Don’t Blame Globalization Written by Phil Murray Monday, 10 November 2008
In Globalization (Greenwood Press, $44), Donald J. Boudreaux, chairman of the economics department at George Mason University, intends to help us understand worldwide free trade. Copyright 2008 American Institute for Economic Research
The author begins by documenting the many benefits of globalization. Chief of these, he writes, is that people who live in more open economies have higher standards of living than people who live in less open economies. But Boudreaux also shows that people around the world who earn higher incomes have higher life expectancies, achieve higher levels of education, enjoy more leisure, drink cleaner water, and breathe cleaner air.
The author also refutes the claim that economic growth increases income inequalities. He cites a study that concludes that poor people in countries with a high average level of income tend to have higher incomes than poor people in countries with a low average income. Put simply, life as a poor American is better than life as a poor Cuban. “Today, ordinary citizens of modern open economies enjoy nearly as much access as do the world’s wealthiest persons to the most basic, most essential goods and services,” he writes.
Free trade remains unpopular, however. American autoworkers, for instance, correctly reason that competition from foreign auto producers may cost them their jobs. Boudreaux emphasizes that “foreigners sell only to buy.”
If Americans buy cars from Japan, the Japanese may use the dollars to buy lumber from America. Or, if the Japanese buy coffee from Brazil, Brazilians may use the dollars to buy American software. The implication is that jobs lost in import-competing industries will be offset by the jobs gained in the exporting industries.
Although the author acknowledges the misfortune of laid-off workers, he rejects the notion that trade is the source of their misfortune. To him trade has the same impact on markets that technological progress and entrepreneurial innovation does: It offers consumers a better way to get what they want.
Boudreaux also strives to correct the view that a trade deficit is an “unfavorable” balance of trade. The U.S.trade deficit, he writes, results from the fact that foreigners buy American assets as well as goods and services. In addition to stocks and real estate, these assets include the debt incurred when U.S. corporations or governments issue bonds. Boudreaux contends that borrowing to finance government expenditures is unwise, but maintains that foreign lending does not encourage it. He also points outs that foreign lending reduces the interest rates U.S. taxpayers have to pay on U.S. bonds.
Boudreaux is perhaps the staunchest advocate of free trade on the scene today. Globalization makes a compelling case for free trade and allays many of the concerns of ordinary people. He has set a high bar for any protectionist to write an equally effective rebuttal. Home About Research Summer Fellowship Support Us Archive Bookstore Contact Us EJW News
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I thank Phil Murray for this very nice review of my book Globalization.