Selected Essays of James Tobin
Chapter 1: The global economy: who is at the helm?
1. The global economy: who is at the helm?* GLOBALIZATION: HOW NEW? HOW COMPLETE? Globalization is a fashionable term, used to describe world economic trends somehow associated with revolutions in electronics, computation and communication. The Internet is a striking example. Kids can sit before computer screens and communicate at lightning speed all over the globe at negligible marginal cost. According to many American workers, globalization is not so benign. They associate it with competitive invasions of imports and immigrants, endangering their jobs and wages. Imports are still only 13 per cent of US GDP. Foreign trade is on an upward trend, but this is nothing new. Imports grew from 5 per cent of GDP in 1959 to 6 per cent in 1972 to 10 per cent in 1985. As wages have advanced in the USA we have lost competitive advantage in a series of products: among them apparel, consumer electronics, motorcycles, shipbuilding. We still have jobs for 95 per cent of our labor force, but the jobs are not in the same industries they were 10, 20, 50 years ago. Thanks to technical progress, they are better jobs. When I was a boy, a quarter of the nation’s labor force was in agriculture; the ﬁgure is 3 per cent today. US foreign policy has sought free trade ever since Franklin Roosevelt and Cordell Hull began negotiating reciprocal trade treaties. In those days Democrats were free traders and Republicans were protectionists, having passed the notorious Smoot–Hawley tariﬀ in 1930. The...
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