Doug Irwin: evaluation

Transcript context

…Will this happen again with Africa and South Asia? After all, those are billions of people. Tariffs aside, their infrastructure is often so bad that the real tax on trade, all costs considered, is quite high now. You could imagine it falling a great amount, both by liberalization, but also by better infrastructure. So will we have this period again in the future? Once again, the 1990s was special because we had the collapse of communism, the fall of the Berlin Wall, and so a lot of regime change that led to some of these things. We need a big reform moment in Africa. I agree with you entirely that Africa’s the big chunk of the world where there are a lot of people, and they’re still very closed to trade. They both have trade policies and bad infrastructure that greatly increase trade costs. So if we’re going to see big growth in the future, you’d think that’s where it’s going to be. But I don’t think we’re going to necessarily have a big reform moment in Africa where there’s a simultaneous opening up. It could be more piecemeal. It could be more drawn out over time. That’s where the growth could occur. I don’t think it’s going to be a big bang, like we saw in the 1990s. Globalization theorists used to write about the death of distance, it was called. That doesn’t actually seem to be true — what we call the gravity equation, how much trade depends on distance, it doesn’t seem to have changed much over time. That is, you still tend to trade with countries that are close to you. If you look at real estate values, what’s really gone up are a few major cities, such as New York City, London, San Francisco/Silicon Valley. It seems location matters more than ever before, and yet there’s more trade. What’s the right way to think about that apparent paradox?…

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