Letter: Multinationals might not rule the world but they affect us all

Globalisation is only a myth, as Neal Ascherson claims ("Don't be fooled: multinationals do not rule the world", 12 January), if confined to the version he admits is an Aunt Sally. His piece contains one factual error: the figure of multinationals being responsible for 7 per cent of world production refers only to overseas production by multinationals. Their total share of world production is around a third and they account for the majority of world trade. Further, he ignores the power of global financial markets to deliver instant judgement on national policies.

Only a fool would claim it would be desirable to reduce British wages to Indonesian levels, but this ignores the impact of trade with developing countries in reducing demand for unskilled labour in advanced countries, while increasing demand for the more skilled. That relatively small levels of trade with developing countries have had a significant impact on wages and employment shows how significant globalisation is, not the opposite.

Globalisation has led to a relative rather than absolute shift in power from nation states to global markets, but this has still undermined much of the post-war order. A good example is industrial policy. In Britain, as in many other countries, this has largely been reduced to offering incentives to multinationals to locate here, effectively transferring taxpayers' money to them.

Jonathan Perraton

Political Economy Research Centre, University of Sheffield