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International Trade

The backlash against globalisation

Issue #113 July 2016

Welcome Friend,

Dear Reader

A few years ago, Nobel-winning economist Joseph Stiglitz penned a famous book called Globalisation and its discontents.

He was not so much objecting to globalisation but the way what he called The Washington consensus advanced it.

But actually, there is no doubt that globalisation and international trade has made the world richer. Why then we are seeing another backlash?

This time, the evidence is everywhere. It is in the Brexit vote, the political scene in the US, and the rise of political extremism across the world, for example in both Europe and Asia.

Others say the global economy sits on a mountain of debt.

These four articles help explain why trade promotes wealth, why debt may not be quite the problem people think it is, but also the pitfalls.

Read on and enjoy.

Michael Baxter

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Globalisation, is there really such a reason to be so discontented?

By Michael Baxter

Economic theory is unequivocal. Free trade promotes wealth. It’s down to specialisation and is best summed by what many consider to be the most important economic theory there is: The Law of Comparative Advantage.

Theory says that free trade enables each country to focus on what it does best. According to the theory, free trade works in the interest of both sides of a trading agreement, even if one party is better at producing just about everything than the other. Take as an example, a high-powered lawyer who can command a fee of say...

read full article >

The benefits of trade and globalisation

By Michael Baxter

Trade increases wealth. And according to one set of stats, in the United States alone, GDP is one trillion dollars higher today than it would have been had it not been for advances in trade since World War 2. That’s a staggering finding. The data comes courtesy of the US Peterson Institute. It found that deeper engagement since World War two, caused by trade agreements, and improvements in transportation and communication technologies has increased US GDP per capita by $10,000.

See Why...

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Globalisation and Brexit, global leaders shift emphasis

By Michael Baxter

Part three of a series of three articles:

IMF managing director, Christine Lagarde, has been talking to the FT about globalisation.

She said: “Globalisation can be a force for good and can generate huge benefits. It has taken lots of people out of poverty, it has helped the Chinese economy, for instance by bringing hundreds of millions of people out of starvation. But equally, globalisation is producing losers and we have probably not been paying enough attention to this.

“And if there is a lesson we can draw from the current situation, it is that globalisation has to be inclusive and beneficial for all. So whether on growth, inclusive growth, inclusive...

read full article >

Is there too much debt in the world?

By Michael Baxter
Debt, you keep hearing about it. “The problem with the global economy is too much debt.” So people keep saying. If that is right it is bad news for international trade as too much debt can lead to nasty things like recessions, and a global recession would be nasty indeed.

It is just that the view that the world has too much debt may be wrong. Or at the very least, it is simplistic.

Bear in mind that the global economy is also awash with savings. Contrary...

read full article >

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