Closer global integration needed

Blair: 'Globalization is good, if everyone is on same page'

Jay Bryan
Canwest News Service

Wednesday, October 22, 2008

Former British Prime Minister Tony Blair warned that everything from climate change to terrorism, cannot be dealt with successfully without close international co-operation.
MONTREAL - Any impulse to retreat from a globalized economic system would be exactly the wrong response to the current worldwide financial crisis, warns former U.K. prime minister Tony Blair.

Blair - whose successor, Gordon Brown, is being hailed as the architect of a financial rescue plan largely copied in the U.S. and other industrial nations - told the Board of Trade of Metropolitan Montreal that the crisis demonstrates the need for closer global integration, not less.

Those who would pull back from global trade and financial flows are taking the wrong lesson from the banking and credit tumult, Blair said, because globalization is "a fact, not driven by governments, but by people." The challenge facing governments is to make it work better, he said.

Blair asked a rhetorical question: "Why is it that irresponsible lending in one area suddenly produces a convulsion in the world economy?" Because, he answered, all countries are now so closely linked that it isn't realistic to imagine withdrawing from the risks and benefits of globalization.

However, unlike some commentators who focus on the need for internationally co-ordinated regulatory constraints on business, Blair also pointed to the dangers of too much regulation.

There must clearly be globally synchronized financial regulation "where there is systemic risk," Blair said, referring to the kinds of risks that can go beyond one bank or institution to endanger the whole financial system. A recent example was the collapse of Lehman Bros., a leading U.S. investment bank, which triggered a collapse in confidence that bank obligations would be honoured and greatly worsened stresses on financial institutions.

However, Blair insisted that such new regulation must not be so heavy-handed that it stifles the entrepreneurship that he described as the heart of any successful economy.

Blair's comments about the financial crisis were part of a broader perspective on a more closely knit world in which, he warned, no serious challenge, from climate change to terrorism, can be dealt with successfully without close international co-operation.

Partnered with the theme of global interdependence was one of power shifting inevitably toward Asia, leaving the big Western powers with a limited window of opportunity to help define the nature of a new world order.

"Power is shifting East, and shifting East fast," Blair said.

He noted that in meetings with Chinese leaders during this summer's Olympic Games, he learned that China is now building more power stations than have been created in Europe since the Second World War and planning to open no fewer than 70 new international airports. India will soon be in a position to achieve similar spectacular growth, he said.

The lesson of this gigantic power shift, Blair said, is that the West can no longer dominate the world through sheer economic and military strength.

Instead of dictating, it must seek to persuade through the power of universal values: freedom, democracy and justice.

And to be persuasive in enshrining such values in global institutions, it must be true to them - working harder, for instance, to solve the problems of disease, hunger and poverty in the poorest nations.

Brown, who is now the official envoy of the Quartet on the Middle East, a group including the United Nations, the U.S, the U.K. and Russia, offered another example from his current work.

If there were to be a solution to the Israeli-Palestinian conflict, he said, this would be the most powerful influence imaginable in creating healthier relations between the West and the Islamic world.

Brown was speaking at Montreal's Palais des congres, at an event sponsored by the TD Bank Financial Group.