A story in the Washington Post said “20 years ago globalization was
pitched as a strategy that would raise all boats in poor and rich
countries alike. In the U.S. and Europe consumers would have their
pick of inexpensive items made by people thousands of miles away
whose pay was much lower than theirs. And in time trade barriers
would drop to support even more multinationals expansion and
economic gains while geo political cooperation would flourish.”
There is no question that globalization has been a good thing for
many developing countries who now have access to our markets
and can export cheap goods. Globalization has also been good for
Multi-national corporations and Wall Street. But globalization has
not been good for working people (blue or white collar) and has led
to the continuing deindustrialization of America.
Globalization is a complicated issue. It is necessary to evaluate the
pros and cons before drawing any conclusions.
Pros
Supporters of globalization argue that it has the potential to make
this world a better place to live in and solve some of the deep-
seated problems like unemployment and poverty.
1. Free trade is supposed to reduce barriers such as tariffs, value
added taxes, subsidies, and other barriers between nations. This is
not true. There are still many barriers to free trade. The
Washington Post story says “the problem is that the big G20
countries added more than 1,200 restrictive export and import
measures since 2008
PROMOTED
2. The proponents say globalization represents free trade which
promotes global economic growth; creates jobs, makes companies
more competitive, and lowers prices for consumers.
3. Competition between countries is supposed to drive prices down.
In many cases this is not working because countries manipulate
their currency to get a price advantage.
4. It also provides poor countries, through infusions of foreign
capital and technology, with the chance to develop economically
and by spreading prosperity, creates the conditions in which
democracy and respect for human rights may flourish. This is an
ethereal goal which hasn’t been achieved in most countries
5. According to supporters globalization and democracy should go
hand in hand. It should be pure business with no colonialist
designs.
6. There is now a worldwide market for companies and consumers
who have access to products of different countries. True
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7. Gradually there is a world power that is being created instead of
compartmentalized power sectors. Politics is merging and decisions
that are being taken are actually beneficial for people all over the
world. This is simply a romanticized view of what is actually
happening. True
8. There is more influx of information between two countries, which
do not have anything in common between them. True
9. There is cultural intermingling and each country is learning more
about other cultures. True
10. Since we share financial interests, corporations and
governments are trying to sort out ecological problems for each
other. – True, they are talking more than trying.
11. Socially we have become more open and tolerant towards each
other and people who live in the other part of the world are not
considered aliens. True in many cases.
12. Most people see speedy travel, mass communications and quick
dissemination of information through the Internet as benefits of
globalization. True
13. Labor can move from country to country to market their skills.
True, but this can cause problems with the existing labor and
downward pressure on wages.
14. Sharing technology with developing nations will help them
progress. True for small countries but stealing our technologies and
IP have become a big problem with our larger competitors like
China.
15. Transnational companies investing in installing plants in other
countries provide employment for the people in those countries
often getting them out of poverty. True
16. Globalization has given countries the ability to agree to free
trade agreements like NAFTA, South Korea Korus, and The TPP.
True but these agreements have cost the U.S. many jobs and
always increase our trade deficit
Cons
• The general complaint about globalization is that it has made the
rich richer while making the non-rich poorer. “It is wonderful for
managers, owners and investors, but hell on workers and nature.”
• Globalization is supposed to be about free trade where all
barriers are eliminated but there are still many barriers. For
instance161 countries have value added taxes (VATs) on imports
which are as high as 21.6% in Europe. The U.S. does not have VAT.
• The biggest problem for developed countries is that jobs are lost
and transferred to lower cost countries.” According to conservative
estimates by Robert Scott of the Economic Policy Institute,
granting China most favored nation status drained away 3.2 million
jobs, including 2.4 million manufacturing jobs. He pegs the net
losses due to our trade deficit with Japan ($78.3 billion in 2013) at
896,000 jobs, as well as an additional 682,900 jobs from the Mexico
–U.S. trade-deficit run-up from 1994 through 2010.”
• Workers in developed countries like the US face pay-cut demands
from employers who threaten to export jobs. This has created a
culture of fear for many middle class workers who have little
leverage in this global game
• Large multi-national corporations have the ability to exploit tax
havens in other countries to avoid paying taxes.
• Multinational corporations are accused of social injustice, unfair
working conditions (including slave labor wages, living and working
conditions), as well as lack of concern for environment,
mismanagement of natural resources, and ecological damage.
• Multinational corporations, which were previously restricted to
commercial activities, are increasingly influencing political
decisions. Many think there is a threat of corporations ruling the
world because they are gaining power, due to globalization.
• Building products overseas in countries like China puts our
technologies at risk of being copied or stolen, which is in fact
happening rapidly
• The anti-globalists also claim that globalization is not working for
the majority of the world. “During the most recent period of rapid
growth in global trade and investment, 1960 to 1998, inequality
worsened both internationally and within countries. The UN
Development Program reports that the richest 20 percent of the
world's population consume 86 percent of the world's resources
while the poorest 80 percent consume just 14 percent. “
• Some experts think that globalization is also leading to the
incursion of communicable diseases. Deadly diseases like HIV/AIDS
are being spread by travelers to the remotest corners of the globe.
• Globalization has led to exploitation of labor. Prisoners and child
workers are used to work in inhumane conditions. Safety standards
are ignored to produce cheap goods. There is also an increase in
human trafficking.
• Social welfare schemes or “safety nets” are under great pressure
in developed countries because of deficits, job losses, and other
economic ramifications of globalization.
Globalization is an economic tsunami that is sweeping the planet.
We can’t stop it but there are many things we can do to slow it
down and make it more equitable.
What is missing?
Leadership – We need politicians who are willing to confront the
cheaters. One of our biggest problems is that 7 of our trading
partners manipulate their currencies to gain unfair price advantage
which increases their exports and decreases their imports. This is
illegal under WTO rules so there is a sound legal basis to put some
kind of tax on their exports until they quit cheating.
Balanced Trade – Most of our trading partners can balance their
trade budgets and even run a surplus. We have not made any effort
to balance our trade budget and have run a deficit for more than 30
years resulting in an $11 trillion deficit. The trade deficit is the
single biggest job killer in our economy, particularly manufacturing
jobs. We need the government to develop a plan to begin to balance
our trade deficit even though this is not a political priority in either
party.
Trade Agreements – Both the NAFTA and the South Korean Korus
trade agreements might have been good for Wall Street and the
multi-national corporations but they eliminated jobs in America and
expanded our trade deficit. The upcoming Trans Pacific Trade
Agreement will do the same thing and Congress should not fast
track this bad agreement for a dozen reasons.
Enforcing the rules – China ignores trade rules and WTO laws with
reckless abandon. Besides currency manipulation they subsidize
their state owned companies to target our markets, and provide
funding to their state owned companies that dump their products in
America. They also steal our technologies, sell counterfeit versions
of our products, and impose tariffs and other barriers anytime they
want - as we do nothing to stop them. China does not deserve to be
on our most favored nation list and we need to tax their exports to
us until they stop these illegal activities.
What is good for third world countries, like Kenya, or countries
with tremendous growth, like China, has not been good for
American workers. Globalization is deindustrializing America as we
continue to outsource both manufacturing blue collar and white
collar jobs. Supporters of globalization have made the case that it is
good because it has brought low priced imported goods, but they
have not matched the decline of wages in the middle class and will
not offset the loss of many family wage jobs
Globalization is like being overwhelmed by a snow avalanche. You
can’t stop it – you can only swim in the snow and hope to stay on
top. I would like to make the argument that the US should try a lot
harder to swim in the snow and stay on top. We can’t stop
globalization but there are many policies and strategies we can use
to make it more equitable. We can enforce the trade laws, force the
competition to play by the same rules, and stop giving our
competitors the tools (technology and R& D) to ultimately win the
global war.
Mike Collins is the author of Saving American Manufacturing. His
website is www.mpcmgt.com.
