Don't believe this claptrap. Migrants are no threat to us

Fear of foreigners is nothing new, yet rarely has panic about immigration been so feverish. It tops voters' list of concerns, jangling raw nerves about jobs, public services, race and terrorism. The new bogeyman is a Muslim asylum seeker. Yet, contrary to tabloid hysteria, we are not being swamped with immigrants - nor are they a threat. Fewer than 10% of people in Britain were born abroad. Asylum applications were a mere 25,710 in 2005, while 15,685 failed asylum seekers were deported; the refusal rate exceeds 80%. Britain, a soft touch? Hardly.

While immigration has risen over the past 15 years, the net inflow in 2005 was still only 185,000 - 0.3% of the UK population. Headlines about 600,000 eastern Europeans arriving since 2004 are misleading: most of them have already left again and many are, in effect, international commuters who spend only part of the year here; the number staying longer than 12 months has risen by just 110,000.

So it is claptrap to blame migrants for overcrowded roads, trains and hospitals, which are largely the result of rising affluence and decades of underinvestment. On the contrary, were it not for foreign doctors and nurses, the NHS would collapse.

Britain's open door for eastern European workers is a huge success. It has proved to be a revolving door - and far from bringing Britain to its knees, temporary migrants fill vital gaps in the labour market. Mostly young and single, they pay taxes but cannot claim most benefits (6% claim child benefit), so they are not a drain on the state but a boon. Nor do they steal our jobs: the employment rate is virtually unchanged on a year ago, while average wages are up 3.8%. Unemployment has nudged up, but not because of migrants. Just as women entering the workforce did not cost men jobs, nor do foreigners: they create jobs as they spend their wages.

"Those parts of the country that are seeing job losses are not those where migrant workers are most prevalent," notes Brendan Barber, the TUC general secretary. "They will go where there are job vacancies, not dole queues" - even to the Scottish Highlands, where Poles are reviving communities that young Scots have fled. Precisely because they are more willing to move to where the jobs are, and to do dirty, difficult and dangerous work that young Britons shun, migrants have helped sustain Britain's longest-ever economic boom without sparking inflation.

Consider old-age care, the fastest-growing sector of employment. Young Britons eschew it. To persuade them otherwise would require a huge wage hike - and since public finances are strained, that implies either pensioners making do with less care, budget cuts elsewhere, or tax rises. But immigrants face a different set of alternatives: since wages in London are five times higher than in Warsaw, they are happy doing such work. This is not exploitation: it makes everyone - migrants, taxpayers, Britons young and old - better off. Where there is abuse, legal migrants have recourse to unions and the law. It is illegal migrants, victims of our callous but ineffective border controls, who are most at risk: remember the cockle pickers of Morecambe Bay.

Migrants from poor countries working in rich ones send home much more - $200bn a year officially, perhaps another $400bn informally - than the miserly $80bn western governments give in aid. These remittances go straight into local people's pockets, paying for food, clean water and medicines, enabling children to stay in school, and benefiting the local economy. Just as EU trade barriers that prevent African farmers selling the fruits of their labour in Britain are unfair, so are immigration controls that stop Africans selling their labour here.

Immigrants also make native workers more productive: nurses from the Philippines allow doctors to provide more patients with better care. They also add diversity and dynamism, stimulating innovation and enterprise, and thus economic growth: witness the buzz of a cosmopolitan city such as London. Innovation most often comes from groups of talented people sparking off each other. If they have different perspectives they can solve problems better. Look at Silicon Valley: Intel, Yahoo!, Google and eBay were all founded by migrants.

Undeniably, learning to live together can be tough. Yet closing our borders would not reduce the terrorist threat from a tiny home-grown minority, while anti-immigrant rhetoric fuels hatred towards existing ethnic minorities. While concern about entrenched segregation is understandable, the real issue is not multiculturalism, but social exclusion. Nobody is terrified of rich whites clustering in Chelsea.

As for shared values, society is broad enough to accommodate nuns and transsexuals, Marxists and libertarians, eco-warriors and city slickers - but we must all abide by parliamentary democracy constrained by fundamental principles such as freedom within the law, equality before the law and tolerance of differences. And while we fall well short of the lofty ideals of liberal democracy - discrimination is rife, tolerance limited - they are still the standards we aspire to and the basis of our peaceful coexistence.

For richer, for poorer

Dear Philippe,

Isn't it ironic that globalisation's most startling legacy is not to be fusion food, cheap flights or the web - but debt and deflation? That those of us who worried about the Third World debt crisis, are about to confront our own First World debt crises?

And would you agree that there is a certain irony in poor, developing countries going cap-in-hand to Cancun to beg favours from rich countries, when in fact these same countries are keeping the rich in pocket? According to the World Bank, developing countries are " net lenders to developed countries". "Globalisation" allows rich countries to live beyond their means (including their environmental means) and then to raid the piggy banks of poor countries for finance. The result: huge reserves of IOUs - or debt. Can we discuss how to moderate globalisaton's most damaging legacy: the coming first world debt and deflation crisis?

Ann Pettifor

Dear Ann,

I think fears of deflation are overblown: UK inflation is 3.1%. Where prices are falling - notably Japan - domestic policy failures, not globalisation, are mainly to blame. Japan is a net lender to the world - by over $100 billion a year - not a net borrower. Poor countries can, of course, choose not to tap foreign finance. Those with underdeveloped financial markets should certainly limit destabilising surges of speculative money. But long-term foreign investment in factories can do wonders for countries that are short of domestic savings and know-how.

The big issue in Cancun, though, is trade, not finance. The evidence that freeing trade boosts economic growth - and hence reduces poverty - is incontrovertible. Witness China's great leap forward since it started opening up. The average Chinese person is over six times richer than 20 years ago - the number living on less than a dollar a day fell by 150 million between 1990 and 1998, the fastest fall in poverty ever recorded. The Chinese clearly believe freeing trade is good: that's why they recently joined the WTO. Why don't you?

Philippe

Dear Philippe,

Where did I say I was against trade? Globalisation is not primarily about trade, despite smokescreens erected by "globalisers" and "anti-globalisers" alike. Globalisation is primarily about finance; about transforming the global economy, so that the "money-changers" - not the productive trading sector, now run the world.

The truth is neatly summed up in one statistic. In 1970, 90% of all international transactions were trade transactions, and only 10% were financial transactions. By 2000, 90% of all transactions were financial, and only 10% were trade transactions.

Philippe, be honest: the money-changers have taken over the temple. Trade is now just a small part of the global economy. And the result is devastating: de-regulating international capital has made it easier for rich countries to siphon off resources from poor countries.

Ann

Dear Ann,

I didn't say you were against trade: I said you were against freeing trade. Please correct me if you have changed your views. If so, it might explain why you have not contested my point that freeing trade boosts growth and reduces poverty.

Your assertion that globalisation is primarily about finance, not trade and investment, is incorrect: the volume of transactions on financial markets bears little relation to their importance. It is also beside the point. Developing countries can reap all the benefits of opening up to foreign trade and investment, while maintaining firewalls to protect them against the instability of global financial markets. That is what Vietnam has done under its policy of doi moi - and in the ten years after 1988, when it began to open up its economy, its poverty rate halved. Who said globalisation isn't good for the poor?

Philippe

Dear Philippe,

What do you mean the "volume of financial transactions on financial markets bears little relation to their importance"? This is like saying "volumes of money bear little relation to their importance". I repeat: globalisation is largely about those with money making even bigger volumes of money.

While some countries have become richer by designing, manufacturing and trading (and I am all in favour of that), it is countries (like the UK) that make money from money that have really thrived under globalisation. Of course it's good for poor countries to trade - fairly - but whether it has enriched them is open to question. China's growth numbers, as you know, are treated with great scepticism by all. And, anyway, China's is not a globalised economy - it maintains capital controls.

Ann

Dear Ann,

Do you really think it is City traders who make Britain rich? The wealth of nations springs mainly not from their financial turnover but from their ability to use technology productively. That is why globalisation in the form of international trade and foreign investment is such a good thing. New technologies spread faster; foreign competition keeps companies on their toes; countries specialise in what they do best and buy the rest for less from abroad. For sure, if you choose to define globalisation narrowly as just the free movement of hot money, it is a mixed blessing. But trade liberalisation has an outstanding record of raising living standards and reducing poverty.

Since 1980, an amazing thing has happened. Global inequality, which had been rising since the Industrial Revolution enabled the West to race ahead, has begun to fall. China, home to one in five of the world's people, is catching up with rich countries. India, where a further sixth of the global population live, has also begun to close the gap - as have many other Asian countries. Developing countries that embrace globalisation are making up ground on the West; those that reject it are falling further behind. One can quibble with the precise data, but the broad trend is not in doubt, as any visitor to Shanghai, a futuristic city that only 15 years ago was mostly marshland, can testify.

Philippe

Dear Philippe,

Of course City traders have helped make us rich. Our own goods exports are in decline, and now as a nation, we pay our way thanks to "invisibles" - making money from money. On global inequality, I profoundly disagree. Inequality numbers are very political. No institution collects numbers on income distribution. And the numbers that are collected are of incomes - not assets. The rich have assets, not incomes. The poor have incomes and debts, not assets. If you add in assets, as we do, then globalisation is generating wealth for the rich, and debts for the poor. This is the "hoover effect" - globalisation is sucking wealth from the poor, and concentrating it in the hands of the few.

Ann

Dear Ann,

Of course, the City contributes to Britain's prosperity, but it is not the main reason our country is rich. Financial services account for only 6% of the UK economy.

Global inequality is indeed hard to measure, but simple arithmetic suggests it is falling, as more sophisticated studies can confirm. Half the people in the developing world live in China and India. Both their economies are growing much faster than the US's, Europe's and Japan's. So the gap between rich and poor is narrowing. And as the poor's incomes rise, they will save and accumulate assets - just as we have done. To claim that "the rich have assets, not incomes" suggests that far from New Economics, you have no economics: assets are only valuable because they provide a stream of future income.

Philippe

Dear Philippe,

In economics, defamation is the sincerest form of flattery. So thank you. To check the facts, read the New Economics Foundation's book, Real World Economic Outlook - which includes distinguished economists and a Nobel Prize Winner.

Ann

Dear Ann,

You ask poor readers to plough through your book. I shall be much briefer: if the world followed your prescriptions, we would all be much poorer. And let's not count Nobel prizes: as you know, the overwhelming majority of economics laureates are in favour of globalisation.

Philippe

Ann Pettifor is a director of the New Economics Foundation and was a co-founder of Jubilee 2000. Email: ann.pettifor@neweconomics.org. Philippe Legrain is the author of Open World: The Truth about Globalisation.

Business doesn't rule

Progressive politics ought to be about hope: that we can create a fairer society where everyone can make the most of their potential. Yet the prevailing mood on the left is despair. Globalisation, many believe, is leading the world to rack and ruin - and there is little we can do about it. American-led corporate power is elbowing aside government and trampling on democracy.

Critics such as Naomi Klein, Noreena Hertz and George Monbiot claim that companies run the world. Their brands are colonising our minds. Their sheer size gives them clout. Their financial muscle bends elected representatives to their will. Their freedom to shift factories from country to country disempowers workers. The governments we elect connive in this, either because they are in the pockets of big business or because their power has leached away. So our votes are useless. In place of democracy, we face a grim choice between apathetic acquiescence and doubtless futile resistance.

This is dangerous claptrap. Start with brands. If they are so powerful, why couldn't Coca-Cola convince us to drink New Coke? Why does own-label cereal outsell Kellogg's? The grip of Nike shoes hardly compares with that of patriotism or love. Although some susceptible people, mainly poor kids, may unfortunately be gulled into spending money they can ill afford, this hardly means brands are conquering the world.

Brands are actually signs of corporate weakness, not strength. It is only because fickle consumers have so much choice that companies try to woo them with their branding. Monopolists needn't bother. Moreover, companies that are trying to sell an image or a reputation are incredibly vulnerable to anything that is perceived to damage them. Remember how Shell caved in to a handful of Greenpeace activists over the disposal of the Brent Spar oil platform? As companies increasingly make a virtue of being "socially responsible" - of being good to their employees, the environment and the community, rather than mere money-making machines - their vulnerability can only increase. Thus, brands, far from being vehicles for corporate global domination, give people unprecedented sway over companies' behaviour.

Corporate power is much exaggerated. Take the oft-repeated "fact" that 51 of the 100 biggest economies are corporations. It is arrived at by comparing companies' sales and countries' gross domestic product (GDP). But this double-counting inflates companies' importance, since one company's inputs are another's sales. A less misleading comparison - between companies' value-added, the difference between their sales and the cost of their inputs, and countries' value-added, their GDP - reveals that only two companies make it into the top 50 value-added creators. The biggest, Wal-Mart, an American supermarket chain that owns Asda, created value-added of $68bn (£43bn) in 2000, around the same as Chile's GDP - and less than a 20th of Britain's. Together, the 50 largest countries are 22 times bigger than the top 50 corporations.

In any case, inferring from companies' size that they are as powerful as countries is fatuous. Whereas companies have to attract workers and capital that are free to go elsewhere, countries can impose taxes and regulations: mighty Exxon Mobil pays taxes even in tiny Luxembourg. Supposedly footloose companies cannot, in fact, easily escape governments' writ: they are tied to places in many ways - by their customers, a skilled workforce or the good roads, schools and hospitals that our taxes pay for. Even if companies became more mobile, governments could collude to nab them, by cooperating over tax raising, for instance.

Companies that fail to persuade customers to buy enough for them to earn sufficient profits to pay shareholders and workers an acceptable return go bust or get taken over, whereas even failed states rarely disappear. The only "companies" with powers remotely comparable to those of states are the drug cartels: Colombia's earn billions of dollars a year, control parts of the country, have private armies and operate outside the law.

Wal-Mart seems puny in comparison. Indeed, because it faces fierce competition from other retailers, it has less scope to mark up its prices than the only shop in an isolated skiing village. Competition can constrain even the biggest companies - one reason why globalisation is such a good thing. Closed domestic markets, where national champions can cosy up to government, are much more likely to be monopolised than open global ones. So even though global companies are bigger than before, they are not necessarily more powerful. It is the absence of competition, not size, that gives companies clout.

If companies were taking over the world, you'd expect them to be grabbing a bigger slice of the economic pie. They exist, after all, to make profits. Yet from a recent cyclical peak of 12.6% of GDP in 1997, US corporate profits fell to 11% in 2000 and 9.3% in 2001 - in line with the average over the past 50 years of 10.5%. The figures for Britain show a similar trend.

Of course, companies sometimes have an undue influence on governments. So money and politics should be kept as separate as possible and government conducted more openly. Yet business has a right to lobby governments, just as trade unions, environmental groups and individuals do. This does not imply that governments are companies' lackeys.

Governments can - and do - tame the corporate leviathans. The European Commission stopped giant General Electric from buying Honeywell. The US government nearly broke up Microsoft, which is still being prosecuted by US states and investigated by the European Commission. Business has to abide by a battery of legislation on workers' rights, product liability, health and safety, environmental protection and much else. Where governments fear to tread, lawyers do not: each year people start almost 2 million lawsuits against American companies, which pay out damages of around $150bn a year. Last but not least, taxes on company profits have steadily risen as a share of rich OECD countries' GDP: from 2.2% in 1965 to 3.3% in 1999. If businessmen are running the show, they must be masochists.

The truth is companies are not running the show. We are still free to determine our future - as individuals, as groups of like-minded people and through the power of our elected governments. If people really wanted to, they could reverse globalisation - as they did in the 1930s, with catastrophic consequences. All it takes is enough votes for the Greens, Socialist Alliance or BNP.

Globalisation is a choice, not an imposition. Progressives should embrace it because it makes us richer - in the broadest sense - and allows governments to spend more on schools, hospitals and helping the underprivileged. It does not imply that Britain has to become like America: Sweden's economy is far more open than Britain's, yet its welfare state is second to none. Globalisation comes with several options: we can to a large extent pick and choose what kind of globalisation we want. Don't burn your Nikes: politics is not dead.

Dump those prejudices

Many on the left obsessively loathe the World Trade Organisation, in the way Tory Europhobes hate the European Union. Just as Brussels-bashers peddle lies about the EU, so Naomi Klein, Noreena Hertz and others slander the WTO. That is a pity. The left has warmed to the EU. Now it should reconsider its opposition to the WTO. Believe it or not, the WTO is not against social democracy.

The worst charges against the WTO are these four. First, that it does the bidding of big global companies. Second, that it undermines workers' rights and environmental protection by encouraging a "race to the bottom" between governments competing for jobs and foreign investment. Third, that it harms the poor. And last, that it is destroying democracy by secretly and unaccountably imposing its writ on the world.

Undeniably, some companies have undue influence over governments. More should be done to separate money and politics. But companies are constrained by competition and regulation - both of which the WTO bolsters. Freeing trade curbs domestic giants by exposing them to foreign competition.

Take BT. For international phone calls, where there is competition, it is just one provider among many. For local calls, where there isn't, it can hold customers and the government to ransom, most recently by delaying the roll-out of broadband internet. The only reason companies like Shell heed protests is that they face competition: if Shell had a monopoly, it could safely have ignored Greenpeace's Brent Spar campaign.

Competition is not a cure-all. Often, governments need to regulate too. And they can. It is a terrible irony that the left has lost faith in government. Governments are not impotent. The WTO itself is merely governments acting together to regulate global markets. Brussels has just blocked General Electric, the world's biggest company, from taking over Honeywell. Labour has imposed the utility windfall tax, introduced the minimum wage and ramped up petrol duty.

So much for the race to the bottom. As the fuel protests showed, the main constraint on government is public opinion, not globalisation or corporate power.

If globalisation is forcing governments to slim down, how come the average tax take in rich OECD countries has risen from 35% to 38% of GDP since 1985? Corporate taxes are a bigger share of government revenues than 20 years ago. Surveys show that skilled workers, good infrastructure and nearby customers determine where companies invest far more than low taxes and regulation.

Labour and environmental standards are generally rising, not falling. An OECD study found that workers' union rights had not got significantly worse in any of 75 countries since the early 1980s. In 17 (including Brazil, South Korea and Turkey) they had markedly improved. The same study found that pollution havens are a myth. If anything, competition is bidding up environmental standards.

Developing countries are attracting investment not by lowering their standards, but because they are making the best of their comparative advantage. This does not spell doom for British workers. Provided people are equipped with skills to find another job and are protected by a decent welfare system, we can all gain from globalisation. It makes no sense to protect yesterday's jobs at the expense of tomorrow's.

Nor is it fair. How else are the poor going to get richer? It is a funny kind of socialism that stops at national borders. Surely international solidarity means buying t-shirts from Bangladesh as well as demonstrating for debt relief. The fact that seamstresses in Bangladesh are paid less than in Britain does not necessarily mean they are exploited. They earn more than they would as farmers. And however awful conditions in a Nike factory may be, they are usually worse in a local sweatshop.

Poverty is terrible. But globalisation can help. While GDP per person fell by 1% a year in the 1990s in non-globalising developing countries, it rose by 5% a year in globalising ones. The WTO is a friend of the poor. Its rules protect the weak in a world of unequal power. Unlike the United Nations, WTO rules apply to everyone - even the United States. Costa Rica challenged US restrictions on its underwear exports at the WTO - and won. Of course, the WTO is not perfect. But it is better than the law of the jungle, where might equals right.

The worries about democracy are more well-founded. Democracy remains rooted in local communities and nation states. So it is difficult to work together internationally - on global warming or trade, at the EU or the WTO - without leaving voters feeling out of touch. But abolishing the WTO is not a solution. As we learned from the 1930s, beggar-thy-neighbour policies end up making beggars of us all. Nor are world elections to a world parliament and a world government realistic. Sixty million Britons would not accept 1,300m Chinese outvoting them. So the best option is to reform the WTO.

It is already more democratic than you think. All agreements are reached by consensus. Every country has a veto - unlike at the UN, where only big powers do - and WTO agreements are ratified by parliament.The organisation is held to account mainly through government, but also through contacts with MPs, trade unions, business and NGOs, through the media, and through its website - on which most working documents appear rapidly.

Even so, the WTO should be more open. Government should develop better procedures for informing MPs and voters about its work at the WTO and MPs could hold public hearings to reconnect the WTO with voters. If you hate capitalism, you will probably never support the WTO (although Fidel Castro does). But if, like most people, you believe in markets tempered by government intervention, you should think again about the WTO.