Globalization: Between ultra-liberalism and protectionism, there is a third way

Modern globalization took off about 40 years ago. Even though it has forged a path toward new riches, it has also led to tremendous social and environmental difficulties, the so-called negative externalities. Since the 1970s, politicians looking for ways to thwart the negative effects of globalization have continuously alternated between laissez-faire and protectionism. Some have promoted erecting border walls as a way to limit social dumping and environmental damage. Others have advocated for granting even more freedom to transnational commerce, betting that the profits of increased prosperity would take care of collateral damages.

Yet, both protectionism and ultra-liberalism are blind.

One systematically favors a single nation at the risk of promoting companies that offer more expensive or lower quality products, yet not being necessarily themselves socially responsible. The other ignores the ravages caused by work conditions that sometimes seem like they’re straight out of the middle ages, as well as the conditions inflicted upon nature. This approach counts on the intervention of the “invisible hand” of the market, even though we know –for those who still doubt– that it does not exist, as was bitterly illustrated by the 2013 Rana Plaza tragedy in which 1,100 textile workers perished in a building in Dacca, Bangladesh.

Between these two types of blindness a 3rd path has emerged. It is narrow, but it’s also the only one worth defending if we hope to stem the social and environmental drifts while also sending the disastrous consequences of economic nationalism or savage capitalism back into its cave. The ambition of this 3rd type of globalization is to offer clients optimal merchandise while guaranteeing responsible and sustainable means of production and delivery. It is neither nationality nor the absence of rules that will lead to success. Rather, we must count on transparency in supply chains.

The 3rd path will be enabled by integrating field information on the social cost of goods and services directly into each purchasing act.

By taking social and environmental data into consideration all along the supply chain, a consumer will eventually become a citizen-consumer. This way, he or she will no longer buy something without thinking about it, but become conscious of his/her act. Nonetheless, this 3rd path faces major challenges. What is missing above all is a more complete view on the data about the sprawling supply networks.

Luckily, thanks to NGOs who are working on this issue, like Amnesty International detailing the problems of child labor in the palm oil sector, or the press, like The Guardian denouncing possible human rights infractions in the supply chains of Samsung and Panasonic, we now know more about the workings of modern slavery.

New technologies also bring promising new perspectives: smartphones polling workers about their wellbeing at work, drones helping in the fight against deforestation, “blockchain” transactions aiming to certify the origins of foodstuffs, artificial intelligence-based social ratings.

Legislators are also invited to promote transparency in supply networks, like California for example, who since 2012 has forced more than 3,000 companies to publicly disclose the measures they have taken to eradicate slavery in their supply chains. In France, the recently adopted due diligence law for the purchasing activities of multi-nationals goes beyond mere reporting. Instead, it aims to place French companies squarely on this 3rd path by requiring them to follow certain control procedures.

Finally, from the companies’ perspective, the large multi-national Groups have been on the third path for quite some time now, having implemented social, environmental, and ethical vigilance practices which require more transparency in supply chains. The 7th edition of the HEC-EcoVadis barometer highlights that out of the 120 multi-nationals interviewed, 88% have an ethical code of conduct for suppliers, and 62% use social and environmental auditing programs. Their principal motivation is to manage risk, ensure compliance, and protect their brands by nurturing transparency throughout their value chain. Here, transparency goes hand in hand with managerial performance.

These measures to reduce opacity and guarantee safe supply sources are indeed a type of intelligent protectionism, a protectionism that separates the wheat from the chaff. They encourage the adoption of better social proposals for and by sub-contractors no matter what country they’re in, rather than validating their questionable practices.

The worrisome rise of neo-nationalism as well as a new political resolve to undo laws requiring more transparency (see the US administration’s intention to cancel the “conflict minerals” regulations, Dodd-Frank, Section 1502) may call into question the words of French philosopher Montesquieu who wrote that The natural effect of trade is to bring peace.

Facebook founder Mark Zuckerberg is also worried, and recently published an anti-isolationist and pro-globalization manifesto. We can turn back the trend before it’s too late. Between savage liberalism and economic nationalism, let’s guide globalization onto a third path built on transparency in supply chains.

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