Globalization the Impact of Foreign

Globalization

The Impact of Foreign Economies upon the American Economy

The past recent decades have represented a time of change on all levels. A significant part in these forces and their consequences was played by the economic background. The increased emphasis on the customers' needs or the increased focus on employees' incentives and performances represent only the outcome of other changes. The most important change that has occurred in the recent decades is the occurrence and growth of globalizing forces. Globalization is a concept presenting a transfer of values across countries. These values can refer to culture, language, customs, politics, economic or technology. The forces have had tremendous implications, generally as the opening of borderlines allowed countries to interact and influence each other more and more.

The United States is still the largest economy of the globe, with an estimated gross domestic product for 2007 of $13,780 billion. China is the second largest economy and India is the fourth, after Japan (Central Intelligence Agency, 2008). All these countries interacted and influenced each other along the years in various ways.

With the opening of its boundaries, India opened the door to a large labor force, and most importantly - an extremely cheap labor force. As a result, the American companies rushed to outsource jobs to India. The case was similar with China, but a difference resides in the nature of the outsourcing operations. In this order of ideas, the U.S. signed mostly contracts to outsource software services, whereas with China, the majority of the contracts saw the opening of manufacturing plants. In both cases, the effects upon the American economy were major. Some of the most important ones refer to:

outsourcing jobs also meant sending the capital abroad organizations had easier access to cheap labor force and were therefore able to reduce their expenses and use the savings to further develop their business and the sector where they activated but more jobs for Chinese and Indians meant fewer jobs for the U.S. citizens; large numbers of Americans lost their jobs; the unemployment rates increased; the pressure onto the federal aid system was increased; the living standards of the population were reduced the federal budgets were also affected as the outsourced operations and salaries contributed to the budgets of the destination countries; this then meant that the contributions to the U.S. state budget would be reduced, generating as such fewer funds to offer state services (education or healthcare) and support the development of jeopardized industries and sectors

The forces of globalization had also contributed to a free movement of merchandize and the efficient implementation of Ricardo's comparative advantage. Given that the barriers to trade had been lifted, companies across the U.S. And other states were able to exchange products. To the U.S. economy, this meant yet another way to achieve growth and sell its products. It also meant greater access to foreign products. Once the American consumer got the taste of the foreign products, the demand for these items exponentially increased. Ultimately, foreign imports allowed for economic growth based on consumption. The sustainability of such a system in questionable and even condemned, but fact remains that it was a real effect of globalization.

Another impact of lifting the trade barriers was felt by the American manufacturers. In this instance, much of the foreign production was sold at prices lower than those of the American manufactured items. Being then unable to compete with the significantly lower prices, some U.S. producers had to declare bankrupt. Consequently, the manufacturing sector of the American economy was damaged. What is even more surprising about this is the fact that the U.S. representatives signed international treaties to allow these negative effects to still occur. A most relevant in this instance is NAFTA, or the North American Free Trade Agreement, which saw lifting the barriers between the United States, Mexico and Canada. The agreement was supposed to sustain economic growth, but what it in fact did was to open the boundaries to free labor force in Mexico, repeating once again the situations in China and India.