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How to prepare for next 100 years as globalization spreads economic competition

By David Blair | | Updated: 2019-06-28 16:30
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Worker assemble parts for wheels during production of a Volvo AB S60 sedan at the Volvo Cars USA plant in Ridgeville, South Carolina, US, on June 20, 2018. [Photo/VCG]

I remember American cars my father bought in these years often overheating and breaking down by the side of the road. Dad would have to stay by the car with my mother and sisters while I walked a long way to find a service station and arrange a tow. (This was long before mobile phones.)

So, American consumers were ready for more competitive Japanese-made cars, which had consistently higher quality, to enter the market. My father switched to Japanese cars in the 1970s, and never bought another American-made car.

American car companies saw their profits fall and were not able to pay their workers the very high wages made possible by a closed, non-competitive market. The US government responded by imposing quotas on the import of Japanese cars and by pushing Japan to rapidly raise the value of the yen.

Obviously, there was a conflict. American consumers benefitted from the cheaper, better cars while workers at the big three saw their jobs become less secure and their wages fall. Fortunately, the protection was only partial and temporary, so the competition eventually forced US car makers to improve.

Competition is at the heart of the current disputes over globalization and technology. On net, the spread of economic opportunities around the world has been a great boon. Many products are more widely and cheaply available than ever before.

Many countries, including China and India, have greatly reduced poverty and given opportunities to their people that would have been undreamed of by earlier generations. American and Western European companies and consumers have greatly benefitted.

But nobody really likes competition against themselves. Most people like some degree of stability and protection. A worker who has put in 20 or 30 years in an industry will definitely feel that it is unfair to have to move to a much lower-paying service job. A company facing new competitors will try to convince its home government to stop the competition.

Americans saw many benefits from the second globalization period. As Japanese and, later Chinese, manufacturers began to export to the US, many consumer goods became a lot cheaper in US stores. Many American companies made good profits by exporting to the newly open markets or by outsourcing manufacturing to cheaper and/or better factories outside the US.

In 1945-1975, workers in the US and Western Europe became used to steadily rising real wages. But those wages have been stagnant since the 1970s. Why should a worker in the US or Western Europe be paid more than an equally skilled person in China, or India, or Ethiopia?

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