Globalization: Make Love Not War
If you listen to many exporters and consultants, you?d reckon further globalization was inevitable. The Internet tightly wraps the world together, after all, and nations have become more and more interdependent. Even the awkward embrace between the U.S. and China — poor-nation creditor and rich-nation borrower — underscores the deepening economic ties.
But a January paper by economists Daron Acemoglu of Massachusetts Institute of Technology and Pierre Yared of Columbia University, published by the National Bureau of Economic Research, is a reminder that peace is the soil that nourishes trade. The two economists compared the progression of trade between 1988 and 2007 and the progression of militarism over roughly the same time frame and found that countries that experience an above-average increase in military spending are likely to experience a below-average increase in trade.
?Militarism is negatively associated with trade,? the two authors argue.
The economists use an increase in military spending or an increase in the size of the military as proxies for ?militarism.? Even when they remove from the try out countries actively at war, the findings are the same: more militarism equals less trade progression.
The authors acknowledge they can?t verify that militarism causes the trade effect; rather they are making a correlation — and a warning. ?Globalization is not irreversible,? they say.
That was certainly the case during the last fantastic epoch of globalization between the end of the Napoleonic wars in 1815 to outbreak of World War I a century later. Trade and investment were among the offended of the battles in Europe and the Fantastic Depression that followed in the 1930s. Global integration didn?t resume in intense until the long peace after World War II.