Global Economy?

I don't think we realize just how global our economy is. There are so many nations that have trade with us and invest in us, that it is impossible to separate our problems from theirs anymore. We need to realize that we are all working towards the same things and our fates are interrelated. I read an article that talked about Obama meeting with the Group of 20 to discuss the economy. In this article Charlene Barshefsky is quoted as saying, “This is a classic case of countries bending to domestic political pressure because it is too difficult to make the political argument that if everyone restricts imports, everyone loses." You would think that these leaders would be able to agree on that, seeing as how it is one of the most basic economic principles being taught in our schools.


Gracie said...

I agree that trade is a good thing overall; however, do all countries have incentive to trade? Economically speaking, many countries probably do. The real problem lies in the paradox between economic and political incentives. The leaders of countries, especially if they are elected officials, have more political incentives rather than economic ones. It would be interesting to see if aspects of free trade changed based on election years.

Anonymous said...

I like the point that Gracie brings up. In a free market, countries would only trade if they had incentive to do so. Today, it seems as though we have anything but a free market because of all control our US government has. I wouldn't be surprised if some countries initiated trades based solely on political incentives. It is sad to see how politics has become a profession in and of itself. It leads to bad decisions in order to appease the masses and to be able to advance.

Caleb said...

Of course our economy is a global economy! Look at all the foreign investment in our country and vice versa. I have shoes made in Vietnam, my favorite jacket is made in Israel, my favorite watch is made in Switzerland, and about 80% of the stuff in my room is made in China. The world today trades goods and services like never before. Just call customer service for any number of companies, like Dell. You’ll get a guy with a thick Indian accent telling you his name is Steve. Yet despite the language barrier he will assist you in fixing your problem from more than 8,000 miles away. I think the reason this recession has been such a global one is because the world continues to be more and more connected every day. I bet the next big recession will be every bit as global, if not more.

Dr. Tufte said...

Jason: don't you get it? They're just not that into you.

The politicians I mean. First and foremost this is about them and how they get reelected. That's why they make choices this way.

As to globalization and interconnectedness: this is drivel. We were always global and interconnected. We're just more aware of it now, and more capable of acting upon that in a timely fashion.

Gracie: yes, there is a connection between trade legislation and elections. Because they are pandering to interest groups that want trade restrictions, you usually see tightening before elections (e.g., Bush tightening steel tariffs in 2003). In the same way, you see easing right after elections (e.g., Clinton signing on to NAFTA in 1993 when the Democrats didn't want it).

Gracie and Sophia: individuals and firms always have an incentive to trade. Countries do, only in the sense that they are aggregations of individuals and firms. The country itself has no incentive whatsoever.

Sophia: I think you're revealing some of your underlying fantasies about how the world works. Did you really think politics was ever not "a profession in and of itself"?

Spencer said...

While trade is certainly good for business and globalization is a fact of life I think it is less significant in the United States than in other countries. While political decisions hindering trade can adversely affect US citizens and companies the impact would be significantly less serious in terms of aggregate measures such as GDP than it likely would for most of the world. The good news is that most of these politically motivated trade restrictions have little or no effect on GDP or other large scale measures.