I’ve been thinking for quite a while now on whether or not globalisation has been a good thing for the average person in Western countries. It seems to me that it is driving the unemployment rate inevitably upwards due to the loss of export jobs and there are not and will not be enough jobs created to replace them.
I have worked in international trade for many years and I can see the good and the bad parts. A good example is the technical company my friend works for which is increasing revenue worldwide yet reducing staff, operations and pay levels in the UK (it’s HQs and base for 25 years), after being taken over by American multinational. The American multinational is focused on driving cost down by outsourcing to developing countries even though the UK operation has always been the most profitable of the merged operation (20-30% annual profit every year for 25 years). This same phenomenon is happening all over the UK, thereby killing the domestic market, as British companies sell out to US based multinationals they will kill their own market as the scale of the market has no real value to the foreign mother company.
We can see countries that haven’t sold out their domestic companies (German/Swiss/Danish/Finnish/Japan), still have strong economies in general with high wage levels.
This article sums it up nicely.
http://www.finfacts.ie/irishfinancenews/article_1018738.shtml
There’s a type of unholy alliance between corporations and the Chinese government, the corporations get to keep the extra profit-spread in a nice game…
a) off shoring production and jobs to China
b) China keep yuan down and at the same time buys large amounts of USD to fund American consumers
b) the corporations buy/manufacture the products from China in undervalued yuan
c) customers from US and Europe to pay in artificially strong USD/Euros (money that appears strong but is held together by a bluff)
Using this method they reduce costs on operation and labour, while earning extra profits by taking the difference between the strong USD/Euro and low-pegged yuan.
Ultimately this system is not sustainable as it reduces the purchasing power of their original market, reduces tax income from customs tarrifs and bankrupts it through owing huge amounts of debt (as can be seen looming in the US/UK). But the genius of this system is that it creates vast new markets to enter such as China and India which can replace the markets they have helped to destroy. They can ride the wave to constant profits, but average Western workers will lose out.
The winners on the Western side are the corporation shareholders, management level who get profit share and the financiers who take their percentage of revenue and profits.
The winners on the Asian side are the government who get increased revenue and the average worker in Asia.
So globalisation, good thing for the average Asian, ultimately bad thing for low/middle skilled Western worker. I know consumers have got cheaper TVs, clothes and toys but I don’t see the benefits going beyond that at this point. Resource demand is already driving up costs for basic commodities and consumers are not going to get anything cheaper from here on in because labour costs are already rising in China (and what they got wasn’t cheap if you factor in that it destroyed your own long-term earning power and local economy tax base plus pollution and global warming).
I benefit from globalisation as so do many people in Taiwan I suspect and I know the situation is a bit more complicated than I have outlined above. I just think that it is so obvious that Obama’s no.1 policy should be to abandon the current non-tariff agreements (if China refuses to revalue yuan) which are killing America’s long-term stability and prosperity and I can’t understand why they haven’t done that yet.
The final phase of globalisation will end up with workers worldwide getting put out of the picture altogether with automated services/robots, that’s when the fun starts!