Open Economies Are Still Key
The world needs more flows of investment, services, commodities and manufactured goods to right the ship, not less of them.
The serious and growing financial problems gripping the United States are affecting nations around the globe, evidence of the vast sweep and integration of the world's economies. Stock markets are reeling from London and Tokyo to Buenos Aires and Johannesburg. Currencies have fluctuated wildly. And prices for copper, oil and other commodities -- driven up by strong international growth, to the benefit of developing nations where they are produced – have fallen in anticipation of a global downturn that will surely cut demand. Rarely has the expression "It's a small world," sounded more like a curse. The temptation, then, will be strong in many countries to try to shield themselves from future shocks as they work through the crisis. Such protectionist instincts are understandable, but they are also shortsighted. Amid a global credit crunch that is stifling commerce in nations both large and small, the world needs more flows of investment, services, commodities and manufactured goods to right the ship, not less of them. U.S. Secretary of Commerce Carlos Gutierrez told business leaders in Rio de Janeiro recently that nations with open economies will pull out of the current crisis faster than those that cut themselves off. "More than ever, trade is essential," Mr. Gutierrez said. During the Great Depression of the 1930s, he noted, the U.S. erred greatly in raising import barriers hoping to protect its economy. Instead, it sparked retaliation from other nations and worsened the global economic contraction. Thanks to computers, improved transportation and international financial markets, the world economy is even more integrated today. Improved regulation and market transparency surely will be needed, but the international community must work together to face the challenge. That means continuing to take advantage of comparative advantages by trading with and investing in each other. Now is not the time to raise the drawbridge and try to retreat to self-sufficiency, if such a thing were even possible. No nation can prosper, so to speak, when its citizens merely take in each other's laundry.