73 "Globalization Is Good for You" Ronald Bailey Trade—particularly the domestic consequences of trade—was a central part of the 2016 presidential election. Republican Donald Trump railed against trade agree­ ments like the North American Free Trade Agreement (NAFTA) and the Trans Pacific Partnership (TPP), calling them "horrible" deals that destroyed American jobs and allowed other countries to take advantage of the United States by exporting far more to the United States than they take as imports. Lower labor costs, looser environmen­ tal standards, and less regulation in other countries mean that companks have an incentive to shift jobs overseas. The result is economic dislocation in regions that see massive job losses, and the overall economic benefits of these deals are of little com­ fort to those workers and communities who see their livelihoods disappear. Yet free trade has been a centerpiece of global economic policy for decades, and supporters argue that efforts to protect domestic producers through trade barriers— chiefly tariffs, or taxes paid when a good is imported—wind up increasing the costs of goods, creating inefficiencies, and reducing overall wealth. In this selection, Ronald Bailey summarizes recent research on overall effects of the increasingly free movement of goods, capital, and even people, across borders. On just about every dimension one can think of—individual income, overall wealth, economic growth, life expectancy, gender equality, child labor, environmental protec­ tion, even the likelihood of military conflict-free trade and globalization have posi­ tive effects. "All of this open movement of people and stuff across borders pays off in many measurabk ways," argues Bailey, "some obvious, some more surprising. How important is the open exchange of goods to the spreading of prosperity? This important: Since 1950, world trade in goods has expanded from $600 billion (in 2015 dollars) to $18.9 trillion in 2013. That s a more than 30-fold increase, during a period in which global population grew less than threefold. This massive increase in trade was kicked off in 1948 by the General Agreement on Tariffs and Trade, which began the liberalization process of lowering tariff and non-tariff barriers. As a result, autarkic national econo mies became more integrated and intertwined with one another. The World Bank reports that openness to trade—the ratio of a country's trade (exports , plus imports) to its gross domestic product (GDP)—^has more than doubled^ on average since 1950. Immigration has also contributed significantly to economic growth and higher wages. Today some 200 million people, about 3 percent of the "Globalization Is Good for You" 511 world's population, live outside their countries of birth. According to the Partnership for a New American Economy, 28 percent of all U.S. companies started in 2011 had immigrant founders—despite immi­ grants comprising roughly 13 percent .

1. 73
"Globalization Is Good for You"
Ronald Bailey
Trade—particularly the domestic consequences of trade—was a
central part of the
2016 presidential election. Republican Donald Trump railed
against trade agree-
ments like the North American Free Trade Agreement (NAFTA)
and the Trans Pacific
Partnership (TPP), calling them "horrible" deals that destroyed
American jobs and
allowed other countries to take advantage of the United States
by exporting far more
to the United States than they take as imports. Lower labor
costs, looser environmen-
tal standards, and less regulation in other countries mean that
companks have an
incentive to shift jobs overseas. The result is economic
dislocation in regions that see
massive job losses, and the overall economic benefits of these
deals are of little com-
fort to those workers and communities who see their livelihoods
disappear.
Yet free trade has been a centerpiece of global economic policy
for decades, and
supporters argue that efforts to protect domestic producers
through trade barriers—
chiefly tariffs, or taxes paid when a good is imported—wind up
increasing the costs

2. of goods, creating inefficiencies, and reducing overall wealth.
In this selection, Ronald Bailey summarizes recent research on
overall effects of
the increasingly free movement of goods, capital, and even
people, across borders. On
just about every dimension one can think of—individual
income, overall wealth,
economic growth, life expectancy, gender equality, child labor,
environmental protec-
tion, even the likelihood of military conflict-free trade and
globalization have posi-
tive effects. "All of this open movement of people and stuff
across borders pays off in
many measurabk ways," argues Bailey, "some obvious, some
more surprising.
How important is the open exchange of goods to the spreading
of prosperity? This important: Since 1950, world trade in goods
has
expanded from $600 billion (in 2015 dollars) to $18.9 trillion in
2013. That s
a more than 30-fold increase, during a period in which global
population
grew less than threefold.
This massive increase in trade was kicked off in 1948 by the
General
Agreement on Tariffs and Trade, which began the liberalization
process of
lowering tariff and non-tariff barriers. As a result, autarkic
national econo
mies became more integrated and intertwined with one another.
The World
Bank reports that openness to trade—the ratio of a country's

3. trade (exports ,
plus imports) to its gross domestic product (GDP)—^has more
than doubled^
on average since 1950.
Immigration has also contributed significantly to economic
growth
and higher wages. Today some 200 million people, about 3
percent of the
"Globalization Is Good for You" 511
world's population, live outside their countries of birth.
According to
the Partnership for a New American Economy, 28 percent of all
U.S.
companies started in 2011 had immigrant founders—despite
immi-
grants comprising roughly 13 percent of the population. In
addition,
some 40 percent of Fortune 500 firms were founded by
immigrants or
^ their children.
All of this open movement of people and stuff across borders
pays off
in many measurable ways, some obvious, some more surprising.
Longer, Healthier Lives
A 2010 study in World Development, titled "Good For Living?
On the Rela-
tionship between Globalization and Life Expectancy," looked at

4. data from
92 countries and found that economic globalization significantly
boosts life
expectancy, especially in developing countries. The two
Swedish econo-
mists behind the study, Andreas Bergh and Therese Nilsson,
noted that as
Lfganda's economic globalization index rose from 22 to 46
points (almost
two standard deviations) over the-1970-2005 period, average
life expec-
tancy increased by two to three years.
Similarly, a 2014 conference' paper titled "The long-run
relationship
between trade and population health: evidence from five
decades," by
Helmut Schmidt University economist Dierk Herzer, concluded,
after exam-
ining the relationship between economic openness and
population health
for 74 countries between 1960 and 2010, that "international
trade in general
has a robust positive long-run effect on health, as measured by
life expec-
tancy and infant mortality."
Women's Liberation
A 2012 working paper by University of Konstantz economist
Heinrich
Ursprung and University of Munich economist Niklas Potrafke
analyzed
how women fare by comparing globalization trends with
changes in the
Social Institutions and Gender Index (SIGI), which was

5. developed by the
Organisation for Economic Co-operation and Development
(OECD). SIGI
takes several aspects of gender relations into account, including
family law
codes, civil liberties, physical integrity, son preference, and
ownership rights.
It's an index of deprivation that captures causes of gender
inequality rather
than measuring outcomes.
"Observing the progress of globalization for almost one hundred
developing countries at ten-year intervals starting in 1970,"
Ursprung and
Potrafke concluded, "we find that economic and social
globalization exert
a decidedly positive influence on the social institutions that
reduce female
subjugation and promote gender equality." They further noted
that since
globalization tends to liberate women from traditional social
and political
orders, "social globalization is demonized, by the established
local ruling
class, and by western apologists who, for reasons of ideological
objections
to markets, join in opposing globalization."
512 Ronald Bailey
Less Child Labor
A 2005 World Development study, "Trade Openness, Foreign
Direct Invest-

6. ment and Child Labor," by Eric Neumayer of the London School
of Eco-
nomics and Indra de Soysa of the Norwegian University of
Science and
Technology, looked at the effects of trade openness and
globalization on
child labor in poor countries. Their analysis refuted the claims
made by
anti-globalization proponents that free trade induces a "race to
the bottom,"
encouraging the exploitation of children as cheap laborers.
Instead the
researchers found that the more open a country is to
international trade
and foreign investment, the lower the incidence of exploitation.
"Globaliza-
tion is associated with less, not more, child labor," they
concluded.
Faster Economic Growth
A 2008 World Bank study, "Trade Liberalization and Growth:
New Evi-
dence," by the Stanford University economists Romain
Wacziarg and
Karen Horn Welch, found that trade openness and liberalization
signifi-
cantly boost a country's rate of economic growth.
The authors noted that in 1960, just 22 percent of countries
represent-
ing 21 percent of the global population had open trade policies.
This rose
to 73 percent of countries representing 46 percent of world
population by
the year 2000. The study compared growth rates of countries

7. before and
after trade liberalization, finding that "over the 1950-98 period,
countries
that liberalized their trade regimes experienced average annual
growth
rates that were about 1.5 percentage points higher than before
liberaliza-
tion" and that "investment rates by rose 1.5-2.0 percentage
points."
Higher Incomes
Trade opermess boosts economic growth, but how does it affect
per-capita
incomes? A 2009 Rutgers University-Newark working paper,
"Trade Open-
ness and Income—a Re-examination," by economists Vlad
Manóle and Mar-
iana Spatareanu, calculated the trade restrictiveness indices for
131 developed
and developing countries between 1990 and 2004. Its
conclusion: A "lower
level of trade protection is associated with higher per-capita
income."
Less Poverty
A 2011 Research Institute of Industrial Economics working
paper—
"Globalization and Absolute Poverty—A Panel Data Study," by
the Swed-
ish economists Bergh and Nilsson—analyzed the effects of
globalization
and trade openness on levels of absolute poverty (defined as
incomes of
less than $1 per day) in 100 developing countries. The authors

8. found "a
robust negative correlation between globalization and poverty."
Interestingly, most of the reduction in absolute poverty results
from
better information flows—e.g., access to cellphones—that
improve the
functioning of markets and lead to the liberalization of trade.
For exam-
"Globalization Is Good for You" 513
pie, the globalization index score for Bangladesh increased from
8 points
in 1980 to 30 points in 2000, which yielded a reduction in
absolute poverty
of 12 percentage points.
More Trees
A number of studies have found that trade openness tends to
improve
environmental quality in rich countries while increasing
pollution and
deforestation in poor countries. For example, a 2009 Journal of
Environmen-
tal Economics and Management study by three Japanese
researchers, titled
"Does Trade Openness Improve Environmental Quality?" found
that air
and water pollution decline among rich-country members of the
OECD,
whereas it increases in poor countries as they liberalize and
embark on

9. the process of economic developrnent.
But as poor countries become rich, they flip from getting dirtier
to
becoming cleaner. A 2012 Canadian Journal of Agricultural
Economics study,
"Deforestation and the Environmental Kuznets Curve in
Developing
Countries: A Panel Smooth Transition Regression Approach,"
explored
the relationship between deforestation and real income for 52
developing
countries during the 1972-2003 period. The study found that
deforesta-
tion reverses when average incomes reach a bit more than
$3,000 per year.
These studies basically confirm the Environmental Kuznets
Curve
hypothesis, in which various indicators of environmental
degradation tend
to get worse during the early stages of economic growth, but
when average
income reaches a certain point, subsequent economic growth
leads to envi-
ronmental improvement. Since trade openness and globalization
boost eco-
nomic growth and incomes, this suggests that opposing them
slows down
eventual environmental improveiirent in poor countries.
Peace
In 1943, Otto T. Mallery wrote, "If soldiers are not to cross
international
boundaries, goods must do so. Unless the shackles can be

10. dropped from
trade, bombs will be dropped from the sky." This insight was
bolstered by
a 2011 working paper, "Does Trade Integration Contribute to
Peace?" by
the University of California, Davis researcher Ju Hyun Pyun and
the Korea
University researcher Jong-Wha Lee. The two evaluated the
effects of bilat-
eral trade and global openness on the probability of conflict
between coun-
tries from 1950 to 2000, and concluded that "an increase in
bilateral trade
interdependence significantly promotes peace." They added,
"More impor-
tantly, we find that not only bilateral trade but global trade
openness also
significantly promotes peace."
More Productive Workers
The economic gains from unfettered immigration are vastly
more enor-
mous than those that would result from the elimination of
remaining
trade restrictions. Total factor productivity (TFP) is the portion
of output
I
514 Ronald Bailey
not explained by the amount of inputs used in production. Its
level is deter-
mined by how efficiently and intensely the inputs are utilized in

11. produc-
tion. In other words, it is all those factors—technology, honest
government,
a stable currency, etc. that enable people to work ^'smarter” and
not just
harder.
A 2012 working paper titled "Open Borders," by the University
of Wis-
consin economist John Kennan, found that if all workers moved
immedi-
ately to places with higher total factor productivity, it would
produce the
equivalent of doubling the world's supply of laborers. Using US.
TFP as a
benchmark, the world's workers right now are the equivalent of
750 mil-
lion Americans, but allowing migration to high TFP regions
would boost
that to the equivalent of 1.5 billion American workers.
Think of it this way: A worker in Somalia can produce only
one-tenth
the economic value of a worker in the United States. But as
soon as she
trades the hellhole of Mogadishu for the comparative paradise
of Minne-
apolis, she can immediately take advantage of the higher
American TFP
to produce vastly more. Multiply that by the hundreds of
millions still
stuck in low-productivity countries.
Assuming everybody moved immediately, Kennan calculated
that it
would temporarily depress the average wages of the host

12. countries' natives
by 20 percent. If emigration were more gradual, there would be
essentially
no effects on native-born wages.
In a 2011 working paper for the Center for Global Development,
"Eco-
nomics and Emigration: Trillion Dollar Bills on the Sidewalk?",
Michael
Clemens reviewed the literature on the relationship between
economic
growth and migration. He concluded that removing mobility
barriers
could plausibly produce overall gains of 20-60 percent of global
GDP. Since
world GDP is about $78 trillion now, that suggests that opening
borders
alone could boost global GDP to between $94 and $125 trillion.
Better Job Prospects
A 2013 University of Munich working paper on immigration and
eco-
nomic growth by the University of Auvergne economist Ekrame
Boubt-
ane and her colleagues analyzed data from 22 OECD countries
between
1987 and 2009. It found that "migration inflows contribute to
host country
economic prosperity (positive impact on GDP per capita and
total unem-
ployment rate)." The authors concluded that "immigration flows
do not
harm the employment prospects of residents, native- or foreign-
born.
Hence, OECD countries irfey adjust immigration policies to

13. labor market
needs, and can receive more migrants, without worrying about a
poten-
tial negative impact on growth and employment."
In a 2009 National Bureau of Economic Research study, "The
Effect of
Immigration on Productivity: Evidence from US. States," the
University
of California, Davis economist Giovanni Peri looked at the
effects of dif-
I
GlobalÌ2ation Is Good for You" 515
ferential rates of immigration to various American states in the
1990s
and 2000s. Peri found that "an increase in employment in a U.S.
state of
1 percent due to immigrants produced an increase in income per
worker
of 0.5 percent in that state." In other words, more immigrants
meant
higher average wages for all workers.
Discussion Questions
1. The positive effects of free trade are of little comfort to
factory work-
ers who lose their jobs because their employer moved
production to
a country with lower labor costs. How do you make the case for
free

14. trade to those who bear the brunt of the costs? What happens
when
the "rising tide" of economic growth doesn't lift all boats?
2. Many critics of globalization argue that allowing goods and
capital
to move freely across borders only moves jobs to countries with
the
cheapest and most exploitable labor forces, where job
protections
are minimal (or nonexistent). Supporters respond that these
jobs,
even though they might not pay much by Western standards,
still
provide much better opportunities for people in developing
nations
than would otherwise be the case. Who do you think has the
better
case?
3. What is the alternative to globalization? What costs are
associated
with, for example, trying to protect domestic jobs from being
exported?
What are the benefits of such efforts?