Bernanke Lauds Globalization’s Benefits

Stephen DeAngelis

September 1, 2006

Federal Reserve Chairman Ben S. Bernanke recently shared his views about sharing global wealth [“Fed Chief Backs Global-Wealth Sharing,” by Nell Henderson, Washington Post, 26 August 2006]. In a speech delivered in Jackson Hole, WY, at a conference on “The New Economic Geography,” which focused on “ongoing shifts in the location of economic activity and growth around the world,” Bernanke indicated “political and technological changes are likely to keep spurring global economic integration — the growing exchange of goods, capital, workers and ideas around the world.”

Since this is the position I have consistently promoted, I found Bernanke’s views interesting. His Wyoming audience included academics, central bankers, and analysts and he told them that global integration “creates the potential to elevate living standards and lower poverty, but also the likelihood of resistance by groups or nations that feel threatened by change.”

“The challenge for policymakers is to ensure that the benefits of global economic integration are sufficiently widely shared,” Bernanke said. “The effort is well worth making, as the potential benefits of increased global economic integration are large indeed.” He did not propose specific policies to counter efforts to restrict trade, but suggested as one general example the need to retrain people who have lost jobs because of globalization.

Bernanke noted that although global economic integration has ebbed and flowed it has, over time, remained on a consistent vector.

“The process of global economic integration has been going on for thousands of years,” he said, citing technologies and political systems that fostered increased trade during the Roman Empire, through the voyages of discovery in the 15th century, through the rise of railroads and steam power in the 19th century, and through the advance of telecommunications and global trade agreements in recent years. “The scale and pace of the current episode is unprecedented,” Bernanke said. For example, he said, global exports of goods account for more than 20 percent of world economic output, compared with about 8 percent in 1913 and less than 15 percent in 1990. Moreover, recent political changes have led China, India and former Soviet bloc countries to become more fully integrated into the world economy, meaning most of the world’s population is now participating in a globalized marketplace, he added. “There are no historical antecedents for this development,” Bernanke said.

I wish the Fed Chief had been a bit more prescriptive in his address. Lauding the benefits of globalization is not enough. People want a pragmatic, systematic plan for helping bring the developing world out of poverty. Bernanke offered no such course. He did indicate that globalization’s dark side included job losses as manufacturing moved around the globe, environmental challenges as emerging economies try to move from agricultural to manufacturing on the cheap, and fear that globalization will overwhelm local cultures.

When promoting our Development-in-a-Box concept, I have tried to show how that approach is both practical and achieveable. It involves all stakeholders from governments to corporations to non-profit groups to citizens. While the concept is focused on bringing failed states up to some minimum acceptable standards that will help them attract foreign direct investment, I have also tried to show how such an approach can be used in almost any post-crisis situation.  Dealing with globalization’s “dark” side is a bit more problematic because many of those impacted are not in failed states but in developed states. Bernanke noted that education and training are part of the solution for dealing with these challenges, but many countries, including the U.S., seem unwilling to make the kind of commitment to education that is required to create tomorrow’s workforce so that the negative impacts of globalization can be mitigated.

While I may be disappointed in Bernanke’s initial comments, I’m heartened that he has broached the subject at all.