"The Federal Reserve is a complex organization, and many Americans understand very little about how it carries out its duties and impacts their lives, let alone how it is evolving in the changing environment. Yet, this understanding can contribute significantly to public well-being and to the Federal Reserve’s policy goals as well. The Federal Reserve has been long committed to enhancing public understanding of its activities, the economy, and the financial system through a variety of outreach programs and educational materials." - Janet Yellen, President, Federal Reserve Bank of San Francisco.

Globalization: Threat or Opportunity for the U.S Economy?

This month’s issue of Econ Ed and the Fed highlights economic research published in a past edition of the FRBSF Economic Letter.1 Globalization: Threat or Opportunity for the U.S. Economy? summarizes a speech given by past 12th District CEO and President, Robert T. Parry, at the Hawaii Society of Investment Professionals in Honolulu on April 29, 2004.

This month’s activities will introduce students to the following economic concepts: comparative advantage, specialization, opportunity cost, productivity, globalization, outsourcing, and offshoring. (View the state standards that align to these concepts).

Economic Letter Summary:

This Economic Letter addresses the issues of globalization and free trade as it relates to the U.S. economy and the American worker. The author focuses his discussion on four key questions:

• Why are most economists in favor of free trade?
• What exactly are “outsourcing” and “offshoring?”
• Is globalization a threat or an opportunity for the U.S. Economy?
• What can policies do to help U.S. workers?

The author provides an insightful examination of the pros and cons of free trade by analyzing the effects of increased productivity on the American worker. The article concludes by stressing the importance of improving the U.S. education system: “Education is the bedrock of our current edge in technology and productivity. It’s the key to producing workers with the flexibility to learn new skills as market conditions evolve. And it’s the hope and promise we must provide for future generations of Americans.”

1 Economic Letters are short essays on current and pertinent economic topics from the Federal Reserve Bank of San Francisco’s Economic Research Department. For letters on a variety of other topics and/or to subscribe, please visit our FRBSF Economic Letters web page.