THE BLESSINGS OF GLOBALIZATION
Beyond all the impressive numbers about the extent of globalization, what kind of impact is it having on national economies? There are at least three fundamental blessings of globalization on nations that embrace it: faster economic growth, reductions in poverty, and more fertile soil for democracy.
The greatest beneficiaries of globalization are the long-suffering consumers in those nations that had been “protected” from global competition. Globalization expands the range of choice, improves product quality, and exerts downward pressure on prices. It delivers an immediate gain to workers by raising the real value of their wages. It transfers wealth from formerly protected producers to newly liberated consumers, with the gains to consumers exceeding the loss to producers because the deadweight losses to the economy are recaptured through efficiency gains.
Under autarky, consumers are often cursed with poor service and overpriced and low-quality goods because there is no real competition to spur domestic producers to meet the demands of their consumers. This explains the poor quality of cars sold by protected domestic producers in such places as India, where the standard Ambassador car is based on the Morris Oxford, a make of car that went out of style in Britain four decades ago.
LDCs have the most to gain from engaging in the global economy. First, they gain access to much larger markets, both for imports and exports. On the import side, consumers gain access to a dramatically larger range of goods and services, raising their real standard of living. Domestic producers gain access to a wider range and better quality of intermediate inputs at lower prices. On the export side, domestic industries can enjoy a quantum leap in economies of scale by serving global markets rather than only a confined and underdeveloped domestic market.
Second, LDCs that open themselves up to international trade and investment gain access to a...