WASHINGTON - Central bankers should educate people about the value of globalization and free trade and fight inflation to ensure that markets stay open, Federal Reserve Board Chairman Alan Greenspan said during a speech Tuesday in Mexico City.
At a conference in honor of the 75th anniversary of the Bank of Mexico, Mr. Greenspan said that central bankers can make two important contributions to the debate over globalization, which has been highlighted by riots against the World Bank and the International Monetary Fund in Seattle and the nation's capital this year.
"We should not hesitate to remind our fellow citizens of the manifest net benefits of free trade in goods, services, and assets, benefits that accrue not only to all trading partners on average but also especially to some of the least fortunate within those trading societies," Mr. Greenspan said.
He added, "We monetary policymakers must keep hold of the anchor provided by price stability so as to support maximum sustainable economic growth over time."
In a speech heavy on analysis of historical trends, Mr. Greenspan said that despite the impression many may have of an increasingly interdependent global economy, the percentage of U.S. gross domestic product that is shipped overseas is roughly the same now as it was at the end of the 19th century. While trade has increased markedly in the past 50 years, he said, it has done little more than reverse the decline in trade levels that occurred in the first half of the 20th century.
"In many important respects, the past half century has represented an uneven struggle to repair the close linkages among national economies that existed before the First World War," he said. The war, he said, resulted in barriers to free trade that have taken most of the intervening century to dismantle.
He urged central bankers to steer clear of market disruptions that could provoke a similar reaction now. "To repeat that error would be a tragic act of foolishness and waste," he said.
