At the same time, I believe that reducing real and financial integration via harsh protectionism is tantamount to destroying machines, as the Luddites did during the industrial revolution. In fact, outright protectionist measures have adverse side effects that reduce economies’ growth potential. Over time, these side effects may reduce welfare by more than the problems they seek to address.
Real gross domestic product (GDP) rose at a subdued 1 percent pace during the first half of the year and only 1-1/4 percent over the past four quarters. This pace likely underestimates the momentum in aggregate demand because it includes a sizable inventory correction that began early last year.