Tag Archives: Globalization

The New Normal: Radical Inequality, Suffocating Debt, and Growing Job Uncertainty

By Servaas Storm – The U.S. economy is suffering from two interrelated diseases: the secular stagnation of its potential growth, and the polarization of jobs and incomes. The two disorders have a common root in the demand shortfall, originating from the ‘unbalanced’ growth between technologically ‘dynamic’ and ‘stagnant’ sectors, which—crucially—is bringing down potential growth.

The key mechanism is just this: rising real wages, as during the period 1948-1972, provide an incentive for firms to invest in labor-saving machinery and productivity growth will surge as a result; but when labor is cheap, as during most of the period 1972-2015, businesses have little incentive to invest in the modernization of their capital stock and productivity growth falters as a consequence.

Financial globalization, in addition, enabled the rich to have their cake (profits) and eat it (by channeling them to offshore tax havens or into derivative financial instruments). In this way, trade and financial globalization have been essential building blocks of the dual economy. more> https://goo.gl/5EFndw

How the Obama phenomenon and Trump earthquake happened

By Reid Wilson – The Hill spent months digging deep into decades of data that illustrate the nation’s changing demographics, economics, culture and politics.

Those glimpses of a changing America are evidence of a series of countervailing demographic, political and economic forces that have long exerted themselves on the nation — and now define the quadrennial struggle between two sides of the political aisle that are deeply polarized along race, class, economic and educational lines.

At the center of the divide are two sets of divergent trends.

The first set contrasts the changing face of America, which is being hastened by the rising influence of the most diverse generation in American history, with a radical political shift among the nation’s still-dominant cohort of older whites, who now act as a more homogenous voting bloc than ever before.

The second set reflects the changing nature of how Americans live, work and build economic power. A generations-long trend toward wage stagnation, automation and globalization is in the final stages of exterminating the blue-collar manufacturing jobs that once sustained America’s middle class in the heartland. more> https://goo.gl/YgDUA0

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The end of globalisation as we know it?

By Durukal Gun , Christian Keller, Sree Kochugovindan, Tomasz Wieladek – Modern globalisation has gone well beyond the trade of goods, as technology allowed for transfer of know-how and skills.

Since glottalization began in the middle of the 1800s, it has been through several different cycles. Now it appears to have reached yet another turning point.

Only recently has globalization matched the heights it reached before World War I.

  • First wave of globalization (1850s to 1914)
  • Protectionism (1914 to 1945)
  • Second wave of glottalization (1945 to 1990)
  • Hyperglobalization (1990 to present)

Among the clear beneficiaries of hyperglobalization are the emerging economies, which have become increasingly integrated into more and more complex global value chains. Their role in processing raw materials, and in value-added manufacturing and services has grown rapidly.

The first signs of opposition to hyperglobalisation emerged amid major demonstrations at the 1999 meeting of the World Trade Organization in Seattle. Concerns mounted in the wake of the 2008-09 financial crisis and subsequent global recession, reflected more recently in public resistance to trade and investment agreements such as the Transatlantic Trade and Investment Partnership and the Trans-Pacific Partnership.

Discriminatory protectionist tariffs and trade measures are on the rise. more> https://goo.gl/K54eeK

Updates from GE

Competing for the World
By Jeffrey R. Immelt – Today, I want to give you some views on globalization … what works, and what doesn’t work, and what needs to change. Please keep foremost in your mind that the U.S. has 5 percent of the world’s population with 25 percent of the GDP. I hope to persuade you that – rather than pulling back – the U.S. can win the global game. But, we have to compete.

I have spent my career doing just that. When I joined GE – in 1982 – 80 percent of our revenue was in the U.S. In 2017, nearly 70 percent of our revenue will be global. We have customers in 180 countries and our exports exceed $20 billion. Our U.S. workers earn high wages because they make leadership products that we sell around the world. Globalization has made us become more efficient, more competitive.

Today, people question globalization. The U.S. is challenging trade deals and has effectively shut down its export bank. The U.S. is not alone. Protectionist barriers are rising in Europe and Asia as well. Economic nationalism is replacing free trade as the dominant idea of the era. Meanwhile, the Chinese are replacing the U.S. as the trade leader on the global stage, growing their influence through expanding relationships and economic development.

How did an ideal so connected to American influence and success become so demonized? In retrospect, there were key changes along the way. I’ll name a few. more> https://goo.gl/WLgK88

Crisis of capitalism? Perhaps, but don’t blame it on globalization

By Simon Tilford – Donald Trump, Brexit, serious populist pressures in other EU countries: are we entering a full-blown crisis of international liberal capitalism? There is no doubt that globalization poses policy challenges for governments.

But globalization by itself did not force governments to adopt policies that have divided their countries, exacerbated inequality and hit social mobility. Many of them did those things by choice.

The problem is not that we have allowed an increased role for markets, as many on the left (and increasingly on the populist right) argue. Open markets remain the best way of generating wealth and opportunities, of challenging vested interests and of expanding people’s freedom. We are in this mess because we’ve forgotten the lessons of the post-war period. Basically, we have a crisis of distribution and opportunity.

Globalization is a net positive, and has played a huge role in reducing poverty globally over the last 30 years. But there are winners and losers from increased trade and movements of capital, as there are from rapid technological change, and many countries, notably the US and the UK, have failed to take the necessary corrective action. more> https://goo.gl/ei52Zk

Globalization needs to be all or nothing

By Dambisa Moyo – Much of the criticism leveled against globalization today is related to the idea that it enriches the few, while leaving many people behind.

Policymakers exhibit a blind spot for the true costs and consequences of the policy decisions that they make today. Beholden to a national electorate and a desire to win and stay in office, policymakers show tendencies towards a zero-sum mentality—the idea that in key policy decisions and practical implementation, nations are defined as either winners or losers.

Trade policies are myopic in that policy-makers appear oblivious to the fact that the trade policies they implement today have enormous costs and consequences to their own economies in the future.

To reach a form of globalization that can succeed requires a level of change that will be hard to put in place. In today’s form of globalization, no one is responsible for the “global” economic interest. Instead, it is led by “world” leaders who are incentivized and court national electorates. more> https://goo.gl/WCMJHS

Is globalization’s second wave about to break?

By Laurence Chandy and Brina Seidel – After two decades defined by growing integration, the global economy appears to be at an inflection point. This judgment has been prompted both by structural changes in the global economy, especially since the Great Recession, and political events over the past year illustrative of a backlash against past integration.

The essence of globalization is the movement of goods, money, and people across international borders.

FDI’s (foreign direct investment) rise is a defining component of globalization’s second wave and is synonymous with the growing role of international finance beyond traditional areas such as railways and extractive industries into new sectors including commerce and industry.

Based on our review, the clearest evidence we have of global capital being in retreat is limited to examples of globalization’s excesses being curbed. Elsewhere, the data suggest that the pace of global integration has slowed but not reversed. more> https://goo.gl/CiZrVD

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Failure to Adjust

BOOK REVIEW

Failure to Adjust, Author: Edward Alden.

By Edward Alden – Americans know that something has gone wrong in this country’s effort to prosper in the face of growing global economic competition. The vast benefits promised by the supporters of globalization, and by the U.S. government, have never materialized for most Americans.

Failure to Adjust is the story of what went wrong, and how to correct the course. It is a compelling history of the last four decades of U.S. economic and trade policies that have left Americans unable to adapt to or compete in the current global marketplace.

There is achievable common ground on issues such as fostering innovation, overhauling tax rules to encourage investment in the United States, boosting graduation rates, investing in infrastructure, and streamlining regulations. Alden argues that the federal government needs to become more like U.S. state governments in embracing economic competitiveness as a central function of government. more> https://goo.gl/UpE5Zd

Do Trade Agreements Kill Jobs?

By Steve Denning – Economists at the liberal-leaning Economic Policy Institute have long pointed to the negative effects of free trade, with massive loss of jobs to Mexico and China.

Yet conservative-leaning economists have questioned this interpretation of the evidence. Now some mainstream economists are beginning to agree that there is a problem.

The report shows how it happened.

“The basic narrative begins in the late 1970s and the 1980s. Through globalization, it became possible and attractive for firms to do business in, to, and from far more countries. Changes in corporate governance and compensation caused U.S. managers to adopt an approach to management that focused attention on the stock price and short-term performance.”

As a result, “firms invested less in shared resources such as pools of skilled labor, supplier networks, an educated populace, and the physical and technical infrastructure on which U.S. competitiveness ultimately depends.”

Gary Pisano and Willy Shih [2] have a frighteningly long list of industries that are “already lost” to the USA:

“Fabless chips”; compact fluorescent lighting; LCDs for monitors, TVs and handheld devices like mobile phones; electrophoretic displays; lithium ion, lithium polymer and NiMH batteries; advanced rechargeable batteries for hybrid vehicles; crystalline and polycrystalline silicon solar cells, inverters and power semiconductors for solar panels; desktop, notebook and netbook PCs; low-end servers; hard-disk drives; consumer networking gear such as routers, access points, and home set-top boxes; advanced composite used in sporting goods and other consumer gear; advanced ceramics and integrated circuit packaging.”

Their list of industries “at risk” is even longer and more worrisome. more> http://goo.gl/DS94rO

No quick exit from West’s economic malaise

BOOK REVIEW

Life After Growth, Author: Tim Morgan.

By Alan WheatleyChina’s foreign exchange reserves today stand at an unfathomable $3.66 trillion. Tens of millions of people have been lifted out of poverty by the rise of China and other poor countries plugged into global supply chains.

Hedge-fund manager Stephen Jen, “If you are a laborer in the West, you have been hurt. It’s very clear. If you are a capitalist in the West, you have benefited immensely.”

Globalization constituted a significant, long-lasting and positive productivity shock that should have been met with tighter rather than easier monetary policy,” Bill White, a former chief economist of the Bank for International Settlements said in a speech to Omfif, a London think tank. more> http://tinyurl.com/ofbq36v