Globalization: The Wellspring of Global Economic Growth

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Globalization: The Wellspring of Global Economic Growth

Today, we find ourselves in the midst of the largest financial and economic crisis since the integrated global economy began to emerge in the early 1990s.  In earlier eras, recessions have tended to be primarily national or regional, even though international trade has inevitably suffered anytime a major national economy weakened.  Except now, the world's emerging markets are falling with amazing speed, triggered by a crisis that started in the United States. 

Consider these statistics from December 2008:1 

  • Taiwan's exports plunged 44 percent from the same month in 2007.

  • Brazil's industrial production plunged 12.4 percent from the previous month.
  • The Russian ruble and the Hungarian forint have dropped about 14 percent against the dollar.
  • The South Korean won has shed 8 percent of its value against the dollar and South Korea's industrial output dropped by the largest amount on record.
  • The Mexican peso fell to an all-time low against the dollar.
  • Then, South Korea's exports fell more that 30 percent in January 2009. 

Many were surprised, because it was widely thought that these emerging markets would cushion the global slowdown caused by the developed economies.  Now, these economies are seeing declining trade, shrinking capital flows, and slumping commodity prices just as the Trends editors predicted.  The theory of economic decoupling is shot full of holes. 

A generation ago, this was unheard of.  During the Cold War, the world order was characterized by a static tension between two superpowers, the United States and the Soviet Union.  This ended with the collapse of the Soviet Union in 1991, and opened the world to the dynamic and interacting forces of a free market.  Changes in policy to encourage free trade and competition paved the way to a more efficient and robustly growing economy.  This opened the door to the possibility that free-market capitalism could spread to any willing nation, bringing with it a higher standard of living, education, better health care, and all the benefits that have been enjoyed in the developed Western world. 

The standard for this type of economy — and the benefits that it confers on nations that embrace it — is the American way of life.  America has provided the model for the rest of the world to follow, because American products have proven to be the ones that people across the globe want...

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