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Trivia Tidbit Of The Day: Part 379 -- Globalization Is Healthy.

Democrats = Economic Isolationists

There is a spectre haunting the American economy, a spectre of economic isolationism. Caterpillar CEO sums up the situation rather succinctly:

Owens said that international trade "has become a bad word" as a result of a "pronounced shift toward protectionism" in the U.S....

"There are no politicians who have enough knowledge or courage to try and educate the public. Instead, they're fanning the flames of public apprehension…creating adverse feelings toward trade," Owens said.

Indeed, the new Congress is likely the most hostile to free trade in generations. Yes, generations. Plural. Already, the United States has reneged on the Open Skies Treaty. Already, free trade agreements that have taken months or even years to negotiate may now be tossed into the trash heap. The New Protectionism means that Democrats "seem to have a ‘go it alone' attitude at a time when we need the nations of the world on our side."

Republicans share some of the blame. Rather than sticking up for free trade, many have taken the easy way out in the short run, avoiding the issue time and time again until-- in the long run-- the debate is lost.

The fact of the matter is that globalization has contributed to falling inflation around the globe:


Globalization has also contributed to declining interest rates:


This correlation is not arbitrary, either:

Since the mid-1980s, fluctuations in real GDP growth have declined roughly 35 percent from levels seen during the 1950s to 1970s.
When economies are more interdependent, booms and busts may become muted as excess demands in one part of the globe are filled by excess supplies in other parts, and vice versa. The economy’s equilibrating mechanism can dampen local shocks better when connected to a large market of diversified sectors with integrated flows of goods, services, financial capital and people than when the shock must be borne entirely locally. By helping stabilize the business cycle and enhance investors’ confidence about future economic stability, globalization reduces the real component of long-term rates and thus cuts risk premiums.

Free trade means that consumers can get more bang for their buck. It means consumers have access to better-- and a better variety of-- goods. Free trade means greater economic growth (.pdf):

Over the past four decades, total world trade (exports plus imports) as a percentage of global GDP nearly doubled from 24.3 percent in 1960 to 47.2 percent in 2003. This trend has been accompanied by a more than doubling of global per capita GDP from $2,622 in 1960 to $5,786 in 2003 (in constant 1995 U.S. dollars).

The more open an economy is to trade, the higher the GDP (.gdp):


Moreover, a "trade not aid" policy would not only be an efficient way to help those in developing countries, reducing trade barriers would also boost the American economy quite directly:

A Univer­sity of Michigan study concludes that reducing agri­culture, manufacturing, and services trade barriers by just one-third would add $164 billion, or about $1,477 per American household, annually to U.S. economic activity.

Free trade unequivocally has tangible benefits in the short run and the long run. If we withdraw from the global marketplace and fall into an era of economic isolationism, our nation's greatness will suffer.


Previous Trivia Tidbit: Education Inputs & Outcomes.

Posted by Will Franklin · 7 December 2006 10:42 PM