Impact of globalization on US jobs
One can certainly debate when globalization began in the United States. Was it when millions of slaves were imported from Africa? Was it during the Spanish-American war when the US sowed the seeds of a colonial empire, that, ultimately, never went far. Was it when the US signed the first free trade act with Canada in 1987. That was probably the most reasonable starting point for the purposes of this paper, because this paper places emphasis on labor market impacts.
The unemployment rate in the United States in October, 1987, when that act was signed, was 6.0%. When NAFTA came into force January 1st, 1994, the unemployment rate in the United States was 6.6%. Today, it is 4.1% (BLS.gov, 2017). Now, these outright facts aren't everything in terms of the debate about free trade's impacts on American workers, but they make the point quite clearly that any story being told isn't about the availability of jobs.
So what is the debate about? Labor leaders say it is about labor. AFL-CIO President Richard Trumka (2011) points out that globalization has transformed labor markets around the world, and the United States is certainly no exception. There are several key forces that drive globalization – these include but are not limited to technological improvements in logistics that reduce barriers to the flow of goods, trade agreements to lower trade barriers, and technology that seeks to improve communications. Some of these are organic developments, but some are not. Trumka argues that the elements of globalization that are negotiated – i.e. trade agreements – lack protections for workers. While capital and goods can move freely in an open market, workers cannot. And in many countries, workers lack basic legal protections, include the right to organize. Workers are seldom given a seat at the table in these negotiations. When labor cannot move as freely as capital or goods, that creates a situation where labor needs stronger protections, or otherwise it will be subject to exploitation. But are the forces of globalization to blame, or is there deliberate action at the national level that has undermined organized labor? Arguably more the latter – if your case study is the US, look to the Republican Party, starting with Reagan and the air traffic controllers as the source of reduced union rights, reduced union membership and reduced union political power. Indeed, Vachon and Wallace (2013) do make the point that "political climate variables are strong determinants of union density", and their findings are stronger for that variable than for their concept of globalization.
Trumka's conclusion that the working people of the world should be given voice is salient, but he is less convincing in arguing that this is at the globalization level – look to the national level to see where workers are getting a tough ride, because they aren't getting that same tough ride in Europe. Don't blame the rest of the world for the struggles of America's workers – that's a homegrown problem. Vachon and Wallace (2013) point out that union membership peaked in 1954, decades before any semblance of modern globalization – are we really going to blame a 30-year-old phenomenon for a 60-year-old trend?
NAFTA and the US
Does NAFTA harm the US? Good question. We've seen that the unemployment rate has dropped. So it's not in the number of jobs. We know that stock markets are way up, so it's nothing to do with the health of American corporations The economy has struggled, but that's more Gramm-Leach-Billey than NAFTA. Real wages have gone nowhere, but they haven't gone anywhere since Reagan. This really calls into question who the enemy actually is here. The negative trends seen in union membership and real wages predate NAFTA by years if not decades. Economic measures have improved since NAFTA. Indeed, the economic trendline was well ahead before the financial crisis, and that crisis was related to changes in financial legislation, not NAFTA.
Feng, Hu & Li (2013) make a further good point. They rightly note that the rise of China is a trade-related factor in shifting labor markets. It's basic math, really. Canada cannot shift US labor markets. Mexico can make something of an impact, but not to suppress real wage growth for twenty-three years. But larger global forces, and the entrance of China into global markets, most certainly can. China's entry into the World Trade Organization in 2001 really sent investment into Chinese production systems skyrocketing. Combined with automation, it is reasonable to see that China has had an impact on real wages, because of the cost-competitive nature of its economy. The authors note that this relates directly to offshoring, which creates a gap between those who own the capital and are thus beneficiaries of this practice, and the workers who lose their jobs and when they find new ones usually find worse ones.
NAFTA is a boogeyman for the peanut gallery, but there is no evidence that NAFTA hurts US labor en masse; anecdotal evidence aside, it creates more than it destroys.
Outsourcing Jobs
Now, unrelated to NAFTA is outsourcing of jobs. This is an interesting issue because improvements in both transportation and in communication are key elements of globalization. These are driven organically in part – outsourcing call center jobs is a matter of corporate policy to leverage technological improvements. Outsourcing production is a different matter, and its rapid rise directly relates to the reduction of trade barriers. Also to Americans always wanting cheap stuff and never figuring out that's why they are losing all their manufacturing jobs – it's not that globalization doesn't play a role here but market forces matter, too.
There are new jobs created from globalization, too, and the US has done very well on that front. The key here is that it's not the same people. A steel mill worker who gets laid off at the age of 45 and has a grade 10 education is not magically going to learn to code. This is important – labor markets do not adjust as quickly as capital markets do. A company can outsource jobs in a matter of months. Those workers may not ever be able to find work again. And that's in America, a nation of unprecedented internal mobility. Imagine being Salvadoran and listening to an American whine about having to move to another state to find work.
What never happened – either at the international level when trade deals are reached, or at the national level when the impacts of those trade deals becomes apparent, is that there was never anything put into place to actually help the people that were going to suffer. On aggregate, America does very well from globalization, because the rich and powerful always do. But there are still those who suffer, and they were not ever given consideration. That's what aggregate thinking does – you think we created net more jobs, but fail to realize that the people getting the new ones aren't the same ones who just lost theirs.
How Does Globalization Affect Developing Nations?
One might argue that globalization promotes income inequality, and that's not wrong. But that's also avoiding the facts, because the facts don't support the narrative. How's this for facts – There is a "robust" correlation between free trade and poverty reduction (Bergh & Nilsson, 2014). Even if inequality is rising, to care that the ultra rich are getting ultra richer is missing the point entirely; the point is that extreme poverty is being eradicated. The gap is widening, yes, but so what? Far fewer people are starving today, and when they are, it's usually in a country that lies outside of the globalization paradigm (i.e. North Korea, Niger, war zones, etc.).
Moreover, globalization does not worsen food crises. There are fewer of them, they are less intense, and again they occur in nations with no particular globalization impacts. Unless you think Niger is a major player in global trade. No reasonable person, looking at the evidence, could possibly reach the conclusion that poverty today is worse, that more people are starving, because of globalization. Every single measure, every single study, says otherwise. You may as well deny climate change while you're at it.
How Does Globalization Negatively Affect the Environment
Is globalization going to be blamed for climate change, too? Wow. Because nobody burned carbon before we started signing free trade agreements. It's like this – globalization is the result of burning carbon, not the cause of it. When we burn carbon, we power machines. These machines move goods, and now they move information, too. We relied on these machines since somewhere in the mid-19th century. A while before globalization. Like, a long while. We were always going to burn carbon, way too much, and we were never going to deal with climate change because basically we're really comfortable and we're kind of cowards, knowing that we'll be dead before the worst of it hits.
If you want to look at how globalization affects the environment, there are strong cases to be made; focus on that. For example, environmental regulations are typically viewed by business as a cost. It costs more to put protections in place than it does to just pollute. The pollution is an externality and without protections, that externality is worse, but the cost to business is lower. Business most definitely wants to offload environmental costs on anywhere but itself. Most Western countries, America excepted, have strong protections for the environment. There are a lot of reasons why China and other countries are cheaper places to produce, but a lack of environmental standards is definitely one of them. We offload a lot of environmental costs on developing nations, polluting their countries so we don't have to pollute ours.
This has strongly negative effects on the environment. In some nations, production outstrips local demand by a lot, so the environmental degradation of such a country is probably more than would exist if there was no trade. Trade doesn't necessarily increase pollution – other than long-distance shipping of course – it simply moves it around the globe.
How Does Globalization Affect "World Society"?
Not sure what world society is, but it's an interesting question whether or not globalization undermines democracy. Most organs of globalization are pretty laissez-faire. Proponents of globalization like to argue that it promotes democracy but do we really have more democracies than when the globalization era started? It doesn't look like it.
But what about the strength of existing democracies? That's where this becomes a really interesting discussion, because it seems that globalization does not have to undermine democracy, but the current ways in which it is being implemented it does. One example is the choice of stakeholders with a seat at the table during international discussions. We have already talked about how labor isn't represented – nor are unorganized workers for that matter. Most activist groups are shut out, but corporations are invited. There is actually a fairly narrow body of interests that set the agenda for globalization. This is why we have mobility of capital and goods – those things matter to the stakeholders at the table – while mobility of labor is not a thing. So most of the high level processes that drive globalization – when governments get together – lacks any semblance of democracy. Yet there are important decisions being made that affect people.
Another example would be investor-state dispute resolution mechanisms. These are in a lot of trade agreements, and what they do is they put the taxpayers of a nation on the hook for laws that infringe on the ability of a corporate to earn profits. Such cases aren't held in a transparent fashion, and who knows how judgments are brought about. There is nothing even remotely democratic about signing your taxpayers up for potentially limitless lawsuits that result in billions of dollars in settlements paid out to foreign corporations – or worse yet undermining laws that are in the people's interest to avoid such lawsuits altogether.
Here's the rub – you don't need investor-state dispute mechanisms. You don't need to exclude workers – who are a legitimate stakeholder group – from the table. This isn't globalization failing; its' globalization done wrong. It could be done right; it's just not being done right.
I don't think globalization has anything to do with cultural antagonism. I mean, how white do you have to be to think that cultural antagonism is a new thing? Pretty sure we've had that for as long as we've had cultures. Really, if anything, globalization reduces cultural antagonism. I know that sounds weird to someone whose people perceive themselves as losers in a global game, but when you visit a global city you see it. People are more connected than they ever were, and that breaks down barriers. Remember that transportation and communication are two driving forces of globalization and they both bring people together. This is one area where you could choose to be a pessimist and look at what's going on in the world around you, or cherry-pick incidents of cultures being railroaded by corporate interests. They are both happening, but the latter has been happening for centuries and the former is mostly something that's happened since globalization has taken root.
The Financial Crisis
Good luck finding a credible author who thinks globalization had anything to do with the causes of the recent financial crisis. Three words – Gramm Leach Billey. That's the dismantling of financial regulations that protected Americans for a long time. It's an American thing, and it's internal politics, not globalization. Yes, there were countries to which this contagion of toxic assets spread, but that again is an internal issue. The UK and Iceland got whacked because they loosened their rules; Canada and Australia did not suffer nearly as badly, because they had the old rules still in place. Political decisions in each country were the predictor of whether that country would be hit by the US-led recession. And in the US, it was the unwinding of financial regulation. Just because it's a bad thing that happened during the era of globalization doesn't mean the two are related; this is a correlation/causation fallacy.
Ways to Ameliorate the Negative Effects of Globalization
The first way to ameliorate the negative effects of globalization are to be intellectually honest about what those are. The financial crisis – nope. One culture exploiting another – nope. Climate change? Yeah, no. Stick with the science on this one. And blaming globalization for American domestic policies like Reagan's union-busting or Clinton's Glass-Steagall busting is pretty much dead wrong.
When you understand what is and is not caused by the forces of globalization, there are two approaches that should be taken. The first is to build protections into these systems when they are being developed. This is a huge failure – the failure to actually bring stakeholders to the table because you're afraid of what they'll say. The people in trade negotiations are pretty cowardly that way. If you don't listen, you won't learn. So that's really the first step. Ask workers and NGOs and activist groups about their concerns. Build safeguards in. Accept that any change brings about those who benefit and those who suffer. Understand that sometimes you can build safeguards to mitigate suffering, and make that a part of the process.
The other way to approach the issue is to accept that suffering will occur – change brings about suffering, and lack of change will also bring about suffering. Have a plan in place. You know that opening up trade in steel will put ten thousand steel workers out of jobs? Don't assume that they will learn to code – they won't. They will need actual help – job retraining for some, relocation assistance for others, and some are probably going to be on social assistance. But have a plan. It makes no sense that governments negotiate trade deals and then try to sweep consequences under the rug – be up front about the consequences and do your best not to leave people behind. A lot of the issues people have with globalization are really that they are among those who are worse off, and ultimately a lot of them didn’t have to be.
It's a rapidly changing world we live in. The pace of technological change has probably never been faster. The transformations that are driving globalization are occurring at a very rapid pace – far more quickly than sluggish trade negotiations, I might note. So inevitably, there will be people who are poorly positioned to adapt as quickly as they need to. Why not be empathetic, and help them? Seems reasonable.
There is a lot to be desired about the ways in which the formal, government-driven aspects of globalization have been handled, and implemented. It's time to start fixing those messes and doing a much better job of preventing them from occurring in the future. Turning back the clock on globalization? It won't happen, and if you like facts, you wouldn't 'want that anyway.
References
Bergh, A. & Nilsson, T. (2014) Is globalization reducing absolute poverty? World Development. Vol. 62 ( C ) 42.61.
BLS.gov (2017). Home page. Bureau of Labor Statistics. Retrieved November 4, 2017 from https://www.bls.gov/
Feng, L, Hu, W. & Li, Z. (2013). The effects of globalization on the US labour market: Service sectors considered. The World Economy.
Trumka, R. (2011) A global new deal. Harvard International Review. Summer 2011, in possession of the author.
Vachon, T. & Wallace, M. (2013). Globalization, labor market transformation and union decline in US metropolitan areas. Labor Studies Journal. Vol. 38 (3) 229-255.
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