Consumers and corporations, not governments, are driving economic globalization, noted economist Murray Weidenbaum told a Spokane audience Thursday.
Weidenbaum, chairman of the Council of Economic Advisers under President Reagan, said pacts like the North America Free Trade Agreement are secondary to everyday decisions in the marketplace.
“Individual businesses are the prime actors in the world economy,” he said.
Weidenbaum said half of all trade between some countries consists of intra-company transfers of goods.
And some products with a foreign name, the Honda Accord, for example, may have more domestic components than another with an American name, like the South Korean-made Pontiac Lemans.
Although Weidenbaum said the U.S. economy remains the world’s strongest, with good prospects, he added that trading blocks coalescing in Europe and East Asia may be the most dynamic going into the next century.
As the European Union expands to include more countries, including members from the former Soviet bloc, Weidenbaum said the continent would become the most extensive market in the world.
In East Asia, Weidenbaum said Japan may be struggling through a slight recession, but the region as a whole is thriving.
The growth is particularly notable because most of the capital fueling the growth has been generated within Asia, he said.
On other matters, Weidenbaum said:
The Federal Reserve Bank should maintain its focus on fighting inflation, and not engage in a futile effort to prop up the dollar, which will remain the world’s foremost currency despite its recent slide.
Reforms under consideration in Congress should reduce the tax burden on saving and investing.
High taxes and extensive regulations are forcing more U.S. companies to move more of their operations overseas.
Weidenbaum’s address was sponsored by Gonzaga University, where he has delivered several lectures during the last week as a visiting professor.