Globalization: It’s an Inflation-Busting Superhero

Individual choices contribute to the speed of globalization: World trade accounted for 10 percent of gross world product in 1960 to 30 percent today. Foreign visitors increased, from two per every 100 people in 1960 to 15 per 100 in 2005. More than one third of the world relies on cell phones, and a billion people use the internet. Over the past 30 years, inflation has also decreased, and it is no accident that the countries with the lowest inflation rates are those with the most globalized economies, suggests Richard Fisher, chief executive of the US Federal Reserve Bank of Dallas. Globalization and inflation, it turns out, are naturally at odds. Among its benefits, globalization forces discipline on central banks. With factors of production more mobile than ever, money being the prime example, governments must compete for their control. Fisher identifies “high taxes, excessive regulation and capricious administration” as policies discouraged by globalization. In theory, according to Fisher, globalization rewards morally superior policies. Many questions remain about who really profits from globalization, but some global social benefits are also undeniable. – YaleGlobal