Globalization and the New American Economy
Although the U.S. economy continued to grow in the 1970s and 1980s, its rate of growth
began to fall behind that of western Europe and Japan, even as American corporations began
to feel the pinch of intense competition from foreign corporations. Between the early 1970s
and the late 1980s, the U.S. share of world manufacturing declined. The United States lost
ground in steel, autos, machine tools, electronics, computer chips, and finance. The relative
decline in America's manufacturing position had a devastating effect on the wages of
blue-collar workers, raised protectionist sentiments, and spurred proposals to shield
American industry from foreign competition. The intensity of the fight over the 1994 North
American Free Trade Agreement (NAFTA) shows how America's changing economic position
in the world generated a set of important issues in American politics.
In the 1990s, however, the American economy rebounded with a vengeance, with its
companies once again becoming the key players in crucial industries. The economies once
seen as the principal threats to America's position-the European Union, Japan, and the
so-called Asian tigers-began to lose ground; their rates of growth and technological
innovation began to lag those of the United States. American companies emerged as the
most important actors in the new global economy. Behind the apparent decline in the
competitiveness of the American economy in the 1970s and 1980s, something startling
seems to have been going on. Leaving older industries such as mining, steel, and shipbuilding
to others, American companies proved to be particularly adept in areas such as computer
software, biotechnology, business services (insurance, law, accounting, advertising, and so
on), computer chips, Internet services, telecommunications, military and commercial aircraft,
and popular entertainment. In this emergent global economy, Apple, Microsoft, Intel, Dell,
Disney, Amazon.com, Google, and eBay became (and remain) the companies that draw
global attention and emulation efforts.
The reasons for the turnaround among American companies in particular and the American
economy in general have been the subject of much debate among economists and business
leaders. Some point to the lighter hand of government and labor unions in the United States
(and the union hand is getting even lighter, as the opening story suggests), some point to
stronger entrepreneurial traditions here, and still others credit the existence of freer
markets,1 but all seem to agree that American businesses were better positioned to succeed
in the new global economy that blossomed in the 1990s.2 To be sure, all the economic news
has not been positive: there was a brief and shallow recession in 2001 coming on the heals of
the dot.com bust, a slow jobs recovery in 2002 and 2003, growing federal government
budget deficits after 2001, an ever-growing trade deficit (especially with China), and
persistent talk of a real estate bubble about to burst. Airline companies and auto
manufacturers also found themselves in difficulties. Iconic IBM was bought by a Chinese
company. Nevertheless, from a comparative point of view, the American economy has been
performing very well, and its companies doing remarkably well, especially in light of the
blows dealt by the 9/11 attacks, corporate accounting scandals, wars in Afghanistan and Iraq,
oil price shocks, and the Hurricane Katrina disaster. In 2005, the United States remained the
largest economy in the world measured by GDP, about as large as the combined economies
of Japan, Germany, UK, France, and Brazil.
America's involvement in a changing global economy has been politically consequential. 3 On
the one hand, during good times, economic growth, low inflation, and soaring home
valuations contributes to consumer confidence and rising living standards and general
satisfaction with government leaders. On the other hand, the new global economy is an
incredibly competitive place where companies in different countries are fighting for labor cost,
technological, and price advantages over other firms, forcing companies to be, in the popular
phrase, lean and mean, with many of them trimming health plans, wage and salary schedules,
and positions as part of their competitive strategies. Some companies, moreover, believe
they must outsource to lower-cost suppliers, shift some operations to other locations, and
constantly innovate. This highly competitive economy is one where unions are being forced to
make wage and benefit concessions, the number of manufacturing jobs is not growing
(though manufacturing output is), and where certain "creative class" skills are highly sought
after and rewarded4-software engineers, portfolio managers, Website creators, filmmakers,
and business strategists, for example-while others are not-low-skill manual and service
workers, for example. For the former, work tends to be both exciting and lucrative. For the
latter, work is routine, not very well paid, and characterized by frequent layoffs and part-time
status. This may be why a booming economy in the 1990s and a growing economy in
2003-2005 did not diminish income inequality in the United States.
1G.
Thomas Sims, "Northern Europe, U.S., East Asia Remain Tops in Competitiveness, Wall Street Journal
(September 28, 2005), p. 1.
2Richard
3For
Florida, The Rise of the Creative Class (New York: Basic Books, 2002).
entertaining yet highly informative critiques of extreme pro-globalization advocates and extreme
anti-globalization advocates see Michael Veseth, Selling Globalization: The Myth of the Global Economy
(Boulder, CO: Rienner, 1998); and Michael Veseth, Globaloney: Unraveling the Myths of Globalization (Lanham,
MD: Rowman & Littlefield Publishers, 2005).
4Florida,
The Rise of the Creative Class.