Ben Bernanke on the Benefits of Globalization

As regular readers know, I am an unabashed proponent of the benefits of the global integration of markets and the "flattening" of the commercial world.  These benefits run from the mundane to the altruistic . . . from expanding markets and growth opportunities for small American companies and their employees to providing a platform for developing countries to pull their population out of poverty and laying a foundation for a more interconnected and therefor peaceful world.   My position isn't based on some ideological mandate, but rather on my direct experience of these benefits while traveling the globe on the front lines of international business.

Of course not everyone views globalization this way, although I am struck how rooted in ideology at least the loudest anti-globalization voices are.  It is also interesting (and I think a sign of the "true believer" nature of their positions) how people opposed to globalization as a matter of principle can differ 180 degrees on the critical underpinnings of their arguments.   

For example, Lou Dobbs in his anti-globalization book "Exporting America", argues that the only people benefiting from globalization are foreign countries which are taking advantage of what he sees as a conspiracy of greed driving American corporations to export jobs and to undermine the very existence of the American way of life.  (Before Mr. Dobbs made the transition from serious business analyst to sensationalist pundit, I suspect he would have had more interest in the non-conspiratorial nature of global economics and arcane notions such as supply and demand in integrated markets).  In stark contrast, Antonia Juhasz in her book "The Bush Agenda, Invading the World One Economy at a Time" ( a book which is at least better written and far better researched than Mr. Dobbs' -- and one that I would actually recommend if you want to hear an opposing, albeit controversial view of the subject), argues that the only country benefiting from globalization is America to the point that she believes that globalization itself is a conspiracy between the U.S. government and its large corporations to use global economics as an express arm of foreign policy enabling the U.S. to assert its hegemony on the world without having to resort to strictly military means.

So which is it?   Is America the big loser or the big winner in globalization?   It seems to depend on which bent of dogmatic protectionist you're trying to pitch to -- the angry right or the angry left.  When it comes to the debate over globalization, the two are very strange bedfellows united by an idea, the consequences of which they completely disagree about.

Which brings me to Ben Bernanke, the Chairman of the Federal Reserve Board.  One thing that separates the Fed chairman from most voices in Washington is he's not trying to play to people's emotions to win votes or viewers or readership.   Instead, he's trying to make sense of what is really going on in the world economy from the U.S.'s point of view.  And so I give his views of the impact of globalization far more objective weight than many of the other voices that are frequently shouting over this issue at a much higher volume.

In remarks made last Friday at the annual retreat of the Kansas City Federal Reserve Bank as reported on Yahoo News in an article by Tim Ahmann, Chairman Bernanke stated that "The scale and pace of the current episode (of globalization) is unprecedented.  Economic and technological changes are likely to shrink effective distances still further in coming years, creating the potential for continued improvements in productivity and living standards and for a reduction in global poverty."  This straightforward assessment is certainly consistent with my own observations.  As a cautionary note, however, Bernanke in his usual sober tones also warned that "further progress in global integration should not be taken for granted" and that progress could be set back by "social and political opposition" promoting a new protectionism.   

It seems that when politically motivated factions try and reverse natural evolutionary forces beyond our control, we tend to create unintended consequences with a far more viral impact than if we focused instead on sound policy meant to ameliorate the identifiable pockets of negative impact.   As with many hot button issues today, business can't afford to try and fly under the radar screen and hope no one mucks things up too badly.   Instead, we need to consistently and rationally explain the benefits of globalization both here and abroad.  Mr. Bernanke's remarks provide a good base from which to work.

(Note: The globalization model used as an illustration is from the Norwegian University of Science & Technology's globalization research programme).