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The Benefits of Globalization Are Too Good to Pass Up Sure there's pain in the tumult of our times, but there's plenty of gain, too The demonstrations against globalization during the World Trade Organization summit in Seattle certainly captured world attention. For the eclectic group of demonstrators from some 500 organizations, the dreaded term "globalization" seems to symbolize a world dominated by multinational corporations bent on destroying the livelihoods of millions of workers, worsening income inequality, and savaging the environment. I'll give the protestors this much: The demonstrations highlighted the social stresses brought about by today's rapid economic and technological change. Globalization carries a genuine human cost. Still, the key question for workers and investors worldwide is this: Are the Seattle protests the harbinger of a retreat from the worldwide embrace of freer trade that began with the end of the cold war a decade ago? Is protectionism, the policy of building barriers to trade, gaining momentum at the turn of the century and millennium? Fortunately, the answer still seems to be no. Despite its negatives, the economic benefits of freer trade and open markets are simply too good to pass up for the developed and developing worlds alike. The economic evidence and history overwhelmingly support the view that freer trade invigorates economic growth by encouraging the spread of new commercial ideas, new technologies, and new ways of organizing everyday life. Trade and innovation are accelerated with access to larger markets. For example, a computer program written in Washington State that could only be sold in Washington State is far less valuable than one that can be sold the world over. Put somewhat differently, Stanford University economist Paul Romer calculates that if a developing nation imposes a 10% across-the-board tariff, the cost in investment and profits from the new economic activity being blocked by tariffs could run as high as 20% of gross domestic product. SEMINAL EVENT. Indeed, trade walls are still coming down. In the future, the genuinely seminal event in globalization's recent history won't the street demonstrations in Seattle. Rather, it's the deal brokered last month by the Clinton Administration to bring China into the World Trade Organization. Assuming that the U.S. Congress and the European Union go along -- and that appears likely -- the breakthrough trade agreement will bind China closer to the world economy. Most important, it will unleash powerful pressure for greater social and political reform as China inches ever closer to a market-based economy. "WTO participation would serve the important purpose of locking in China's reforms, restructuring, and commitment to globalization," says Stephen Roach, chief economist at Morgan Stanley Dean Witter. Other Asian countries are also leaving behind their mercantilist policies and strengthening their ties to the international economy. For instance, Japan and Korea are more open to foreign direct investment and cross-border mergers than ever before. Taiwan is expected to follow China into the WTO. "This trend toward borderless commerce means that local political institutional arrangements are coming under increased scrutiny, and the reforms we are witnessing can be thought of as the sometimes grudging adoption of best practices," said Jerry Jordan, president of the Federal Reserve Bank of Cleveland, in a recent talk. The protestors in Seattle got it wrong. The quickest way to boost worker living standards and improve the environment is to knock down trade barriers -- and fast. The integration of the rich and poor nations of the world is not a zero-sum game where the gains of one come at the expense of the other. And driven by the rapid democratization of information, technology, and finance, globalization is turning out to be remarkably progressive force. The Internet, for example, is a global communications network that is hostile to privileged elites and closed-minded bureaucracies. BOOMER PROTECTION. In the U.S., baby boomers have a selfish but vital stake in a healthy global economy. Some economists and investment professionals fret that when America's massive post World War II generation retires and draw down their private pensions, the huge asset sale will depress stock and bond values, leaving boomers with low savings in their golden years. But the specter of a pension-asset implosion becomes less plausible the more that global capital markets grow. Here's just one measure: A decade ago there were perhaps 100 million equity owners worldwide, estimates David Hale, chief global economist at the Zurich Group. By 2010, he figures that the number could soar to 1 billion with the spread of pension funds throughout the developing world. Boomers will find plenty of willing equity buyers during their retirement years in a global economy. Otherwise, watch out. In a sense, today's world economy picks up where the 19th century world economy was headed before the dark days of three wars -- the two World Wars and the cold war. Globalization holds out the promise that the prosperity and voting power enjoyed by the modern industrial nations eventually will be shared by the entire world. Let's just hope that this time the scenario plays itself out without the ravages of war. Farrell is contributing economics editor for Business Week, and co-host of Minnesota Public Radio's Sound Money, which is broadcast in 171 markets nationwide EDITED BY DOUGLAS HARBRECHT _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ |
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