Globalization

THE World War brought back to governmental and public attention a problem which at the beginning of the century appeared to have been entirely settled -- the problem of the passport. The passport does not date back further than the sixteenth century. After a short period of suppression during the French Revolution, it was very generally applied during the first half of the nineteenth century, but in the years immediately preceding the World War it remained in force chiefly as a police measure and as a means of defense used by autocratic governments.

ONE of the remarkable phenomena of the world's economic life in the past few decades has been the way in which international commerce has grown by leaps and bounds. A hundred years ago the aggregate value of world trade was less than $2,000,000,000 or only $2.34 per capita; by 1900 it had increased tenfold, to over $20,000,000,000, or $13.00 per capita.

ITALIAN fascism has proclaimed national "sacred egoism" as the sole creative factor. After reducing the history of humanity to national history, German fascism proceeded to reduce nation to race, and race to blood. Moreover, in those countries which politically have not risen -- or rather, descended -- to fascism, the problems of economy are more and more being forced into national frameworks. Not all of them have the courage to inscribe "autarchy" openly upon their banners.

IT is not to be expected that the work of rebuilding a world economic order can be completed overnight or that the economy of the nineteenth century, destroyed by three decades of war and depression, can ever be completely restored. Unfortunately, the conditions that are prerequisite to an early or unqualified return to freer markets do not now exist. There is pronounced imbalance in the world's trade. Many nations are compelled sharply to restrict imports in order to safeguard their monetary reserves; they cannot abandon administrative controls until better balance is restored.

The world economy is changing profoundly due to the enormous growth of services exports, the forging of new kinds of business alliances and the merging of transactions of different types. Effective policies will recognize the deficiencies of both managed trade and outright protectionism. Needed is a deliberate and active policy that gives the demands of the external economy priority over domestic policy demands and problems. Integration is the only basis for an international trade policy that can work and the only way to rapidly revive a domestic economy.

The crises of globalization will be solved by neither a super-IMF nor an unfettered market. Herewith, a third way.

Doomsayers predict that globalization will weaken national governments. They should bite their tongues. Global governance will of course grow in step with economic integration. But it will actually express and promote, rather than suppress, the interests of nation-states.

Antiglobalization activists are convinced that economic integration has been widening the gap between rich and poor. The best evidence, however, proves them wrong. Thanks to higher growth driven by greater openness to trade and investment, global inequality has narrowed and global poverty has been reduced.

The Mind and the Market shows that complaints about capitalism are older and more respectable than most of the antagonists in today's globalization debates realize.

Economists who insist that "offshore outsourcing" is just a routine extension of international trade are overlooking how major a transformation it will likely bring -- and how significant the consequences could be. The governments and societies of the developed world must start preparing, and fast.

Jobs growth was slow in May, renewing pessimism about the U.S. economy. Spence, a Nobel Prize-winning economist writes that economic growth and employment in the United States have started to diverge, increasing income inequality and reducing jobs for less-educated workers.

It is time to face reality: the current round of multilateral trade talks is doomed. Rather than try to revive it, argues a former U.S. trade representative, world leaders should salvage a few smaller agreements and study what went wrong in order to do better the next time around.