DALLAS: How does globalization work? Citizens and companies do not seek to do business in faraway places for the sheer adventure of it. They do it because it makes them better off. This is the natural process of capitalism, constrained by the cost of transport and information and accelerated by technologies that make it cheaper to move goods, services and ideas. Globalization will proceed apace unless or until the governmental authorities intervene to stop it. Policymakers in both the political and monetary realms must come to grips with this if we are to fulfill our mandates.
A few numbers tell the story of the world’s march toward globalization:
• Trade as a percentage of gross world product has risen from 15 percent in 1986 to nearly 27 percent today.
• In the past two decades, the stock of foreign direct investment assets has nearly quadrupled as a percentage of gross world product.
• More people than ever are crossing national borders – for business and pleasure. On average around the globe, countries received just one foreign visitor for every 100 people in 1950. By the mid-1980s there were six, and since then that number has doubled to 12.
• Since 1991, international telephone traffic has more than tripled. The number of cell phone subscribers has grown from virtually zero to 1.8 billion – 30 percent of the world population – and Internet users will soon hit 1 billion.
Many analysts highlight globalization’s private-sector benefits – the strength built by competing as well as the gains from trade, specialization and productivity that come with expanding markets. But globalization offers less certainty for the public sector.
An essay in the 2005 annual report of the Da ...