William C Dudley: Making globalization work Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Central Bank of Brazil, São Paulo, 1 March 2018. * * * Thank you, Ilan, and thanks to the Central Bank of Brazil for organizing this event. It is a pleasure to have the opportunity today to talk about the issue of globalization. As always, what I have to say today reflects my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System.1 Although the debate about the benefits and challenges of globalization is not new, it has recently come into sharper focus. This debate is important to all of us, and I think it is particularly relevant to Brazil given its importance in the global economy. Globalization means different things to different people. In my remarks today, I will focus on the role of globalization as a force for international economic integration and economic development. I will highlight three themes: First, the important role that trade plays in promoting higher standards of living globally. Second, how changes in trade can create challenges for industries and their workers when they lose competitiveness. Insufficient attention has been given to this issue. We must do better in addressing the very large costs that can be imposed on particular communities and households. Third, the answer to those challenges is not greater protectionism.
Withdrawals from the fund at 4 per cent can therefore finance 15 per cent of public spending in 10 years’ time. This can continue on a permanent basis without reducing the capital in the fund. The fund will therefore lead to smaller cuts in government welfare spending than would have been the case without the fund as the costs related to the ageing of the population have an impact on government budgets. The actual building up of the fund may span a short generation. A fund with investment abroad enables Norway to separate the revenues generated by oil and gas production from petroleum revenue spending. An alternative could have been to regulate the production rate, keeping our wealth under the sea bed for a longer period, as was attempted in the 1970s when the production ceiling was set at 90 million standard cubic metres per year. Oil companies currently produce 240 million standard cubic metres per year. The fund acts as a buffer between widely fluctuating oil revenues and domestic expenditure. The annual spending decision can be made independently of the size of the revenues. Thus, the fluctuations in government oil revenues do not have an automatic impact on the Norwegian economy. The fund also has a stabilising effect on the krone exchange rate as capital outflows increase when Norway’s petroleum revenues rise. As a savings plan, the fund enables petroleum revenues to be used by not only the current generation but also future generations. The fiscal rule ensures that this is the case.