What the global economy means to you

Globalization of the U.S. Economy since 1959

Percentage of the national economy began a gradual increase to beyond 20 percent. An important consequence of economic globalization is the creation of a worldwide competitive standard. In the 1960s the benchmark for General Motors was staying as competitive as Chrysler or Ford Motor Co. Today that is not good enough. Globalization has raised the standards across the board. American industries that measure up to the new higher standard, such as entertainment and computer software, prosper greatly. The rest struggle to hang on to their market share by merging with each other. On average, this consolidation has resulted in the gradual decline in purchasing power for the wage earner discussed in Chapter 2. The move from the National Finals to the World Business Olympics is much more than simply an enlargement in scope. Capital and most products (and some services) are portable. Labor is less portable. Although the desire of Third World residents to work in the West is substantial, there seems to be no reciprocal desire on the part of North Americans or Western Europeans to relocate to the Third World. Thus, we see textile plants closing in the South, computer help desks closing in Silicon Valley, while downtown Detroit is an urban wasteland.

Even an eventual reversal of the trend toward globalization will not result in a return of American wages to the purchasing power levels of the 1970s. There are two reasons for this. One is that although sentiment for political, and to a greater degree economic, isolation is never very far beneath the surface in America, isolation movements historically generate more noise than widespread support. That freer trade contributes to the prosperity of everyone is accepted as fact in political and economic circles today. The second reason is that there are many places in the world where wage rates are a lot lower than in the United States and the European Union. Although there have been recent increases in the purchasing power of American wages, a long and continued upward trend in wage rates is very unlikely simply because there are so many places where wages are lower. (See Table 3.1.) In Western Europe, a general sustained upturn in the purchasing power of wages (except possibly in Britain) is unlikely. Throughout the rest of Europe, persistent unemployment rates exceeding 10 percent almost everywhere will stand in the way of widespread wage increases.

There are no reliable data about the wages in Communist China. However, a visit to your local discount store will turn up silk shirts for $25 and AM/FM portable radios, with headphones (batteries not included), that work quite well for $5, both made in China. It is probably impossible to determine the wages of the people who made these things. Common sense says they can’t be very much, perhaps slave level. To a significant extent, the cause of the decline in income in the United States is irrelevant. Whether the statistics accurately describe reality is somewhat irrelevant, too. For many people the freedom and joy of self-determination and self-expression that they reap from their own business far exceeds the value of even a lot more money from a job. The remainder of this book is designed to equip you to meet the economic challenges that are the legacy of the economic developments just described.

Last word

Entrepreneurial skills will aid you in your job search, should you choose to continue as a wage earner in the unstable job market, because you will be more competent and confident selling yourself. Obviously, the skills you are about to learn also will aid you greatly if you choose to start a side business to augment your current income from wages or to launch your own business full time.

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