Globalization Reality

It seems to me….

Globalization is not a monolithic force but an evolving set of consequences – some good, some bad and some unintended. It is the new reality.” ~ John B. Larson[1].

Politicians always seem more interested in pandering to an anxious uninformed electorate than in fostering a meaningful debate over actual issues. The effects of globalization and free-trade is one of those subjects that has become an issue of voter concern even though the vast majority of both politicians and voters have personally benefited from it.

There shouldn’t be any disagreement that globalization and free-trade has significantly benefited all nations, both foreign and the U.S., but also has resulted in increased wealth inequality within countries in part by creating concentrated groups whom those advantages have bypassed[2]. While free-trade has reduced the price of goods and services, it has not always benefited labor markets – from 1990 to 2008, essentially no net new jobs were created in those areas most exposed to foreign competition.

Globalization has reduced wealth inequality at a worldwide level but also has to some extent facilitated an increase in that inequality at a national level. Large international corporations are able to relocate capital and labor for economic advantage at the expense of labor. The U.S. is at a disadvantage in that it is one of the few countries without an economic policy explicitly tasked to connect capital and labor.

Globalization is not a zero-sum game. In spite of local economic disruption, increased globalization is of general benefit to everyone. Unfortunately, many emerging and developing countries are facing economic challenges and long-term structural growth declines limiting their convergence with advanced-economy nation’s living standards at previously anticipated rates primarily due to political instability, conflict, and corruption.

Complaints of unfairness in global trade are legitimate but pretending the U.S. is being taken advantage of also ignores complaints lodged against the U.S. with the World Trade Organization for our unfair practices. All nations understandably attempt to maximize their trade balance; the U.S. runs a trade deficit partly due to the dollar’s role as a global reserve currency, not necessarily because of unfairness. Countries do manipulate their currencies but not essentially for economic gain; e.g., recent fluctuations in the Chinese renminbi was less about trade than preventing currency flight by Chinese investors concerned about their slowing economy. Tariffs never are a viable solution as they penalize all consumers rather than benefiting only those they are intended to help.

Contrary to what many Americans think, only about 700,000 of the 6 million jobs offshored have been to China. The remainder were lost primarily resulting from changing consumer demand or to technology allowing fewer employees to accomplish the same amount of work than previously required. (Won/loss figures are misleading as it is estimated that nearly 1 million manufacturing jobs have returned to the U.S. since 2010.)

What is frequently lost in the discussion is the simple fact that most of the jobs lost to other countries through off-shoring are the very same jobs that would have been lost through automation if they had remained in this country: that those jobs still exist anywhere is solely attributable to low labor costs. The solution is not demanding products sold in the U.S. be manufactured here but rather more innovative labor policies: training/retraining, innovation incubators….

There are justifications for facility closures other than outsourcing to other countries such as products changes, strikes, sales reductions, or numerous other reasons. Production changes frequently necessitate new facilities: steel is no longer produced the way it was in the past as neither are automobiles or clothing.

It is not correct to judge corporate relocations only by their negative impact on a small geographical area, which admittedly can initially be very negative to those affected. That consequence, while challenging, can eventually be advantageous. Investment in training/retraining, job recruitment fairs, and employment bureaus for those affected is necessary to compensate for the loss of jobs. Areas primarily dependent upon single employer need to diversify. The time to prepare for corporate relocations is before a company moves, not after.

Cities and states provide incentives for corporations to relocate to their area but complain when the corporation again relocates for another better offer. If a company was willing to relocate once, it is clearly indicating it would do so again in the future. The lesson should be that any incentive should be in externals that businesses find attractive such as availability of well-educated potential employees, up-to-date infrastructure, and recreational opportunities.

Small business incubators, an organization designed to accelerate the growth and success of entrepreneurial companies through an array of business support resources and services that could include physical space, capital, coaching, common services, and networking connections should be created in affected areas.

When businesses do relocate, long-term vacant facilities become monuments to the past reminding area residents of lost employment availability and should be demolished at the owner’s expense if empty for over six months. The so-called rustbelt is dotted with those relics where no one will relocate or willingly re-build until they are removed. It normally is best to wipe the slate clean and start over.

While conventional economics holds that workers transition to other labor markets in different areas following loss of employment, this is no longer as feasible as previously believed for a variety of reasons such as spousal employment, home mortgages, or child program enrollment. Relocation was much easier when only one spouse was employed. Now that both spouses must work to meet normal living expenses, it is no longer reasonable to expect one of them to give up their personal career path for the possibility of the other finding employment elsewhere. Many homeowners remain underwater owing more on their existing mortgage than their home is worth. And children are frequently enrolled in special programs parents are unwilling to forgo.

People have always only reluctantly left family, close friends, or ethnic areas where support might be available. When other factors also are considered, relocation is extremely difficult especially when funds are limited and employment prospects unknown. It must be accepted that labor-market adjustment attributable to globalization affects local employment rates and wages for much longer than previously anticipated unless sufficient aid is provided.

That’s what I think, what about you?

[1] John Barry Larson is the U.S. Representative for Connecticut’s 1st congressional district, serving since 1999.

[2] Foroohar, Rana. After Decades Of Consensus, The Value Of Global Free Trade Is Being Contested By The Left And Right. What Every Voter Needs To Know, Time, 11 April 2016, pp 32-35.

About lewbornmann

Lewis J. Bornmann has his doctorate in Computer Science. He became a volunteer for the American Red Cross following his retirement from teaching Computer Science, Mathematics, and Information Systems, at Mesa State College in Grand Junction, CO. He previously was on the staff at the University of Wisconsin-Madison campus, Stanford University, and several other universities. Dr. Bornmann has provided emergency assistance in areas devastated by hurricanes, floods, and wildfires. He has responded to emergencies on local Disaster Action Teams (DAT), assisted with Services to Armed Forces (SAF), and taught Disaster Services classes and Health & Safety classes. He and his wife, Barb, are certified operators of the American Red Cross Emergency Communications Response Vehicle (ECRV), a self-contained unit capable of providing satellite-based communications and technology-related assistance at disaster sites. He served on the governing board of a large international professional organization (ACM), was chair of a committee overseeing several hundred worldwide volunteer chapters, helped organize large international conferences, served on numerous technical committees, and presented technical papers at numerous symposiums and conferences. He has numerous Who’s Who citations for his technical and professional contributions and many years of management experience with major corporations including General Electric, Boeing, and as an independent contractor. He was a principal contributor on numerous large technology-related development projects, including having written the Systems Concepts for NASA’s largest supercomputing system at the Ames Research Center in Silicon Valley. With over 40 years of experience in scientific and commercial computer systems management and development, he worked on a wide variety of computer-related systems from small single embedded microprocessor based applications to some of the largest distributed heterogeneous supercomputing systems ever planned.
This entry was posted in Automation, Automobiles, China, Clothing, Corporation, Economy, Education, Employment, Employment, Finance, Free-Trade, Globalization, Income, Incubators, Inequality, Infrastructure, Investment, Jobs, Jobs, Labor, Manufacturing, Offshoring, Outsourcing, Recruitment Fairs, Relocation, Renminbi, Research, Retraining, Steel, Trade, Trade, Training, Transportation, Transportation, Unemployment, Wages, Wages, Wealth, Workers, World Trade Organization and tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink.

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