Peter Costello


Address to the Rotary District 9800 Conference



22 MARCH 2001
7.30 PM

Earlier this year I met a delegation of Rotary members from the Polio Eradication Taskforce. They told me about the program under which Rotary International, in partnership with some other organisations, is conducting a program to eradicate polio from the world by 2005. The Americas, the Western Pacific (including China) and Europe are now polio free. If polio can be eliminated from the twenty remaining endemic countries, some on the Indian sub-continent and some in Africa, it will be eliminated from the world and no child will ever again suffer the disease. This visionary plan is to rid the globe of polio. If it exists nowhere, it can’t be transported. It will be eliminated.

Ridding the world of a disease which has caused so much suffering requires strong international cooperation and is spearheaded by international organisations such as Rotary, the World Health Organisation, UNICEF. These are organisations with global reach. This is a global health care program. The capacity to reach into every nation in the world, in this case for good, is an example of globalisation. This kind of thing could not be done in previous generations.

You might think it strange to hear me use the word globalisation in this context. Globalisation is normally used as a "boo-hiss" word these days. It is generally invoked to complain about something – some area of economic hardship or some social malaise. In the health area globalisation – the capacity to act internationally through multinational institutions and to reach all the world’s people – can be used for great good.

Globalisation is a description of the way in which the lives of citizens in different countries all around the world can be affected by other people, or governments, or corporations, or decision makers – how the people of the world are much more closely connected these days. Principally they are connected because transport between countries is much faster and more available and communication between individuals around the world is faster and more available than ever.

The telephone which first connected suburbs now connects the world, emails have replaced faxes which allow instantaneous communication around the world, and citizens around the world draw on common knowledge banks and exchange common knowledge across an internet which now literally wires home to home, office to office, business to business, and business to consumer right around the world. Media companies keep us informed of events around the world as they are happening in real time.

I remember in my childhood whenever a neighbour or friend went somewhere exotic they would take photos and come home to show the neighbours who would gather for a ‘slide night’. This was a way of showing us what other places were like, places we had not seen and didn’t expect to see. I cannot imagine any children attending slide nights these days. They can recognise streets in New York or Los Angeles from film sets or computer games, most of the locations of the world are frequently displayed on television. All of this instantaneous communication has taken a lot of wonder out of the world, but you will never go back.

I want to suggest that ‘globalisation’ is a process, it is not a value. It describes what is happening. In some cases this process can be a force for good – the elimination of polio. In some cases it can be a force for ill – the export of extreme political views. But ‘globalisation’ is not a value any more than ‘telephone’ is a value. It is a process and it will have good effects and bad effects. Railing against globalisation is like railing against the telephone. Railing against an outcome which may have occurred as a result of all these changes in travel and communication and inter connectedness may make sense, talking about how it can be harnessed or moderated for other goals makes a lot of sense, but in itself these technical changes are not values. And what is more they are not reversible.

I think that one of the things that is worrying people about this process is the effect that it is having on the nation state. The powers of a nation or a national government as a consequence of these developments seem to be much more limited.

Many things are now influenced by decisions taken at an international level, for example, allowable greenhouse gas emissions can determine how much land clearing is allowed, or the ability of a national government to raise money and the costs of doing can depend on international credit rating and confidence in its economic policy. Governments seem to have less room to manoeuvre and if they have less room what hope have individuals? This leads to a sense of powerlessness. Whatever the strengths or ills of the nation state at least people (in a democracy) get the chance to vote the leaders in and out. They do not get the chance to vote in or vote out the people who staff the international organisations or national decision makers in other countries whose decisions have real effects upon their lives.

Tonight I would like to consider this question of globalisation and national policy in the context of the Australian Federation.

As you know we are celebrating 100 years of federation, this year, the federation which created the Australian nation. In a real way the modern Australia was created as a consequence of globalisation. Because of its location in the Southern Hemisphere, so far from Europe, Australia was not discovered by European explorers until much later than they discovered other lands for future colonies such as North America and South America. It was not discovered until such time as transportation had improved and scientific knowledge developed to such an extent that ships could navigate from Europe to the southern Indian and Pacific Oceans.

European settlement came to Australia when a great global power – Britain – decided to settle a colony in New South Wales. This was done when transport had improved to the extent of being able to sail colonists (and convicts) around the world and when it was possible to maintain some kind of governance in the colony connected to the administrative centre of the Empire thousands of miles away.

Australia was established as part of one of history’s great Empires – the British Empire. Like me, you probably grew up with a school atlas which showed the British Empire starting from Britain across the sub-continent to Australia back up to Canada, all coloured in red. This was the great Empire on which the sun never set. And the early part of Australia’s modern history is the story of the colony of a global empire. As we know in 1901 six colonies federated to form a nation. Over the course of the last 100 years we have seen that nation moving continually to greater independence and separation from the Empire.

For example, when Britain declared war on Germany in 1914 Australia was automatically at war because the declaration was on behalf of Britain and its Empire. Australia was in a curious position – on the one hand it was a part of an Empire, fighting as part of the Imperial Force, but on the other hand it was an Australian Imperial Force.

War time Prime Minister Billy Hughes said, "A man may be a very loyal and devoted adherent to and worshipper of the Empire, and may still be a very loyal and patriotic Australian".

Australians commenced the war as imperial forces under British command and in many cases were used to fill up regiments or battalions in conjunction with the British Army. It was not until 1917 that ANZAC troops served for the first time under unified Australian command on the Western Front initially under Field Marshall Sir William Birdwood and then under Sir John Monash. All five Australian divisions were grouped into an Australian Corps for the first time. Never before had all Australian troops served under a unified Australian command and never before had each of the individual divisions been commanded by Australian soldiers. By the end of the war there was a feeling that although the soldiers were part of Empire they were unique and distinct and they wanted their own separate commanders. It was under Australian command that ANZAC troops had the famous victories at Hamel and Amiens on the Western Front breaking the German line in 1918.

As the decades passed the ties of Empire receded – with the appointment of Australian born Governors-General, the Statute of Westminster and its adoption in 1942, the establishment of Australian citizenship, and later the abolition of appeals to the Privy Council. The story of much of the last hundred years was emergence of independent nation from the colony of Empire.

Incidentally this is not just true of Australia, the twentieth century generally saw the emergence of independent nation states and nationalism. In some places like the Balkans this is continuing to this day.

The point of this is that the story of the last 100 years has not been a loss of national sovereignty but an assertion of national sovereignty and increasing public support of national sovereignty notwithstanding the ambiguous result in the Republic Referendum of November 1999.

Let us now switch to the economic focus. A large part of Australia’s wealth is and always has been based on international trade. A great deal of Australia’s wealth came in the 1850’s and 1860’s with the gold rushes. Gold was a commodity to be mined and sold on world markets. Similarly the development of the mining industry in lead, silver, iron ore etc. was the exploitation of resources for world markets. Mining was always an internationally exposed industry in Australia. It was never protected by tariff. The Australian mining industry was always exposed to international trade and it survived and prospered only because it was world class and leading edge in terms of technology and investment.

Similarly the development of agricultural industries, particularly the wool industry, was a result of international trade. When Australia rode on the sheep’s back it was not because the domestic production of wool was being sold and consumed in Australia. It was because this was a commodity produced for global markets. And the industry survived and prospered because no one in the world could do it as well.

Australia’s economic development has always been reliant on international trade. And its investment has always relied on international investment starting with the financial houses of London which invested in companies and formed enterprises in the colonies in the 19th Century. Even today Britain is (narrowly) the second largest foreign investor in Australia (U.S. 27%, U.K. 26%, Japan 7%). Suggestions that somehow Australia is threatened by foreign investment or threatened by trading into international markets are so wide of the mark. Australia is only here because of foreign investment, and the industries that we know are here because of foreign investment in Australia and successful trade on world markets.

But people want to know that their national leaders are batting for them. Other countries are batting for their own national interest. And we should bat for ours. We must bat with an eye to our interest in both the short term and long term and we should do so intelligently.

In the past we have seen local and national producers selling into world markets. Now we see a process that is leading local or national producers to want to consolidate to become world scale to sell into world markets. I will take as an example here the recent announcement of BHP and Billiton. BHP has always sold on world markets. Now it wants to get larger economies of scale, indeed to become the world’s largest mining company, to sell onto those markets. For the largest mining company in the world to be located in Australia is a good thing for this country.

Companies that have assets and employees located all around the world are never really located in one place. They do some things in one country and others in other countries. To the extent that they have a ‘home’ it is where the Head Office is located and mostly the location of the Head Office is identified as the place where the Chief Executive lives.

One of the things the BHP Billiton partners said was behind their proposals was ‘access to capital markets’. This is something you frequently hear from large companies. What it means is that a company which wants debt or equity to invest has to get that from somebody else’s savings. These days these savings are held in pension funds or superannuation funds. The amount of savings available depends on the living standards (you have to be reasonably well-off to have savings) and the scale of population that has them. The large populations of reasonably well-off people live in the Northern Hemisphere, principally in Europe and North America. Access to capital markets mean being able to access the savings of North Americans and Europeans, it may mean through instruments on the New York Stock Exchange or the London Stock Exchange, it may mean through bond markets, or it may mean attracting northern pension funds to invest down in Australia.

Geoffrey Blainey coined the famous phrase in writing about Australia, ‘the tyranny of distance’. The tyranny of distance is being overcome by international improvements in transport and communications. But there is a still a distance between Australia and the large world capital markets. As a result Australian companies, particularly those that want to expand internationally, have a pressure to gravitate to the institutions of the Northern Hemisphere. If we want the savers of the Northern Hemisphere to bring their saving here we have to make sure our capital markets function as efficiently as possible to stay in the game. The Australian Stock Exchange has led the world in technological developments, our Corporate Law is probably state of the art and the IMF has described our system of financial supervision as ‘path breaking’ and recommended it as a model for other countries.

But we are still a country of 20 million people in the Southern Hemisphere a long way from the affluent population centres of the Northern Hemisphere. The North American Free Trade area now has some 300 million people. The European Union now has some 372 million people. These population centres provide large markets for the sale of goods and services, they provide large markets for raising capital. From an economic point of view a larger population is an advantage. Now, it is unthinkable that Australia would ever have a population of that dimension but you must bear in mind that with our comparatively small population we are just going to have to do things better and better and run harder and harder to keep our place amongst the countries of the world.

This process of "globalisation", the improvements in transport, communication and technology which are linking people and businesses and lobby groups and governments around the world has been going on a long time. It was transport and communication advances that led to the founding of Australia and which gave it great industries in mining and agriculture and today in financial services and tourism. And this process can be a force for good or for ill. Some things we will like and some things we will not. But we will not stop the process. We can try to direct and harness the outcomes.

One great outcome from the possibilities now with us would be the elimination of polio.

When Paul Harris founded Rotary in Chicago in 1905, he did so with the idea of finding within a large city the kind of friendly spirit that he knew in the villages where he had grown up. He sought the friendliness and tolerance he found in the Vermont of his youth.

This organisation dedicated to restoring the spirit of the village is now multinational. Rotary itself has over 1.2 million members in 29,000 Clubs, in 161 countries around the world.

Is Rotary, a globalised service organisation, an example of the ills of globalisation? Of course not. It is a great force for good.

Can we make other global developments work for good? Of course we can. Economic growth is still the best poverty-buster yet invented, and in our part of the world – East Asia – has halved the number of people living in extreme poverty in less than 2 decades.

But will these developments always work for good? No they won’t. They will have to be harnessed, directed, and in some cases steps taken to prevent anti-social outcomes (witness the Government’s steps to curtail interactive gaming). These developments have speeded up the time between action and result and spread the consequences much wider. Accordingly the capacity for good or ill outcomes has been leveraged considerably. The stakes of getting things right are that much higher.

22 Mar 2001

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