Brandeis International Business School

The Best of Times, the Worst of Times, and a Time of Amazing Opportunity
Judith M. Dean
Brandeis University
IBS Graduation Faculty Address
May 13, 2018

Dean Petri, “Dean” Graddy, Professor Basu; faculty and staff; parents, guests, and graduates! It is my honor to speak to you today, in celebration of the IBS graduating class of 2018!

“It was the best of times, it was the worst of times.” These are Charles Dickens’ immortal words from A Tale of Two Cities, a novel written about the French revolution. As the US sits on the edge of a trade war with China, these words seem more relevant than ever. Today, amidst amazing global prosperity, relations within and between countries have been clouded by misinformation, misunderstanding and fear. You are starting a great adventure. Let me tell you why I think it’s the best of times, why it’s the worst of times, and why it’s a time of amazing opportunity for you to make a difference in this world.

It’s the best of times! The UN’s first Millennium Development Goal was to reduce the proportion of the world’s population living in extreme poverty by 50%, by the year 2015. This goal was actually achieved 5 years early! In 1990, nearly 2 billion people were living in extreme poverty. A large share lived in China and India. But by the early 1990s, both countries had launched broad economic reforms that led to remarkable results. By 2011, China’s average income has grown by more than 500%, while India’s has grown by nearly 300%. Poverty had also fallen dramatically. In China, the share of the population living in extreme poverty fell from 57% to 8%, and in India, from 46% to 21%.* Significant poverty reduction also occurred in Africa and Latin America. While there is still a long way to go, there has been great progress in helping alleviate dire poverty globally.

As the World Bank wrote in a major study in 2016, trade has been a major driver of global poverty reduction. The 1990s reforms undertaken by both India and China involved dramatic reductions in trade barriers, followed by tremendous growth in trade. There are good reasons to expect that freer trade would help reduce poverty. Many of the poor work in industries and agricultural production in which their country has a comparative advantage. Freer trade would expand these activities, raising national income and purchasing power. We’d also expect it to generate faster growth, through: global competition, access to new technology and cheaper inputs, increased foreign direct investment, and participation in global value chain production. But freer trade alone will not solve world poverty. In fact, domestic impediments can reduce the gains from trade, or prevent those gains from reaching the poor. Restrictions on labor mobility, for example, can inhibit workers from moving into growing industries. Distortions in financial markets and investment regulations can prevent firms from taking advantage of economies of scale or new technologies. Domestic reforms are crucial, so that gains from freer trade can reach the entire population.

It’s the worst of times. In 2017, the new US administration began a series of changes to US trade policy that are closing off its markets to global trade. The US withdrew from the Trans-Pacific Partnership, a nearly completed free trade agreement among 12 countries. The US then threatened to withdraw from the NAFTA—a 20+ year-old free trade agreement with Canada and Mexico. Both Ford Motors and GM were threatened with trade barriers if they made new investments in auto production in Mexico. This past year, the US imposed new trade restrictions on many goods, including Chinese solar panels, Indian steel products, and Korean and Mexican washing machines. Most recently, the US imposed a 25% tariff on all steel imports, and large trade barriers on China, triggering a trade war.

The cost of US barriers is high. Steel is used as an input into many products—automobiles, aircraft, household appliances, furniture, etc. Many of these US industries have strongly opposed the steel tariffs, arguing that they will raise costs to US consumers, reduce US industry sales, and threaten US workers’ jobs. Major steel exporters have threatened to retaliate, raising prices and shrinking the volume of trade even further. Even the threat of trade barriers caused Ford and GM to abandon new investment and production plans in Mexico. But autos are produced jointly by firms in the US, Canada, and Mexico, as well as firms in the EU, UK, and East Asia. In a world of global supply chain trade, trade restrictions have a domino effect throughout the chain, raising costs for all producers, and thus, ultimately for consumers as well.

For many low and middle income countries, the US is a major source of imports and destination for exports. Closing US markets threatens their continued progress in growth and poverty alleviation.

At this point you may be thinking, “Oh no, another economics lecture on trade!” I think I may have earned my Star Wars knickname. You remember how Episode 1 began? “A long time ago in a far away galaxy…Turmoil has engulfed the Galactic Republic. The taxation of trade routes to outlying star systems is in dispute.” My students called me “Jedi Judy, fighting for freer trade in the universe!”

So let me tell you why this is a time of amazing opportunity for you! You have all worked hard to acquire knowledge and skill in finance, economics, and business. But at Brandeis, you have also heard the importance of truth and justice. As you step into your next adventure, you have a chance: to bring truth where there is misinformation and misunderstanding; to bring light instead of heat to contentious issues; to help bring about just treatment of people in all countries.

Some of you will be working for investment banks, using your skills in risk assessment. You have a chance to collect the right data and provide accurate assessments of potential investments in many countries and industries. You may have the chance to improve the assessment tools, to facilitate better decisions on foreign investment—especially in emerging markets. You can help people understand why foreign investment can bring benefits to both the source and the host country.

Some of you will go into other financial institutions. Here you may have the chance to improve access to finance for many small and medium scale firms who are underserved in both the US and many other countries. You may be able to help develop better systems to evaluate these firms’ performance, so that they can demonstrate their potential for future growth. You may also have a chance to reduce financial impediments faced by workers and firms, so they can take advantage of the new opportunities created by trade.

A number of you will be in business. You may be entrepreneurs, offering online high tech services to companies in many countries. You may be working for a multinational in a global value chain, or a firm in an emerging market that is a key link in that global value chain. These are opportunities to demonstrate that trade between countries is mutually beneficial. By jointly producing goods, foreign and domestic firms can benefit from each other’s strengths. Here you can help people understand that trade is not a zero-sum game. It’s about making better products more efficiently, in order to bring prosperity to all.

It really is a time of amazing opportunity for you to make a difference in this world, not only through your academic training, but through a shared commitment to truth and justice. Wherever your next steps take you, we wish you great success, and look forward to hearing about your latest adventures!

*World Bank, World Development Indicators. Downloaded 5/12/2018