There has never been a more interesting, and indeed challenging period in the recent history of our continent or the world. This period began with the collapse of the Iron Curtain. From a divided world, often on the verge of major conflict, we were transformed by the acceptance of the former communist states that they could no longer function as they had in the past. Indeed even before the fall of the Berlin Wall, in 1987, to be precise, the Chinese government had written to the GATT Secretariat in Geneva and the memorandum contained an explicit recognition that, in economic terms at least, the command economy had failed. Only free markets could provide the impetus for growth and innovation. Later, Central and Eastern Europe and Russia itself were to follow.

As President Havel once said “it all happened so quickly we did not have time to be astonished”. At this same time the European Economic Community, conscious of the malaise (commonly called Euro sclerosis) for the period since the oil shock of the early 1970s, took a new and serious step forward in the integration process which was directly linked to the effective functioning of the market economy. The “1992” project to provide free movement of goods, services, persons and capital by the 1st January 1993 was launched. So also was the project to create a single currency. Both were to succeed beyond the expectations of those of us who were in the Delors’ Commission. These projects in turn enhanced the capacity of Europe to play a fundamental role in the creation of the World Trade Organisation that came into existence on the 1st January 1995. This organization thereafter provided a foundation stone for significant aspects of the process of globalization. This fundamental role was demonstrated by the fact that the WTO became the lightening rod for those who also opposed globalization, a fact that was graphically illustrated by the riots in Seattle and Cancun at meetings of the WTO.

This brave new world has not been in existence for very long but is now facing a challenge that virtually no one really expected. The tsunami like effects of the financial crisis that have hit the world has not merely brought recession in it’s wake, but has raised even more fundamental questions about values, about individualism and about society. The advocates of the thinking of Friedman and Hayek are in retreat and J.M. Keynes is back in fashion. If the market has failed as a result of excessive reliance being placed upon self-regulation rather than a more intensive kind of external oversight, the argument goes that greed has had a part to play in the taking of risk. The realities of government responsibility for the creation of unsustainable imbalances in the global economy and property bubbles has however been made clear in many serious reports such as the Turner Report in the United Kingdom. Whatever the realities of responsibility, the fundamental questions on the nature of our enterprise system are on the table now and the answers will greatly influence the world in which you will all live and work in the future.

What are these issues? Part of the debate is around the question of fairness. The Anglo Saxon model is contended by many to create greater and greater divides between rich and poor in society. It is contended, on the other hand, that some societies particularly in the Nordic region have perfectly viable economies that function with far greater redistribution through higher taxes. Now, suddenly, there are some reversals. The British marginal rate for high income earners has jumped to 50% whereas in France, for example, it is 40%. Some of the former Communist states lower marginal rates of tax. There are many cultural and perhaps religious factors that influence these differences. In my opinion whilst changes in attitudes to egalitarianism will occur, as they have in the past, this is often a cyclical phenomenon. However, it is a good thing that we have been provided with a catalyst to examine our values. Europe, in particular, has needed to do so.

As graduates today you should not look at these uncertainties as creating a question mark around the process of globalisation or the market economy as a whole. The painful lessons of the past (including the very recent turmoil) in my opinion have not called into question either of these concepts. Whilst the World Bank has indicated that 17 of the G20 which met in November 2008 and expressed this rejection of protectionism have in the interval introduced such measures and there are numerous other example these do not suggest as yet a rethink of the fundamentals. Nor does the regrettable failure to conclude the Doha Round. The overall tenor of international debate and the statements of virtually all government leaders have rejected protectionism and attacks on globalisation. The disasters of the 1930s are not going to be repeated. So we are in the midst of a traumatic time and one which is challenging but the world is not falling in on us all. Governments have to respond not by avoiding the problems but by taking up their responsibilities to create competitivity in the societies that they govern. They will not do so with short term palliatives or diversions.

In a sense, the modern era of globalisation has repeated on a larger scale the experience of earlier waves of economic modernisation. For example, a hundred years ago about 150 children in every thousand in the US or Germany died before their first birthday. In a poor and unstable country like Mozambique or Sierra Leone today the infant mortality rate is about the same – it is more dangerous to be a baby than a soldier in such war-torn places.

The promise of globalisation is that all countries can make progress towards the rates of four or five infant deaths per thousand we see in the rich countries today. Infant mortality worldwide has dropped by two-thirds worldwide since 1950.

The point is that globalisation can’t be written off as just an opportunity for big business or for international finance. For all the problems and instabilities it involves it also offers the potential for fundamental improvements in the quality of people’s lives. Those improvements during the past two or three decades are reflected in the dramatic declines in poverty in China and India, for example.

But of course it would be naive to pretend that, particularly at this time, the economic benefits should make globalisation uncontroversial. There are competing interpretations of some of the economic evidence, so we are not dealing with matters of hard scientific fact in any case.

Any structural change in the economy causes upheaval. We are undergoing a severe one at present. Some jobs disappear and others are created. Some skills become redundant and new ones are needed. People naturally tend to be anxious about what changes will mean for them.

What is more, amongst many young, idealistic people, and amongst many scholars, there is a deep mistrust of the political or cultural aspects of globalisation. It is seen as a vehicle for the extension of power by those who are already powerful, whether that is multinational businesses, the big banks or even the United States as a whole.

Many also fear its effects on their way of life and their traditions. For all of us, our sense of identity is shaped by living in a particular time and place. It is easy to suppose that these specifics will be drowned by the tides of globalisation.

The modern process of globalisation has ebbed and flowed for the past two centuries. But the ebb tides, decades like the 1930s and 1940s, have always marked times of upheaval and violence. We should be prompted to ask now how fragile is the globally inter-dependent economy? How can we best take advantage of the opportunities it offers?

I sincerely hope all those who claim to speak for the poor people of the world have finally understood the intellectual poverty of a strategy of disrupting the international meetings which offer the governments of poor countries their opportunity to shape international policy.

It can be hard to defend globalisation robustly without sounding wilfully optimistic, and these are hardly times for excessive optimism. Even at the height of the turn of the century economic boom, in 1999 and 2000, many thoughtful people felt uneasy about the apparently inexorable process of global integration, about the financial instability and social disruption it seemed to involve. How much more uneasy about the state of the world do many feel now.

But that is all the more reason for taking globalisation further, for extending its benefits as widely as possible. There is no other route to reducing poverty or improving health and life expectancy. Like any meaningful opportunity, it involves risks. But the examples of the past suggest that the alternative, a retreat from this controversial process of creating deeper and stronger links between the peoples of the world, would be riskier still.

One of the most dispiriting aspects of our time has been the division that is increasingly evident between those in business and those in politics. You must surely engage in political debate and influence change. The advantages that you have been given demand no less.

This is the text of a speech first delivered to the IESE Business School at the University of Navarra