Friday, February 22, 2008

Unimaginable poverty would result from a life of economic isolation

A Review of Don Boudreaux's Globalization By John Tamny February 21, 2008

Due to the unfortunate rebirth of economic nationalism in recent years, commentators of the libertarian and conservative persuasion have had to sharpen their arguments in favor of free trade. Amidst the ongoing debate against Lou Dobbs and his not-so-merry collection of protectionist cohorts, George Mason’s Don Boudreaux has been an indispensable source of broadly understandable talking points that have shown the undeniable good that free exchange brings to the world. Thanks to his recent publication of Globalization, commentators and interested people alike can now access a book containing all the salient facts supporting a concept that can only enrich us.

Boudreaux makes what might seem difficult sound easy, and it begins with his definition of globalization: the advance of human cooperation across national boundaries. Boudreaux could have stopped right there, but goes on to explain that every “man-made thing you see is something no one person could possibly make alone.” That being the case, the shirts we wear and the food we eat are the happy result of millions of people around the world engaging in their narrow economic specialties such that we’re clothed and fed.

The above helps the reader to understand the unimaginable poverty that would result from a life of economic isolation. Absent the cooperation he describes, rather than doing what we do best in exchange for the best offered by others, we as individuals would be wholly self-reliant, and tragically poor. That we’re mostly able to freely exchange our individual output with the world’s citizens means our lives get easier and cheaper every day. In short, as the world’s division of labor broadens, and as tariffs fall, we’re the beneficiaries of frequent non-monetary “raises” due to economic specialization that makes goods more plentiful, and as a result, cheaper.

Importantly, the book offers clear answers to the many objections raised to globalization over the years; from its impact on the environment, wages, job growth, deficits in trade, and with the rise of sovereign wealth funds, foreign investment. Those who emotionally support free trade but sometimes doubt its wonders will likely be won over by Boudreaux’s explanations. And for those violently opposed to the freedom he espouses, let’s just say this book will make them think...

The above helps explain why Boudreaux is sanguine when it comes to foreign investment. He welcomes it for increasing the number of potential bidders who might have designs on our assets. The existence of foreign investors not only means we might sell what we own at a higher price, but it also means we’ll then have access to the knowledge of a broader range of investors who might have a better idea of how to get the most economic value out of the asset purchased. When foreigners buy our government debt, that just means they lower the interest costs on debt incurred in our name.

Boudreaux’s long-term outlook when it comes to globalization is positive. While it’s certainly possible that countries around the world could revert to the impoverishing economic isolation of the first half of the 20th century, he notes that socialism has happily been discredited, and at the same time the increasingly mobile nature of capital means a country’s citizens will quickly feel any negative shift away from economic freedom.

In concluding his excellent book, Boudreaux reminds us that prosperity results when we refuse to let political boundaries define economic boundaries.” His words are simple and powerful at the same time. If we let others do for us what’s not in our economic interest so that we can achieve our individual work specialty, we’ll be better off. Easy words for an individual to live by. Now we just have to convince our politicians. John Tamny is editor of RealClearMarkets, and a senior economist with H.C. Wainwright Economics. He can be reached at

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