Bruce Greenwald and Judd Kahn offer some unique insights on the ongoing debate of globalization. From their point of view, many Americans have an irrational fear concerning globalization. This fear focuses on the idea that someone in another part of the world is taking good jobs from Americans. The political debate is usually focused on the negative side of trade. Their view in the book, Globalization: the Irrational Fear that Someone in China Will Take Your Job is that this fear is misplaced.
Greenald and Kahn develop a strong case for their view of an irrational fear of globalization. Foremost, globalization is not new. The growth in globalization was actually faster in the '50-'75 period. The impact of globalization has also slowed because we are less dependent as an economy on agriculture and mining which was an important part of US trade. The US economy has seen a significant switch between manufacturing and services which has been much greater than the growth of trade and globalization.
An even stronger argument is that countries control their fate more so than trade. Globalization is strong but not universal across all countries. The differences in country growth may be more due to issues unrelated to trade. The rising tide of globalization has not effected all boats the same. Prosperity is much more effected by localized economic changes. For example, the impact of regulation may have as importance effect on growth as trade. Productivity is varied across industries and countries and will have a greater impact on growth and job change than globalization.
Employment trends dwarf the impact of globalization. The loss of manufacturing job is a direct result of productivity changes and the adjustments in the economy to be more service oriented. The impact of productivity has taken more jobs than any other single factor.
The impact of globalization and profits is also not clear. Those businesses which are highly competitive and have lower returns on equity still have the same profile. The profitability of businesses are more effected by such factors as economies of scale, cost structure and overall demand. Many firms that are profitable in local markets are not successful when they move offshore.
In international finance, the home field advantage is strong. Foreign direct investment is actually down from previous periods. There is no great theme of foreign firms buying up the US nor are US firms buying up the rest of the world. The key financing mechanism for most firms is still retained earnings and not foreign borrowing. For external funds, bank lending is still the key source over pubic debt or equity. The bank lending route is a more localized avenue for raising funds. It is unlikely that this will change in the near-term so financing has not been as effected by globalization.
The key risk for globalization is still the reserve currency problem. The importance of the dollar has not diminished and their is no alternative reserve currency like SDR's to solve the problem of global liquidity. The other problem of globalization is the need for a consumer of last resort to offset the current account imbalances. The savings shortfall in the US needs to be offset by greater spending in the surplus countries like China.
Greenald and Kahn provide an alternative story of globalization. Perhaps one sided in the direction against critics of globalization, the authors give a healthy different perspective to the globalization debate.
Greenald and Kahn develop a strong case for their view of an irrational fear of globalization. Foremost, globalization is not new. The growth in globalization was actually faster in the '50-'75 period. The impact of globalization has also slowed because we are less dependent as an economy on agriculture and mining which was an important part of US trade. The US economy has seen a significant switch between manufacturing and services which has been much greater than the growth of trade and globalization.
An even stronger argument is that countries control their fate more so than trade. Globalization is strong but not universal across all countries. The differences in country growth may be more due to issues unrelated to trade. The rising tide of globalization has not effected all boats the same. Prosperity is much more effected by localized economic changes. For example, the impact of regulation may have as importance effect on growth as trade. Productivity is varied across industries and countries and will have a greater impact on growth and job change than globalization.
Employment trends dwarf the impact of globalization. The loss of manufacturing job is a direct result of productivity changes and the adjustments in the economy to be more service oriented. The impact of productivity has taken more jobs than any other single factor.
The impact of globalization and profits is also not clear. Those businesses which are highly competitive and have lower returns on equity still have the same profile. The profitability of businesses are more effected by such factors as economies of scale, cost structure and overall demand. Many firms that are profitable in local markets are not successful when they move offshore.
In international finance, the home field advantage is strong. Foreign direct investment is actually down from previous periods. There is no great theme of foreign firms buying up the US nor are US firms buying up the rest of the world. The key financing mechanism for most firms is still retained earnings and not foreign borrowing. For external funds, bank lending is still the key source over pubic debt or equity. The bank lending route is a more localized avenue for raising funds. It is unlikely that this will change in the near-term so financing has not been as effected by globalization.
The key risk for globalization is still the reserve currency problem. The importance of the dollar has not diminished and their is no alternative reserve currency like SDR's to solve the problem of global liquidity. The other problem of globalization is the need for a consumer of last resort to offset the current account imbalances. The savings shortfall in the US needs to be offset by greater spending in the surplus countries like China.
Greenald and Kahn provide an alternative story of globalization. Perhaps one sided in the direction against critics of globalization, the authors give a healthy different perspective to the globalization debate.
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