Globalization, Trade, GDP

Imagine: The Gaia Economy

By, 11/23/2007

In the 1960s James Lovelock introduced the popular Gaia Hypothesis, proposing the entire earth (living and non-living) is part of a complex interacting system functioning as a single organism. (Read more about it here: http://en.wikipedia.org/wiki/Gaia_hypothesis.)

Another baby-boomer, utopia-dreaming mantra of world unity was John Lennon's 1971 song: Imagine. Everyone knows it. (Come on sing along, you know you want to.) Imagine there's no countries, it isn't hard to do…

It's said that Lennon described the song as "an anti-religious, anti-nationalistic, anti-conventional, anti-capitalistic song, but because it's sugar-coated, it's accepted." He also (supposedly) said Imagine is "virtually the Communist Manifesto."
http://en.wikipedia.org/wiki/Imagine_%28song%29

Believe it or not, both visions of utopia are starting to come true! But probably not quite in the way Messrs Lennon or Lovelock would've imagined. It's no small bit of irony that the world is more cohesive today—and growing evermore so—precisely because of capitalism and globalization. Call it the Gaia economy.

But we think folks are still too often focused on their domicile country and fail to see the bigger picture. At this point, it's not just important for investors to recognize the Gaia economy, it's imperative. Gaia isn't just the stuff of multi-lateral governmental trade pacts or big multinational corporations. Everyone's affected by it, even the little guys.

Smaller Companies Grab Bigger Share of Surging U.S. Exports
By Courtney Schlisserman, Bloomberg
http://www.bloomberg.com/apps/news?pid=20601109&sid=aXW6MDFmxRFo&refer=home

A few benefits of a Gaia economy include:

  • More stable and consistently positive global GDP growth.
  • A better form of portfolio diversification: Global stock portfolios have smoother rides than single-country portfolios, and often capture greater benefits. (Just think of how much you'd have missed if only invested in US stocks the last five years!)
  • Currency fluctuations matter little. Currencies are a zero-sum game with a global view. If the dollar is down, then the non-dollar is up, and vice-versa. To the global economy, it's all just different flavors of money.
  • Trade deficits don't matter. Do we ultimately care if California has a trade deficit with Connecticut? No! Likewise, it doesn't matter much between countries either.
  • Competitive juices flow. Just like Nevada doesn't try to compete with California on agriculture, countries don't need to prop up industry where it's less efficient.

Therefore, one of the biggest risks to stocks and the economy is governments blocking the global Gaia initiative (AKA protectionism). Potential barriers to free trade could kill the global organism. But for all the political rhetoric lately, the trend seems to be in globalization's favor. World trade borders are evaporating and new trade accords are signed regularly. Governments are increasingly aware their countries aren't islands. To wipe out the percentage of GDP arising from foreign lands—for any developed country today—would effectively cripple it. The recent decision to reject tariffs on Chinese paper goods is only one example of many.

Asia Pulp & Paper Commends US Decision to Reject Dumping Duty on China Paper
By AFX News Limited via Forbes
http://www.forbes.com/markets/feeds/afx/2007/11/23/afx4367876.html

The best way to imagine accelerating global growth and prosperity is to continue opening borders, eliminate tariffs and other fees, and allow evermore folks (particularly in developing regions) to participate.

We aren't saying the world isn't without its problems, or even that globalization is the answer to all ills. Huge economic and cultural challenges remain:

U.S. Private-Equity Kings Negotiate a Maze in Japan
By Andrew Morse and Yukari Wantani Kane
http://online.wsj.com/article/SB119576763431801357.html?mod=todays_us_page_one

But for all that, the web of economic interdependence grows denser by the day—countries and regions inextricably linking themselves together. And there is much further to go.

We imagine a world of free trade where governments allow capital and goods to flow freely through borders. You may say we're dreamers, but we're not the only ones. We hope someday you'll join us, and the world will be as one.

*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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