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Anti Globalists Just Don't Get It

The Best of Business Week Online: Trade

Anti-Globalists Just Don't Get It

What they say they want--fairness, progress, and justice for workers--is best achieved through free trade

A loose coalition of forces, from trade protectionists to angry anarchists, gathered in Washington during the recent annual meeting of the World Bank and the International Monetary Fund to battle a common enemy: global trade. Sadly, these protests may have an impact on U.S. policymakers at a crucial moment.

The Administration's proposal to grant China Permanent Normal Trade Relations status, easing Beijing's entry into the World Trade Organization, is in jeopardy on Capitol Hill. Yet the time to get China to embrace international trade rules is now, while it is still grasping for economic clout. China may be so big within a few years that it will be able to dictate its own terms of entry into the world system. A trade deal now would also strengthen China's private sector, which remains under assault from retrograde apparatchiks.

Almost as disturbing, the bickering could still derail legislation granting African and Caribbean nations, among the world's poorest, preferential access into the U.S. market. A free-trade deal for these regions would be a much stronger spur to economic growth than recent calls by wealthy nations for loan forgiveness, however worthy the idea.

At the same time, the idea of turning away from open borders and freer trade at this juncture in our history is bizarre. The U.S. economy is remarkably strong. Economic growth is accelerating even as the expansion ages. Median incomes are at record levels, and unemployment is at a three-decade low. Income inequality, which had widened precipitously over the past two decades, appears to be narrowing once again.

The notion that the gains from freer trade outweigh the costs has deep intellectual and empirical roots. Douglas A. Irwin, economist at the University of Chicago, traces the idea that global commerce increases world aggregate wealth back to philosophers and theologians in the first several centuries A.D. For instance, the philosopher Seneca sometime before the year 65 wrote that "the wind has made communication possible between all peoples and has joined nations which are separated geographically."

Economists later built more sophisticated models on the essential insight that countries stand to gain from the voluntary exchange of goods across borders. The long-term economic record, from tariff barriers of the 1930s to Latin America's import-substitution policies of the '60s and '70s, confirms that trade barriers damage growth.

But the debate with the antitrade crowd is less about economics than philosophy. Although antitrade activists' rhetoric is cloaked in the language of progressivism, these are deeply reactionary forces. The late Sir James Goldsmith, in his book The Trap, wrote an early manifesto for protesters of global capitalism. He blamed the 18th century Enlightenment in the West for the world's ills. Goldsmith wanted to rein in science and technology, reaffirm traditional values, limit immigration, and preserve cultural identity. The animating vision behind the protests in Seattle and Washington is a no-growth economy: a society without change in a world inhabited by nations that value stability and planning above all.

The 18th century British social commentator Thomas Carlyle memorably called economics "the dismal science." Yet a freer flow of commerce and information is hostile to closed-minded bureaucracies and encourages democracy. A world open to freer trade is one that is open to new ideas, new technologies, and new ways of organizing.

This openness and flexibility largely account for the enormous increase in material wealth and opportunity since the Industrial Revolution. But for far too long, those gains have been concentrated among modern industrial nations. Given time and political support, global capitalism could spread that bounty worldwide.By Christopher Farrell; Farrell Is Contributing Economics Editor. His Sound Money Radio Commentaries Are Heard on Saturdays in 170 Markets Nationwide.

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