August 23, 2000
International economic integration has tripled living standards around the world over the last 50 years, but it is arousing so much popular opposition that further integration can't be taken for granted, IMF Chief Economist Michael Mussa says. In a paper to be presented at a conference of central bankers organized in Jackson Hole, Wyoming by the Federal Reserve Bank of Kansas City this week, Mussa warns that a "sharp reversal" is possible in the trend toward global economic integration.
Economic prosperity, Mussa notes, isn't enough to prevent a backlash against globalization. The protesters in Seattle demonstrated that globalization has its detractors, and we have hardly seen or heard the last of them, Mussa is quoted as saying. But, the chief economist notes, "while we need to remain cognizant of the risk that such protests may gain political momentum, I do not believe the conditions are ripe for a return to isolationism. The plain fact is that the US economy, and the world economy more generally, have prospered enormously under, and partly because of, favorable policies toward international economic integration."
Those benefits, Mussa says, have been spread "quite broadly, but not universally" across the globe. On average, governments around the world have dropped 80 percent to 90 percent of their trade barriers since the end of World War II. That has helped triple per capita incomes around the world and ensure global economic growth of four percent a year on average, he says. Still, Mussa notes, history shows that economic prosperity isn't always a conducive climate for free trade and investment.
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