America is undergoing one of the greatest periods of transformation in history. Not unlike the powerful changes caused by the industrial revolution that shaped the 19th and 20th centuries, today, globalization is shaping the 21st century and the United States is leading the way.

Since economic globalization—the integration of national markets through international trade and investment—emerged in the 1980s, resources have shifted to sectors with competitive advantages, productivity has reached new highs, and innovation has flourished.

In turn, globalization has become a vital factor in the economic growth of the United States and benefited working Americans in many ways.

As a result,

  • Trade now supports nearly one in every five jobs;
  • Workers in globally engaged companies earn more than the average;
  • Globalization has generated an increase in annual U.S. income of approximately $1 trillion (average annual income gains of $10,000 per household).

American workers are quickly adapting to globalization by upgrading skills, achieving greater levels of specialization and effectively managing new productivity-boosting technologies. In the process they are becoming more competitive and improving the American standard of living.

Nevertheless, misinformation persists. For too long, critics have focused on stagnant average hourly wages. This is misleading since wages only reveal part of the picture.

Today, benefit packages have become increasingly lucrative, representing a growing share of total compensation. When benefits are included, private sector worker compensation after being adjusted for inflation has risen by more than a third since 1980.

Additionally, income derived from non-labor sources such as the stock market—a huge recipient of globalization’s capital flows—continues to boost individual wealth.

"The Wall Street Journal" recently noted that between 1980 and 2005 the share of American workers who owned stocks more than doubled to 52% from 25%. Thanks to 401(k) plans and IRAs, stock gains have been spread more widely across America.

Claims that the middle class is shrinking may be true, but misleading, since the number of middle class working families moving into higher income brackets has exceeded the number of lower income families moving upward.

Thus, after adjusting for inflation, the share of American households making more than $50,000 rose to 47% in 2005 from 38% in 1980. This helps explain why more families can afford vacations, cable TV, cell phones, iPods, air conditioning, second cars, etc.

Fears that the United States is de-industrializing or losing manufacturing jobs due to globalization also are misguided. Technological advancements and strong productivity growth—not globalization—are responsible for most American job losses.

Thus, from 1979 (the year of highest U.S. manufacturing employment) through 2006, the number of manufacturing jobs fell from 19.8 million to 14.1 million. Concurrently, the value of U.S. manufacturing shipments rose from $1.7 trillion to nearly $4.8 trillion, confirming the U.S. manufacturing sector is alive and well.

Over the last 10 years, new technologies have resulted in an annual increase in manufacturing productivity of 4.5 percent, which is much faster than the 2.7 percent annual growth in overall business productivity. Consequently, fewer workers can turn out more products faster than ever.

As American manufacturing output continues to rise, it’s likely that number of manufacturing jobs will continue to fall, a situation similar to what has occurred in the agricultural sector.

However, isolationist policies that are gaining support in Congress have the potential to derail globalization, as well as its advantages. Federal Reserve Chairman Ben Bernanke rightly points out that, “Economic isolation and retreat from international competition would inexorably lead to lower productivity for U.S. firms and lower living standards for U.S. consumers.”

Globalization increases competition benefiting consumers. It also benefits American producers and workers by motivating them to create better goods and services that, through globalization, can reach world markets. In turn, this creates more opportunity and jobs back home. All Americans are the beneficiaries!

This article appeared in World Trade Magazine, January 2008.

John Manzella
About The Author John Manzella [Full Bio]
John Manzella, founder of the Manzella Report, is a world-recognized speaker, author of several books, and an international columnist on global business, trade policy, labor, and the latest economic trends. His valuable insight, analysis and strategic direction have been vital to many of the world's largest corporations, associations and universities preparing for the business, economic and political challenges ahead.

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