JACKSON, Wyo. – Federal Reserve Chairman Ben Bernanke urged policymakers Friday to resist pushing for protectionist measures that would crimp globalization and the increased trade and higher living standards it could spur.
"Further progress in global economic integration should not be taken for granted," Bernanke said in prepared remarks to an economics conference sponsored by the Federal Reserve Bank of Kansas City.
"Geopolitical concerns, including international tensions and the risks of terrorism, already constrain the pace of worldwide economic integration and may do so even more in the future," he said.
Bernanke's remarks come as trade tensions have heightened between the United States and China and global trade talks have recently stalled. Americans have grown increasingly anxious about the potential to lose their jobs to competitors in China and India, two quickly emerging economic giants.
Against that backdrop, U.S. policymakers — as politicians have through the centuries — may be tempted to enact protectionist measures that would seek to slow globalization. But that would be unwise, Bernanke said.
Such protectionist feelings have cropped up through history when people feel that the increased global competition threatens their jobs and their livelihoods, he said.
"The natural reaction of those so affected is to resist change, for example, by seeking the passage of protectionist measures," Bernanke said. "The challenge for policymakers is to ensure that the benefits of global economic integration are sufficiently widely shared — for example, by helping displaced workers get the necessary training to take advantage of new opportunities," he said.
New technologies and faster communications have made it easier for companies to look beyond national borders for workers — often cheaper workers. In the United States, factory jobs once held by U.S. workers have been lost to overseas competition or moved offshore. Certain service sector jobs once in the United States also have moved overseas.
It marked the first time Bernanke has spoken to the high-profile economics conference as chairman of the central bank. A well-respected economist, longtime professor and a former Fed member, Bernanke took the Fed helm in February, succeeding longtime chairman Alan Greenspan.
In his prepared remarks, Bernanke did not discuss the future course of interest rates in the United States. With Bernanke's guidance, the Fed earlier this month halted the longest unbroken stretch of interest rate increases in recent history. The Fed had steadily boosted rates since June 2004 to fend off inflation.
But with the economy losing steam, the housing market cooling, job growth slowing and consumers turning cautious, the Fed decided to take a breather to assess how its previous rate increases — which take time to work their way through the economy — are affecting economic activity.
The Fed's goal is to raise rates sufficiently to thwart inflation but not so much as to cripple the economy.
Some economists think the Fed will stay on the sidelines. Others, however, think another rate increase could be in store at the Fed's next meeting on Sept. 20 or sometime later this year.