Globalization Revisited

The current recession has provided members of the world business community the opportunity to reconsider globalization, which is the internationalizing of business. A U.S. owned producer might have parts designed in the U.S., gather raw materials supplied from Congo, manufacture components in China, then assembled in Mexico and sold all over the world.

The world has just experienced a four year world business boom under the banner of globalization. People happy with globalization are those who have meaningful and profitable parts to play. Those who are unhappy are those who lost their jobs and contracts because someone else does what they did better and cheaper. Consumers are happy with all of the stuff they can buy relatively inexpensively.

We who have lived under capitalism knew that a correction was inevitable. It has hit and now people and governments are evaluating whether the good was worth the recession. If they decide it was not, expect protectionist legislation. However, unless the whole world goes protectionist, those individual countries which do will be placed at a severe trade disadvantage as the world economy mends and goes into another boom cycle.

Should the U.S. be leery of globalization? Sure. We have to compete and win. No more $50 per hour auto workers! Because of the internet, even our engineers have to compete with those from developing countries who command much less pay but are comparably educated and trained. Language is becoming less of an advantage as the world business community accepts English as the language of business. Globalization can act as a world-wide standard-of-living leveler.

Another U.S. vulnerability that caught my attention during the energy crisis was the way, when the U.S. refused to do business with regimes that exercised terrible human rights, the Chinese and Russians, who never met a human right they liked, moved right in. They would build roads and otherwise help these regimes develop their natural resources. One has to think that very favorable agreements favoring the Russians and the Chinese have been signed. Some rights purchased may be exclusive.

There are other pitfalls. The U.S.’ proposed “cap and trade” legislation, if not matched by China and India, will also put us at a severe trading disadvantage. If health care costs are imposed on U.S. companies, they will be trying to compete with yet another disadvantage. If unions are provided more clout with the “card check” legislation, labor costs could put us (further) behind our Asian competitors.

Globalization can work to our advantage or disadvantage. It involves hard-knuckle capitalism and requires our continuing to improve productivity and the wisdom to keep a close eye on our competitors.

Our lawmakers need to consider legislation’s impact on our ability to compete. It’s a tough world outside the beltway. Too bad the law of supply and demand doesn’t work very efficiently in our government.