Reaction to Globalization and Deindustrialization
Written by: Joe Morris Doss
Americans report a lack of agency, that most seem to feel that we have very little say in what is going on and that we are relatively helpless to do anything about what bothers or concerns us. At the Threshold is offering a series that is intended to examine the causes of that frustration.
Globalization is a fact. This is producing a very different mode of operation internationally and domestically. Americans are finding the change highly exciting, very scary, and often painful. Some are all for it; some are absolutely against it; many are just confused and waiting to see what things look like when enough of the smoke clears.
Trade agreements are opposed by politicians on the left and on the right, from Bernie Sanders to organized Labor to Donald Trump. Others who also represent both the left and the right, from President Obama to most Republicans in Congress, are all for free trade and the agreements that enhance it. That alone is confusing enough.
If you understand it and embrace it you are pleased that globalization is widening and deepening in almost every conceivable dimension. Anyone can do business with anyone else anywhere. America’s hardware, software, automobile, pharmaceutical, and other companies all depend more than ever on sales abroad for their growth; 40% of the S&P 500’s revenues are international. The American economy is increasingly dependent on globalization with respect to the inflows of talent and investment and outflows of goods, services, and capital seeking higher returns. If you are in favor of all this, it is very likely that you would be in favor of opening America to engagement with the whole world in more ways than simply doing business. You are, if you will, “open” to internationalism and the whole new dispensation about how the world works.
If you have lost a job because manufacturing plants are closing down, or if you live in large regions of the nation where the pain of unemployment is being broadly shared, you are likely to blame the movement of companies abroad and view international labor competition as unfair. It is likely that you would be more closed to “internationalism,” generally. For example, you would be more likely to resent the immigration of new peoples into the land, and perhaps not only because of labor competition, but because of a rising wish to be left along and closed to the rest of the world. Besides open borders and free trade, you might resent cosmopolitan culture and global intervention. You might just find a candidate appealing who is for closed borders, trade barriers, local and nationalistic culture, and an America First foreign policy.
In an age of anxiety, that closed posture might have a shot at winning. On trade agreements, for example, though supporters represent both the left and right wings of the political spectrum, the opposition is moving into the lead at this point: 60 percent of Republicans, 49 percent of Democrats and 50 percent of independents believe that trade agreements are mostly harmful (according to a Brookings Institution/Public Religion Research Institute study).
OK, but where does this picture leave us? Here is the reality, and so, “get over it:” globalization is here to stay. We have to adjust, pitch in, and continue to work for the common good.
Take the movement of American manufacturing to foreign lands:
It is tragic to see the suffering caused by those whose jobs are taken abroad, but then it is also tragic to see the suffering of human beings in other countries who lack jobs and livable wages. Christians are just as concerned for neighbors who are far off as for neighbors who are near. The evidence is stacking up to indicate that globalization is better for the world, and if that is so, then Christians must be ready and willing to work for the good of all.
Meanwhile, there is always going to be “the next China” to attract labor-intensive, low-wage manufacturing. In fact, America’s efforts to bring back home one or two million manufacturing jobs pale in comparison to the nearly 100 million manufacturing jobs that are flowing out of China and recirculating to places where there is cheaper labor costs: Myanmar, Bangladesh, Ethiopia, and other low-wage, low-skill countries.
The output of American made goods by American companies will continue to decline because the math still clearly favors arbitrage – (1) producing at the cheapest price and (2) closest to one’s customers. The combination of cheaper labor and being able to build close to the customer is the optimal way to manufacture. Indeed, the American manufacturer is discovering that building closer to the customers they are reaching right at home can be cheaper than the savings to be made by hiring cheaper labor elsewhere. In an age of globalization, the hope for increasing American manufacturing is largely in having foreign companies build locally in order to be closer to the Americans to whom they hope to sale what is manufactured. This is apparent, for example, with Japanese cars.
The best way to increase manufacturing at home is not to try to bring plants and companies back, but to improve the infrastructure, making it easier to build and sale across the land. Of course this includes improvement of the social infrastructure in states and cities wishing to attract high-wage business, e.g. schools, broadband availability, culture, etc.
One other fact should be taken into account as workers loose manufacturing jobs: a relatively new problem is about to overtake American workers: robotics. The only hope going forward is to provide training for new jobs and new skills, while supporting those who will need to be retrained.
Take those trade agreements:
Is it not clear enough that The US got the deal it wanted with Iran regarding nuclear weapons production because it had entered into trade agreements with countries that cooperated with the imposition of economic sanctions?
Are enough people paying attention to what “the turn to the East” has meant to American business enterprises, and how much damage would be done economically if the US does not enter into pan Asian trade agreements that are fair, innovative, and farsighted? A study by Peter Petri and Michael Plummer estimates that the Trans-Pacific Partnership would boost American incomes by $131 billion.
Does anyone think Mexico would have become as democratic and economically healthy without NAFTA? And, the flow of Mexican and US immigration during Obama’s term has mainly been the voluntary exiting of Mexicans on their way home to capitalize on the growing economy. The smartest thing the US can do is to send job creating and socially stabilizing supply chains back with those people returning Mexico, investing there. America should begin to think of itself as the heart of an integrated North American supercontinent. The infrastructural, economic, cultural, and strategic blending of north America has become an irreversible fact.
Though developments are still so rapid and so fluid that it is difficult to draw definitive conclusions, overall and on balance there is evidence that globalization is good for the American economy. A study by the Peterson Institute found that past trade liberalization laws added between $7,100 to 12,900 in additional income to the average household. And, a more efficient manufacturing system makes it possible to divert resources into things that improve the quality of life. Neil Irwin points out that Pittsburgh has lost 5,100 steel jobs since 1990, but it has also gained 66,000 health care jobs over the same time.