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Saturday, May 05, 2007

The benefits of globalization

The Dallas Fed's annual report for 2006 is aptly titled "The Best of All Worlds" and focuses on the trends and benefits of globalization. As usual, the Dallas Fed does a great job of showing how globalization and international trade help not only the domestic economy of the United States but also the other countries of the world.

This is from one of the chapters:

The report also has this interesting relationship:

Economic theory predicts that more intense competition, whether domestic or foreign, forces firms to be more efficient, to lower costs, and these pressures combine to keep prices falling. Some might point to the U.S. automobile companies as examples of how foreign competition is costing domestic jobs, but the alternative is to have higher prices, which likely impact more people in a negative way than they help people in a positive way.

Some might suggest that there are other possible explanations for the relationship in the graph above, but it is unlikely that they would jive with the other relationships the Dallas Fed provide in their annual report.

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