio University, where you are now part of an important global community.

Hopefully your spirit of global citizenship can inspire your governments to take more seriously issues such as climate change.  As US President Obama once said, "Partnership and cooperation among nations is not a choice; it is the one way, the only way, to protect our common security and advance our common humanity".

As members of society's future leaders, you should also seek to contribute to solving problems like global poverty which sadly afflict too many people in today's world.  In other words, as global citizens you have global responsibilities.  There are many ways that you can do this.  For example, the Japan International Cooperation Agency has its program "Japan Overseas Cooperation Volunteers", and many other countries have similar programs such as the US Peace Corps.

Please don't think that global citizenship is a strange revolutionary concept.  Way back in the year AD 220, Greek philosopher Diogenes Laertius said “I am a citizen of the world”.  And more recently in AD 1776, the American revolutionary Thomas Paine said “The world is my country, all mankind are my brethren, and to do good is my religion”.  These and many other thinkers should be a source of inspiration to us all today.

Lastly, it will be important for you to become politically active.  Our political classes need to understand your desires and frustrations, and to have your inputs.  If not, they could pay the price through social instability resulting from your frustrations.  Further, your open minds and idealistic spirits could help solve the many "neighborhood-territorial problems" in East Asia.

For your own sakes, you also need to participate politically.  You are inheriting the legacy of political decisions made today.  As IMF Deputy Managing Director Nemat Shafik said last week in Tokyo, part of the reason that governments keep pushing today's problems into the future is because youth is not complaining.

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