I believe it is time to question the benefits of globalization. We were told that globalization would benefit all nations. Sure, maybe in the short term but in long term and sustainability globalization may not be the answer.
I am not advocating "protectionism". Frankly, I am not sure what am advocating right now. But I know this: globalization has not been the "win-win" that "free trade" proponents have argued.
Globalization is not sustainable because it supports a downward pressure on wages and encourages and requires insatiable consumption of resources and cheap consumer goods. But the financing of the consumption, particularly by consumers, is not by higher incomes but by higher amounts of debt. Globalization may only lead to more "boom/bust" cycles in the future.
Basic economic theory of "competitive advantage" says that when one trading partner can produce a product more cheaply than its trading partners, trade still provides benefits to both nations. This sounds good in theory but there is a major caveat to this theory: while it may increase national incomes, particularly incomes of multi-national companies, it can still reduce the income of most workers.
A briefing paper by the Economic Policy Institute established two key findings related to globalization and wages:
1) In 2006, the impact of trade flows increased the inequality of earnings by roughly 7%, with the resulting loss to a representative household (two earners making the median wage and working the average amount of (household) hours each year) reaching more than $2,000. This amount rivals the entire annual federal income tax bill paid by this household.
2) Over the next 10-20 years, if some prominent forecasts of the reach of service-sector offshoring hold true, and, if
current patterns of trade roughly characterize this offshoring, then globalization could essentially erase all wage gains made since 1979 by workers without a four-year college degree.
Globalization was sold to us as "the next best thing since sliced bread". Sure producers can lower their costs and in return lower their prices. But how do American workers make-up for the lower wages that they must accept in order to remain employed? Lower prices for consumer goods is obviously not enough.