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Economists praise globalization of economy

Posted By Jon Dougherty On 04/17/2002 @ 1:00 am In Front Page | Comments Disabled

The trend toward globalization of the U.S. economy is good for American corporations because it not only boosts profits but in doing so helps create jobs, say a number of economic experts who spoke to WorldNetDaily in a series of wide-ranging interviews.

Indeed, claim the analysts, continued overseas corporate growth – even during hard economic times – is an essential component for an economy to thrive.

But, according to some recent reports, not everyone is enamored with corporate growth, especially if it means some short-term job loss in markets such as manufacturing that are increasingly being viewed as archaic and outmoded. And some say even the more “modern” high-paying, high-tech jobs are now starting to go away.

In an April 2 Los Angeles Times story entitled, “High-Paid Jobs Latest U.S. Export,” the paper said that “the increased flow of trade and investment across borders played a large role in the economic expansion of the last decade.”

“Now, during an economic contraction, the flip side of globalization is apparent: U.S. firms are finding cheaper places to do business where they also can sell their goods,” the paper said. “Along with computer chips and airplanes, it is jobs and investment dollars sailing overseas.”

Others who oppose increased globalization say countries who rely more on their own devices tend to better weather economic storms.

“More interdependence hasn’t raised the standards of living in Latin America in the last decade or in Africa in the last two. And it has made many countries in East Asia extremely vulnerable to the vicissitudes of trade, investment, and currency speculation,” said a report by editor Matthew Rothschild in the April 2001 issue of The Progressive.

“Less interdependence, by contrast, has shielded countries from such destabilizing economic forces. Those countries with capital controls – Chile, China, India and Malaysia – were able to withstand the economic downturn of the late 1990s far better than those without such controls, like Thailand and Indonesia,” he wrote.

But most analysts, political leaders and economists from both sides of the aisle tend to favor increased globalization for American corporations as a way to boost both income and job opportunities here at home.

“I’m worried about jobs,” President Bush told supporters and union members in a speech celebrating free trade in New Orleans Jan. 15. “And I believe if you trade more, there are more jobs available for hardworking Americans.”

“There are some who play politics with the trade issue,” he continued. “They want to shut down trade. I like to remind people, those who shut down trade aren’t confident. They’re not confident in the American worker; they’re not confident in the American entrepreneur; they’re not confident in American products.”

“…We ought to have free and fair trade around the world,” Bush said. “This isn’t a Republican issue; this isn’t a Democrat issue. Trade is a jobs issue.”

Sara Fitzgerald, a trade policy analyst for the Center For International Trade and Economics at the Heritage Foundation, agrees, with a few minor revisions.

“Trade is about income, not jobs,” she told WorldNetDaily. “[The North American Free Trade Agreement] and the Uruguay Round (part of the General Agreement on Trade and Tariffs – GATT) have resulted in lower prices for goods – benefits amounting to $1,200 to $2,000 a year for a family of four.”

“Between 1950 and 1999, imports have increased by 2,000 percent,” she said, adding that “over the same period, the number of manufacturing jobs has increased by 3 million.”

Walter E. Williams, an economics professor at George Mason University in Fairfax, Va., and a featured WND columnist, says he hasn’t seen any ill-effects of globalization or so-called outsourcing – moving parts of manufacturing and production to cheaper overseas job markets.

“Our economy is still the envy of the world,” Williams said, “even during the relatively mild recession. The outsourcing and jobs going overseas is just efficient allocation of resources.”

“If a product can be made more cheaply somewhere else, then that’s where it should be made. Americans, in general, are better off as a result,” Williams continued.

Tom DiLorenzo, an economics professor at Loyola College in Maryland, noted that “globalization and outsourcing aren’t exactly the same thing.”

First off, said DiLorenzo, “the former is a broad definition of international trade,” and for the past two decades, outsourcing has been mostly occurring with “labor-intensive jobs that, frankly, few Americans want to do, such as sitting around all day long putting computers together in a factory.”

DiLorenzo said by outsourcing “these menial jobs,” it enables companies to grow and hence “to offer Americans more and better-paying jobs.”

But union officials oppose outsourcing. They say keeping jobs here is good for the economy.

“We hope that American companies will be feeling patriotic and they will have some commitment to their communities and their workers and will address their cost pressures in some other way than outsourcing,” Thea Lee, an assistant director for international economics with the AFL-CIO in Washington, told the L.A. Times.

Others, however, say that outsourcing is what is helping companies remain profitable and, hence, in business.

“The unions are opposed to ‘outsourcing,’ of course, because they want every company to use high-priced – and often not very productive – unionized labor,” DiLorenzo said. “This would increase production costs and make American companies less competitive in global markets. And in the long run, this is bad for the U.S. economy.”

Net job growth

When Reform Party presidential nominee Ross Perot predicted during the 1992 campaign that NAFTA and GATT would result in so much job loss from the U.S. that it would create “a giant sucking sound,” millions of Americans responded by casting a ballot for him and, for a short time, such support put him ahead of Republican incumbent George H. W. Bush and Democratic nominee Bill Clinton.

In the years that followed, there have been millions of jobs lost. The Commerce Department doesn’t know how many, but scores of Americans that lost mostly manufacturing jobs since the free-trade initiatives became law can attest to the fact that Perot was right. Manufacturing jobs are traditionally hard-hit, and many of them, especially in textiles, children’s toys and other labor-intensive industries, went south for cheaper job markets years ago.

Leading economists, however, say that while many manufacturing jobs have gone away forever, they have been replaced by other high-tech jobs and positions that, on average, pay much better.

“There has been a change in the kind of jobs [lost since NAFTA and GATT], yes, but for the most part it’s been a good thing,” DiLorenzo said. “It has meant fewer lower-paying jobs, menial jobs and more higher-paying jobs that are a little more pleasant.”

“People who lose their jobs, clearly they’re not better off. But they have to retrain or go out and find another job,” Williams said, adding that he, too, believes globalization has resulted in a net gain in American employment.

“So far, those are high-tech jobs,” he said.

“Someone laughingly said to me some years ago that if the government cut off immigration or stopped issuing visas to people in India, they’d have to close down Silicon Valley,” Williams said. “So what that says is, in many cases young Americans are not preparing themselves for the highly skilled jobs.”

“Foreign investment has brought – and continues to bring – many jobs to America,” Fitzgerald said. “Mitsubishi and Honda are just two examples of the numerous foreign automakers that have plants in the U.S. According to the Directory of Foreign Firm Operations in the U.S., more than 2,400 foreign firms operated about 5,700 businesses in the U.S. in 2000.”

Fitzgerald said that, according to the Commerce Department, U.S. firms shipped about $134 billion in information technology products in 2000 to more than 180 countries. Information-technology industries contributed about one-third of real U.S. gross domestic product growth from 1997-2000.

“No one can predict what kinds of jobs will exist in 10 or 20 years,” said DiLorenzo. “So I don’t think you can say, ‘high-tech jobs are going away.’”

“The main determinant of wages is worker productivity,” he continued, “which depends primarily on formal and informal education, experience, age and the kind of tools and equipment that are available to the work force. … The horrible public education system creates serious problems here, for example.”

“If we were to respond to try to protect jobs, we would be in the doldrums like some countries in Europe,” Williams said. “There, the labor unions deny the possibility of outsourcing. These countries are in deep trouble because of those labor regulations.”

Is business over-regulated?

Some economists have argued for years that while modest regulation of business and industry is necessary – to protect the environment, to ensure fair hiring practices and to set minimum safety standards, for example – in large part federal agencies have so over-regulated American businesses that – in part – it has contributed to decisions to relocate plants and facilities overseas, in countries where regulations are less cumbersome and expensive.

“In general,” Williams said, “business is over-regulated, yes. The kind of regulations, in terms of taxes that some of our competitors don’t face, it handicaps us.”

“American businesses are over-regulated,” said Fitzgerald. “Many firms have plants overseas because it’s cheaper to produce a product in the country that it’s being sold in rather than shipping the product overseas. Additionally, by producing in a foreign country, the product evades tariffs and quotas that it would face if it were exported.”

DiLorenzo agreed, noting that “tax and regulatory policy is one thing that could be changed to have a significant, positive effect on business growth in the U.S.”

He says the capital gains tax should be permanently abolished “to encourage more investment.” And, he said, the corporate income tax is debilitating because it “constitutes triple or quadruple taxation of the same money” while it “punishes investment in American business.”

“The level of income taxation exceeds what medieval serfs paid,” he said, adding that too much regulation on business “imposes enormous costs … with little, if any, benefit to anyone.”

Recipe for success

Globalization foes doubt the economic gains promised by the spread of U.S. corporations.

“We are told that this corporate encirclement of the planet will bring with it greater prosperity, peace and ecological balance,” says an excerpt from “The Corporate Planet: Ecology and Politics in the Age of Globalization,” a book by Joshua Karliner, the executive director of CorpWatch, an anti-globalization website.

“In many respects traditional nation-states, including both the high-tech industrial democracies and the multitude of Third World governments, have grown weaker and less relevant,” he wrote. “This leaves the corporate capitalists and the leaders of the industrialized countries to present their neoliberal brand of globalization as inevitable and themselves as healers of the world’s ills.”

Not so, says Fitzgerald. In fact, she says a better plan to stimulate continued growth in terms of industry and jobs is to encourage more and wider “free trade.”

“The issue is income, not jobs,” she said. “Past trade agreements have brought higher-paying jobs to America – jobs supported by exports are estimated by U.S. Trade Representative Robert Zoellick to pay 13 to 18 percent more than non-export jobs.”

“We should do all we can to get government out of the way of” business, DiLorenzo said, “including abolishing the antitrust laws which prohibit such things as joint production ventures – though some are permitted – when other countries, like Japan, have no such laws.”

DiLorenzo said the “wisest use” of resources would be to allow market forces – “the decisions of consumers” – to decide the “configuration of industry in the future.”

“Letting politicians have a hand in deciding is a recipe for disaster,” he said. “That’s the Japanese system, and look where they’ve been over the past 20 years.”

Yesterday, Heizo Takenaka – Japan’s economy minister – said that the downgrade of Japan’s sovereign ratings by Standard & Poor’s was a message that the nation should move ahead with economic reforms. S&P blamed the downgrade on the government’s lack of progress implementing economic reforms; officials haven’t done enough to counter the problems in its banking industry and reduce the amount of its budget debt.

“As America emerges from its own recession,” Fitzgerald added, “opportunities for U.S. workers should not be hampered by unnecessary politics that limit trade.”

But “there has never been 100 percent free trade” in the U.S., said DiLorenzo.

“It’s all a matter of degree. If we allow people in other countries to sell goods here, those dollars eventually make it back here in the form of purchasers of American goods,” he told WND.

True free trade “is mutually beneficial in that it benefits both trading countries,” he said. “That’s why it’s so extremely dumb to restrict trade like President Bush has done with steel tariffs; he’s doing to us what our enemies would like to do in wartime,” essentially blockading trade and implementing “economic warfare.”

“Our current system is a mix of free trade and protection,” said Fitzgerald. “While the U.S. is the world’s largest agricultural exporter, we have high farm subsidies,” which act “as a non-tariff barrier, thus [tilting] the playing field in our favor.”

She said that “recent actions have left the U.S. commitment to free trade in question,” specifically actions that “include tariffs on steel, tariffs on Canadian lumber and the farm bill that is being conferenced in Congress.”

“While the U.S. preaches at developing countries to open their markets, America has greatly protected the domestic textile industry, for example, which hurts developing nations and undermines U.S. credibility,” she said.

“I think some of the latest administration moves – such as restrictions on steel imports and wood from Canada – [prove] we have a long way to go for us to posture as a free-trade nation,” Williams said. “Nonetheless, we have freer trade than other nations, and Americans are better off as a result of it.”


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