Back to the Future
Nayyer Ali, MD

True or false: We have never lived in a more unified global economy. Even though the last few years have seen a tremendous media buzz around the idea of "globalization", in truth, we are just reaching levels of economic linkage that were set a hundred years ago. In 1913, on the eve of the First World War, the world was at a peak of integration. There was essentially a single world currency (gold, as all major paper currency was backed by reserves of gold), borders were much easier to cross, and one could argue that technology such as telephones, telegraphs, automobiles and electricity were more transforming than today's technology boom. Global investing was easily available through the London investment banks, and both trade and financial flows between regions of the world were higher on a percent of the economy basis than they were in the 1990's. One observer remarked in 1913 that major wars were now impossible because countries were too linked by trade. Of course this global order blew up and degenerated in wars, depressions, and a communist movement that removed a huge swath of the world from the global economy for up to 70 years.

Now the new global economy has restored what once existed. The big winners of this system are the poor in developing countries that integrate themselves best (think South Korea, Mexico, Malaysia), and the skilled workers of the developed world (think all those dot-com millionaires, Bill Gates, shareholders of Intel, etc.). Overall, there has never been as much growth in the global economy, in both rich and poor countries, as there was in the 1990's. Several hundred million people in East Asia alone were lifted out of poverty over the last 20 years. The American economy expanded by over 400 billion dollars in size in 1999 alone.

But despite what looks like a bright picture of improvement, globalization as a process has been under assault, even among the educated elites in the developed world. The recent protests at the IMF and World Bank meetings and the WTO meetings in Seattle, with young people dressed up as endangered sea turtles, is an emblem of this assault. The three most significant terrorists episodes in the United States recently (Oklahoma City, the Olympics, and the World Trade Center) can all be seen as an attack on globalization. The American labor movement is dead set against loosening trade barriers, and many politicians do not understand the real benefits of trade. Outside of America and Britain, there is no major world political figure who champions globalization.

Far too many thinkers and politicians have the false notion that exports are good and imports are bad. Trade is good, not because it creates more jobs, but because it allows a nation to have a higher standard of living as a whole than it would without trade. Look at Iraq, which is cut off from world trade, or to those countries which purposely limit their trade with the world. The purpose of trade is to purchase desired imports, and exports are merely the price one pays for those imports. The problem comes because those harmed by free trade are easily identified and quite vocal, while those who benefit are the broad population, and are mostly silent.

Currently there is a major debate in the United States Congress on whether to grant China permanent normal trade relation status as part of China entering the World Trade Organization. Opponents are claiming that China will steal jobs from the United States and that such a vote will encourage human rights abuses in China. But almost all the changes China has to make to enter the WTO are in favor of allowing more imports. In addition, cutting China off from trade with the United States over its human rights record will almost certainly never happen, so what is the point of annual reviews that so far have always let China off the hook? Advocates of free trade with China suggest that more American involvement will lead to China becoming more free and democratic in the long run.

The bigger fear is that America, which is in a period of peak prosperity, will turn its back on being the leader of integration in the world. If that happens, we may see the world turn into regional economic blocs that act to shut out outsiders. Specifically, there is concern about the long-term direction of the European Union and of ASEAN in Asia. The process of globalization is actually just getting started. Even a country like China still consists mostly of huge numbers of poor rural peasant farmers with little or no purchasing power for modern goods. The next fifty years, barring war or some other catastrophe, will see the greatest rise in living standards that has ever occurred. And most of this rise will be in the developing world. It is those countries that embrace the modern world that will benefit the most.