The Good News

SYNOPSIS:

I've heard it said that I should try, just once, to write something upbeat. Honestly, on the domestic front it's hard. Yes, the business cycle is looking up but with the budget out of control, pork-stuffed legislation making its way through Congress and the extractive industries making environmental policy, we seem to have lost the ability to govern ourselves. Did I mention civil liberties?

But if I take the global long view, there's still a lot to cheer about.

When I went to graduate school, almost 30 years ago, I initially thought about specializing in development. After all, there is no more important topic in economics than how to raise the standard of living of the world's poor.

But in the mid-1970's, development economics was just too depressing to pursue. Indeed, it might as well have been called non-development economics. No third world nation had made the transition to advanced-country status since 19th-century Japan. Circa 1975 it seemed that the club of nations with decent living standards was no longer accepting new members.

Now we know that the club isn't that exclusive, after all. South Korea and several smaller Asian economies have made a full transition to modernity. China is still a poor country, but it has made astonishing progress. And there are signs of an economic takeoff in at least parts of India. I'm not talking about arid economic statistics; what we've seen over the past generation is an enormous, unexpected improvement in the human condition.

How was this improvement achieved? Whenever I give talks about my latest book, someone asks whether I still believe in free trade. The answer is yes not because I have any fond feelings about multinational corporations, but because every one of those development success stories was based on export-led growth. And that growth is possible only if rising economies can expand into new markets. Some critics of globalization seem to be nostalgic for the era before the big growth in third-world exports of manufactured goods. I'm not, because I remember the way that era really felt, our despair over the possibility of development.

That said, the critics of globalization do have some valid points.

First and foremost, the promise of export-led growth has failed in too many places. In particular, Latin America has signally failed to replicate Asia's success: Latin nations have liberalized, privatized and deregulated, with results ranging from disappointing (Mexico) to catastrophic (Argentina). Open world markets, it seems, offer the possibility of economic development but not an easy, universal recipe.

Meanwhile, competition from newly industrializing economies does hurt some workers in advanced countries. I could tell you how sensible government policies could minimize this cost, but since we don't have those policies and aren't about to get them, free trade is, in reality, a morally ambiguous issue. And someone in my situation has to acknowledge being in a particularly weak moral position, since they aren't yet having newspaper columns written in Bangalore.

Yet I keep coming back to the big good news of the past 25 years: in a world with more or less free trade, development is possible. We are not, it turns out, condemned to live forever on a planet where only a small minority of the global population has a decent standard of living.

Will this good news continue? Growing tensions over world trade worry me. The steady trickle of U.S. protectionist moves, against everything from steel to Chinese bras, hasn't yet become a torrent. But there's a definite sense that the grown-ups have left the building.

What's particularly striking is the contempt this administration has for the rules. I was on the staff of the Council of Economic Advisers during the Reagan administration (those were nonpolitical jobs back then); one thing I remember was that if the experts said a proposed trade restriction violated international trade law, that was that. By contrast, just about every protectionist step taken by the Bush administration has been clearly in violation. And if the major economic powers stop honoring the rules that preserve open global markets, the chances of future development in poor nations will be much reduced.

But none of this cancels the fact that over the past 25 years more people have seen greater material progress than ever before in history. That's something to celebrate.

Originally published in The New York Times, 11.28.03