Andrew Leigh

ENGAGED EGALITARIANISM: REINVIGORATING GLOBALISATION IN THE POST-COVID AGE

The Canberra Times, 1 February 2021

Pandemics increase our fear of foreigners and lend power to the isolationists. COVID-19 has empowered those who believe in shutting out the world, and made life tougher for those who believe in the benefits of engaged multilateralism and diverse multiculturalism. Not since the twenty-first century began has there been a better time to be a racist, xenophobe, protectionist, chauvinist, or jingoist.

But just as the cost of coronavirus has been disproportionately borne by the most vulnerable, so too a retreat from global engagement would hit disadvantaged people the hardest. A more closed economy means slower growth, which in turn means that unemployment will stay higher for longer. Less overseas investment will constrain productivity growth, limiting potential wage rises. Weaker international institutions will slow the rate at which vaccines flow to the world’s poorest nations. Nations that depend on remittances and foreign aid are especially vulnerable in the face of a downturn.

Capturing the benefits of globalisation for the most vulnerable requires more than a laissez faire willingness to let the market rip. It requires a tax system that ensures multinational firms cannot dodge tax, an education system that equips people to thrive in an open economy, a targeted safety net that reduces poverty, and international institutions that focus on the wellbeing of workers, not just shareholders. In short, it requires ‘engaged egalitarianism’ in trade, aid, investment and migration.

Since the Whitlam Government’s 25 percent across-the-board tariff cut in 1973, successive Australian governments have recognised the benefits of trade liberalisation. Like the Goods and Services Tax, tariffs tend to be regressive taxes, meaning that they eat up a larger share of the incomes of low-income households than high-income households. Growing up in the 1970s and 1980s, I remember the price of children’s school shoes being a significant cost for my middle-class parents. Today, clothing and footwear prices are considerably cheaper.

Economist Paul Krugman once pointed out that we can think of trade as akin to a magical machine that turns our exports into imports. We fill ships with iron ore, wheat and gold. They return laden with furniture, trucks and smartphones. The ‘magical trade machine’ delivers to low-income households a wider range of products, at lower prices.

Rather than lambasting ‘negative globalism’, engaged egalitarianism demands that Australia plays a more active role in campaigning globally for trade liberalisation. Within APEC, we could press for agreements that countries will not impose additional trade restrictions on food and essential medical supplies. In the World Trade Organisation, we ought to be encouraging a comprehensive, long-term solution to the breakdown of the dispute resolution process.

Coronavirus could worsen global poverty through a range of channels. With inadequate hospitals and too few health professionals, developing countries struggle to test and treat victims of COVID-19. One study estimates that the share of employees who can telework is around 40 percent in Finland, but just 5 percent in Mozambique. The Pacific is among the most vulnerable regions in the world to COVID-19.

In the past seven years, Australia has slashed development assistance by more than $11 billion. Overseas development assistance has fallen from 0.33 percent of gross national income in 2013-14 to 0.19 percent in 2020-21. As a share of the economy, Australia aid is at its lowest level on record. Our stinginess is starting to show. National security experts have pointed out that aid cuts are damaging Australia’s ability to exert soft power in the Asia-Pacific. And when climate change is an existential threat to some Pacific states, it doesn’t help that Australia is a global laggard, as demonstrated by our last-place ranking on climate change policy in the 2020 Climate Change Performance Index.

Australia’s reliance on foreign investment dates to the earliest days of European settlement. Throughout Australia’s history, investment from Britain, the United States, Japan and China has helped fuel economic growth. Foreign investors don’t just bring cash, they also contribute know-how. British pharmaceutical firm AstraZeneca has been operating in Australia since 1957, carrying out research and development with local medical researchers, and currently employing around 900 people. Foreign investment can also provide competitive pressure. Aldi’s entry into the supermarket industry caused Coles and Woolworths to lower their prices.

Foreign investment can also help reduce trade conflict, by giving foreigners a stake in the success of the Australian economy. Australian National University economist Adam Triggs points to the example of Indonesia, which for years restricted beef exports from Australia. But as Indonesian firms invested in the Australian cattle industry, Indonesia’s incentive to curtail our beef exports has been substantially reduced.

In recent decades, investing in better industrial machines, newer computers, and more efficient offices increases the amount that each worker can produce each hour. So if we want fatter pay packets, foreign investment can help.

When it comes to migrants, it’s too easy to forget that those who come to Australia bring not just a mouth to feed, but two hands to work and a mind to inspire. One-third of Australia’s Nobel laureates – including Canberra’s Brian Schmidt, as well as J.M. Coetzee, Patrick White, and Bernard Katz – have been immigrants.

Over the past seven years, the Morrison Government has stymied some forms of permanent migration and made it more difficult for permanent residents to gain citizenship. Prior to coronavirus, processing times had blown out, and immigration visa queues had become so long that they would make a Soviet commissar blush. Meanwhile, temporary migration grew – partly because international students flocked to our universities, but also because temporary skilled work visas have been allocated to unskilled occupations.

Temporary workers have also been placed in vulnerable situations. If students work too many hours, they can be deported. If working holidaymakers do not complete sufficient time working for a regional employer, their visa will not be extended. One report described conditions faced by some temporary migrants as a form of ‘modern slavery’.

When the pandemic recedes and immigration resumes, it will provide the chance to fix some of the problems in the system. It may be worth considering additional protections for temporary migrants who report abuse by employers – akin to the protections available for spousal visa applicants who are the victims of family violence.

As a share of our population, few countries have successfully welcomed as many migrants as Australia. As one of the largest recipients of refugees from camps managed by the United Nations High Commission on Refugees, Australia could even play a role in brokering a better global approach to managing asylum seekers. Yet this will only be possible once the remaining few hundred asylum seekers are resettled from Papua New Guinea and Nauru.

Globalisation has shaped our nation for the better. With 1/300^th of the world’s population, Australia stands to benefit from being connected, through trade, aid, investment and migration. If our nation rejects the benefits of openness, we will end up poorer and more unequal.

Conversely, an engaged egalitarian approach reflects Australia’s values and our history, and offers a bright future for our nation and the globe.

This is an edited extract of an article published in the Australian Fabian Review. Andrew Leigh is the federal member for Fenner.

ENDS

Authorised by Paul Erickson, ALP, Canberra.