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Opening Arguments

The messy market

Welcome to the brave new world:

Today's global economy baffles experts -- corporate executives, bankers, economists -- as much as ordinary people. Countries are growing economically more interdependent and politically more nationalistic. This is a combustible combination. The old global economy had few power centers (the United States, Europe, Japan), was defined mainly by trade and was committed to the dollar as the central currency. Its major countries shared democratic values and alliances. Today's global economy has many power centers (including China, Saudi Arabia and Russia), is also defined by finance and is exploring alternative currencies to the dollar. Major trading nations now lack common political values and alliances.

It is no more possible to undo globalization than it was possible, in the 19th century, to undo the Industrial Revolution. But our understanding of international markets, shaped by impersonal economic forces and explicit political decisions, is poor. Countries try to maximize their own advantage rather than make the system work for everyone. Considering how much could go wrong, the record is so far remarkably favorable. Alas, that's no guarantee for the future.

But people tend to talk about the "global economy" as if it's a finite phenomenon with discrete and fixable components rather than a growing, ever-changing fact of life. And politicians make insane promises based on that mistaken premise. Exports are better than imports, so let's stop all this free-trade nonsense and get back to ""fair" trade.

Markets are messy things. The global market will be messier than anything that has gone before. We're going to be interconnected, as countries and economies, in ways we will barely be able to udnerstand, let alone control. Get used to it.

Comments

mark garvin
Wed, 07/16/2008 - 10:19am

A few years ago I had an interesting discussion with a close friend who works for the State Department, after his return from a province in Vietnam where a US company had suddenly had it's land rights for a new bottling plant terminated and, coincidentally, rights had been simultaneously granted to an Australian bottler for the same land.

He told me that even in a world where corruption is common and business decisions are often influenced by political (and non-democratic) considerations, the United States has one huge advantage. He claimed that throughout the world (or at least the many regions where he has lived and worked) Americans are known as the best business partners. Better than the Chinese, the French, the Japanese or the Germans. In the aggregate, we pay our bills, honor our agreements, provide the goods and perform the work better, faster and more honestly than companies in any other country. And almost uniquely, we allow even the smallest company from the poorest country access to our courts where agreements are enforced largely without bias, corruption or political influence.

Keeping this reputation seems to me to be the best, most achievable long-term strategy for managing the messy global economy.

Leo Morris
Wed, 07/16/2008 - 10:34am

Agreed. Free markets wouldn't have been possible without contract law. And the more we conduct ourselves honorably, the more others will choose us as a preferred trading partner.

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