This is the year when Globalization Backlash is reaching a fevered pitch. It’s been building for decades as whole groups of workers are excluded from the windfall profits of trade. As a Midwestern girl, I have seen my region of the United States come to known as the “Rust Belt” for all of the abandoned factories and displaced low-tech manufacturing jobs sent overseas to lower-paid workers.
All this while, company CEO compensation has increased on the whole to obscene levels and Wall Street barely skipped a beat during the Financial Crisis of their own making. Income disparity is now at levels not seen since the Robber Barons in the early 20th Century. American culture demands some level of fairness and access to opportunity. Politically we see the wave of anger fueling Brexit, Donald Trump’s candidacy and the backlash against trade agreements.
Dont’ Write an Obituary for Globalization Yet…
Business Insider reporter, Ben Moshinsky, recently wrote an article: Globalization is slowing dying. Trade has been part of commerce for centuries. There have been other time periods when trading has shrunk. Protectionism and rising tariffs are normally associated with troubled times. When U.S. leaders heeded the calls for protectionism in the early 1930’s, they helped to deepen what in the U.S. is called the Great Depression. Eventually cooler heads prevail back towards more open trade. Now globalization is fueled by technology, communications and capitalism. We won’t see globalization die except in an extreme scenario, like a zombie apocalypse.
Time to Speak Up for Trade
Never has it been more important for business professionals around the world to speak up for the net positive benefits of trade AND to fight for fairness and to assist those who globalization leaves behind.
- Opportunities for Companies of All Sizes The reality is that the U.S. enjoys relatively high employment rates and that is part due to globalization. Selling goods and services to customers in other countries means jobs back at home. According to the U.S. Small Business Administration, over 90% of American exporters are small businesses. Trade agreements and globalization mean that companies of all sizes have access to world markets.
- Globalization is NOT a Zero-Sum Equation Many populist politicians today treat trade like it’s zero sum. That means that for you to gain, I have to lose the same amount. The reason why globalization is such a powerful force is that the net gain is positive for all. I sell you my tomatoes and you sell me your radios and we both again something we want and don’t otherwise have. This production specialization is the foundation of globalization.
- World Economic and Political Stability is Not a Trivial Matter The world has not experienced a global-scale military conflict since 1945. One factor in this relatively peaceful period in history is globalization. There is greater motivation to work through conflicts when countries would lose trade. It also gives us a greater interest in working together on economic issues. Mark Zuckerberg and Facebook are actively working to increase global access to the Internet for billions of people. Those people could become Facebook users and also consumers of a variety of online products and services.
- Going Backward is Not an Option A few years ago, there was a big “Buy American” movement. I think they largely gave up and realized that consumers and businesses were less interested in where a product was made and more interested in the value received compared to relative cost. For all of those interested in “bringing jobs home”, it would come at a tremendous price and still not achieve what you want. Those jobs are gone. The good news is that there are new quality jobs in their place for those willing to learn new skills. I don’t mean to trivialize this – it’s a daunting task to radically change your career. But it can be done (I know because I need to do this).
- Globalization Allows for Sharing of Knowledge and Ideas By doing business in other countries, companies gain new perspectives on how to approach a challenge or opportunity. Sometimes smaller strategic partners will share technology and resources in order to go after larger deals. There are of course risks in sharing, but also gains and insights to be had.
A Final Few Thoughts on Fairness…
The negative effects of globalization need to be much better managed than they are today. Displaced workers need training for new in-demand jobs. The environment has paid a heavy price for our increased consumption, leading to many damaging and potentially irreversible effects. I think that a carbon tax on goods (based on the energy and other resources needed to produce them) is a step in the right direction. And finally, executive pay needs to better align with the rest of the company. Capping compensation on the top side of the company as a reasonable multiple of the lowest pay rate may be a good place to start. With some smarter policies, globalization’s negative effects can be tempered.
A Manifesto to International Entrepreneurs Everywhere:
I encourage you to continue to go forth to:
Invent new ways to make the world a better place
To find opportunities wherever they may be in the world
To build strong, ethical companies to support your families and the families of your employees
And to learn from new people and places things in order to gain insights and wisdom.
Onward & upward,
The International Entrepreneur