We Talked Globalization when we should have Talked Hometown

In an article authored by Hari Sud for UPI Asia, I found out what has happened to my country of America the past thirty years and especially the last ten years.

I have reprinted the article in its entirety, since I strongly belief it should be read and considered by all; the article is entitled: “What’s next for globalization?”  I have taken the liberty of high-lighting sections and phrases, which I deem most important to our current financial burden.

What’s next for globalization?

By Hari Sud
Column: Abroad View
Published: February 20, 2009

Globalization

Toronto, ON, Canada, — As the U.S. financial meltdown continues in 2009, attention is now directed toward the wider and long-range impact of globalization. In theory, globalization is increasing the mobility of goods, services and capital throughout the world by removing the barriers to free trade and increasing closer integration and the inter-connectedness of national economies.

For the West, that has translated into relocating labor-intensive and smokestack industries to countries where costs are lower. Europe and the United States have envisioned themselves as the world’s bankers, financial masters and influence peddlers – which was great in theory, if only the crooks in the U.S. financial sector had been kept away from the proceeds of globalization.

Since 2001, the United States has been awash with cash. It came from oil-producing Arabs and from the export proceeds of China, Japan, South Korea, Taiwan and India. That cash found a home in the subprime mortgages that have started the financial meltdown that is pulling the world down.

Europe and the United States were winning the globalization race until 2008, as master bankers handling the export earnings of other states. On the sidelines, China, Asia’s Tiger economies, Brazil and India began generating some cash and technology and building their own economies, leading to rapid increases in their gross national products. However, the benefits did not extend to the rest of Asia, Africa and other less-developed countries.

The flip side of the equation is that the United States and Europe gained cash but lost their bread-and-butter capability – manufacturing. The loss of manufacturing, which initially brought prosperity to the West, is now sorely missed.

U.S. President Barack Obama’s nearly US$1 trillion stimulus package is meant to fix infrastructure like bridges, roads, schools and waterworks. These are important, but the money might be better spent on manufacturing that could sustain prosperity and produce tax dollars to fund the infrastructure.

U.S. stock market losses are said to be US$8-9 trillion, with global losses close to US$21 trillion. The list of international losers includes Arabs, who have collectively lost US$3.5 trillion, and a few nations who owned sovereign funds have lost about US$1 trillion. The rest of the losers include pension funds, wealthy people’s hedge funds and small investors who were enticed into the market with incentives.

Globalization has impacted everybody, directly or indirectly. Now, without jobs and money, the U.S. workforce is a lost cause.

How was globalization managed in the last 20 years? The key tool of globalization is trade liberalization. The West saw protectionism as a hurdle to its trade policies in the last 50 years. With its demise, poor nations could freely buy high-value items and technology from the West without extending equal benefits to their poorer sections. So with trade liberalization, the West almost gained control of other global economies.

Every time a poor country complained, they were prescribed the same trade liberalization medicine. China and Asia’s Tiger economies are good examples. In short, the mantra has been, “Make stuff for us and get integrated into the global economy, and sooner or later benefits will flow your way.” But none did flow to the very poor in Asia and Africa.

Then came the 2008 financial crisis. Proponents of globalization, which had sucked every nation into its clutches, began to feel the heat. Surprisingly, the United States and Europe were at the forefront of this debacle. Their paper wealth rapidly declined and with it came the credit crisis.

Whatever was left of U.S. and European manufacturing has been decimated. Unemployment began its steep climb with 2.5 million U.S. jobs lost in 2008 and bigger losses expected in 2009. Since the bulk of U.S. manufacturing resides in China, Asia’s Tiger economies and India, there is no other place to employ these people. The only quick solution is to provide temporary jobs upgrading infrastructure. A more permanent solution is to bring back to the West some of the lost manufacturing jobs.

In its rush for globalization, the West forgot there is a real world outside of company boardrooms and political party platforms. This real world worries about jobs, income, mortgages, food on the table and college fees. None of it is feasible if jobs are exported.

What globalization did was to relocate jobs elsewhere. It would have been more beneficial had the jobs stayed home and the money, instead of being exported to set up factories elsewhere, spent at home to achieve greater productivity, which could have balanced low labor costs elsewhere.

So, it is a tricky situation for Obama. Even if he wants to create jobs at home he has very limited options other than repairing bridges, schools and municipal works.

Had globalization been pursued with competitive manufacturing and with some regard for human rights, it would have been a different story today. Had the Chinese excelled in manufacturing certain products, the West would have bought them and in return sold them its own competitively made quality products. That way trade would have been balanced, leaving no surplus cash – and no subprime loans would have been advanced.

What is next for globalization? The United States and Europe, the main interlocutors at the Doha Round and trade talks in Davos, Switzerland, have to back down a bit. The less developed countries, except China, have never been happy with trade liberalization, as they know that trade concessions are mostly for the West. So trade talks have to be postponed for a while. Then, if trade liberalization talks are ever reconvened, these should center on benefitting the poor much faster than previously.

Also, economies should stay a bit less dependent on others so that any financial crisis in a country does not adversely impact the livelihood of people in other countries. Particular attention should be paid to balanced trade.

In the developed countries, economic recovery should center around permanent jobs. Banks and corporate boardrooms should go slow on quick profit making, while Wall Street should refrain from pocketing huge bonuses so that it does not become a driving force for another financial meltdown 10 years down the road. That is possible if nothing is done. The mantra should be to undergo a bit of change and focus on permanent jobs and balanced trade.

In summary, the West should back off from excessive globalization and restore manufacturing to its rightful place. It must bring back some of the jobs lost to China, which has enjoyed the fruits of globalization and trade liberalization enough. This will minimize unhealthy schemes like subprime loans in the United States.

The next best thing for globalization is competitive manufacturing, which would eliminate the wholesale transfer of industry sectors abroad, in favor of greater profits.

In addition this YouTube video produced by The Berkman Center for Internet & Society at Harvard University: exploring cyberspace, sharing in its study, and helping to pioneer its development.

Mapping Globalization

Maps of infrastructure show what’s possible in a connected world, but not necessarily what happens. Understanding globalization requires new kinds of maps – maps of flow of bits, atoms and ideas. Ethan Zuckerman discusses maps, real and suggested, to help understand our changing world.

Update 05 Mar 09:

A Global Retreat As Economies Dry Up
from Wash Post – World News by Anthony Faiola {vbar} Washington Post Staff Writer

SINGAPORE This shimmering city-state was the house globalization built. When world trade boomed, Singapore’s seaport at the crossroads of East and West became the Chicago O’Hare of freighters and supertankers. Singapore Airlines took off despite serving a country with no domestic air routes. Nea…

Update 05 April 09:

How China Is Capitalizing on the Economic Crisis
from TIME.com: Top Stories

How Beijing is using the global economic crisis to assert itself on the world stage.