Globalization Upon Us

American children sing “We are the world,” but the world does not listen. Children in Iran burn American flags. Children in Iraq throw stones at American soldiers. Children in China write hateful essays about the “evil” American ways. American politicians attempt to spin how third world countries embrace Western ways while the terrorist alert is heightened to acknowledge another international threat. Increased globalization has elevated the risk at the domestic and international levels for US government military and civilian personnel.

According to the Forrester Research, approximately 3.3 million U.S. jobs and $136 billion in wages could be moved overseas to countries like India and China by 2015. Therefore, many organizations will need to change their strategies in order to meet the international challenges ahead.

Let’s look into the future. Many developing countries will continue to grow strongly over the next decade. In fact, these countries steadily shift to consumer-led growth instead of export-led growth.  The dollar spirals downward and foreign currency goes upward.  China and India have added millions to their labor force creating products as well as outsourcing their services abroad at a fraction of what American workers can provide. 

These upstart countries are positioning themselves to become the next Super Power.  For example, China passed Japan as the world’s second-largest economy. According to the World Bank estimates, China could surpass the US by 2020. China’s gross domestic product (GDP) spreads across 1.3 billion people ($3,600 per person) while the US GDP covers a smaller population ($42,000 per person). Yet, China will continue to fuel the world’s economy due to its thirst for raw materials and products in order to meet its own demand.

Globalization continues to transform our organizations.  Today, many American businesses have a global focus.  The S&P 500 companies now generate 46% of their profits outside the US. In fact, some of the largest companies are higher.  For example, Coca-Cola has become a very successful brand abroad, with operations in 206 countries.  Over 80% of the company’s revenue comes from abroad.  Coca-Cola CEO Muhtar Kent explains, “We are a global company that happens to be headquartered in Atlanta. 

Do the math!  American businesses are headed offshore for increased profitability.  Companies gain from this foreign exodus the benefits of accessing more lucrative markets, new technologies, easy credit, and quality, cheap labor. When American businesses cut jobs, it has impacted the standard of living for today’s families.

Columnist Fareed Zakaria highlights the dilemma: “Capital and technology are mobile; labor isn’t….And this is a country with one of the highest wages in the world, because it is one of the richest countries in the world. That makes it difficult for the American middle-class worker to benefit from technology and global growth in the same way that countries do.” 

Economist pundits and political opportunists paint globalization as the best thing since sliced bread yet hide the realities of global competition from the general public. The forecasted outlook for the full-time worker is bleak. Clearly, technology and outsourcing are making the contingent (temporary) and other forms of flexible labor (independent contractors, on-call workers, temporary help agency, part-time, and contract workers) a reality for future employment opportunities.

As a matter of fact, Charles Handy theorized that unemployed or spare workers would create their own new work in the future. Business executives express little moral remorse as they keep American workers at bay.  Therefore, a different type of U.S. business model will need to be developed for global competition in the near future.

How do US organizations compete globally with the realities of outsourcing and create an American labor force that is clearly energized and motivated in the process?  What will happen to the quality of life for the middle class as global averages impact American wages?

 © 2011 by Daryl D. Green

 

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27 thoughts on “Globalization Upon Us

  1. The quality of life in the U.S. will change. We become more materialistic and in need of possessions we cannot afford outright, we are also taking our lives downhill by neglecting the vital necessities and replacing them with unnecessary items only beneficial for entertainment. The problem here now is the fact almost all middle class employees have either become low class employees or remained middle class, but have accumulated even higher debt because of the lifestyles they refuse to give up. However on more positive note experts calculate that although Americans have lost their jobs to outsourcing, the newer generations have become more educated and have managed to find themselves being pulled into the international labor force, “For those workers in America globalization has been a godsend. Countries all over the world seek American engineers, scientists, and other highly educated professionals. To benefit from the effects of globalization America must seek to educate its work force or face defeat by Asian and European counterparts.” This is as direct as anyone can get about where the U.S. is headed if it does not take action to secure its future.
    Reference:
    Clay, Casey. (2010) Has globalization hurt America’s workers? Retrieved from: http://www.helium.com/items/383867-has-globalization-hurt-americas-workers

  2. We as Americans are already seeing the middle class shrink dramatically. My generation will be one of the first to not live as prosperously as our parent’s generation. We are getting the same types of degrees but today there are more people competing for the same jobs. Here are some startling statistics from Michael Snyder’s article:

    • 83 percent of all U.S. stocks are in the hands of 1 percent of the people.
    • 61 percent of Americans “always or usually” live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.
    • Approximately 21 percent of all children in the United States are living below the poverty line in 2010 – the highest rate in 20 years.

    The reality is that no matter how smart, how strong, how educated or how hard working American workers are, they just cannot compete with people who are desperate to put in 10 to 12 hour days at less than a dollar an hour on the other side of the world.

    Reference:
    Snyder, Michael, Recession (July 2010). The Middle Class in America Is Radically Shrinking. Here Are the Stats to Prove it. Retrieved 2/7/2011 from:
    http://finance.yahoo.com/tech-ticker/the-u.s.-middle-class-is-being-wiped-out-here's-the-stats-to-prove-it-520657.html?tickers=%5EDJI,%5EGSPC,SPY,MCD,WMT,XRT,DIA

    • Eric, interesting and controversial points (I like it)!

      Some people would argue that…”83 percent of all U.S. stocks are in the hands of 1 percent of the people” is a good thing. Isn’t this how capitalism works?

  3. More lyrics from “We Are the World”…there comes a time—when we head a certain call? Nobody is listening! Again referencing John McCarthy, IT-enabled companies, estimates that India’s IT-enabled industry grew by 70% during 2001-2002. A Business Week article dated 2003 warned of the growing threat to the American work force from India. Technology allows professional employees sitting 6,000 miles to perform as they were in the next office, working for substantially less. Our government has ignored all the calls! Legislation governing business payroll taxes, corrections to health care cost, and correction to uncontrolled unions must be adjusted to incentivize organizations to keep U.S. employees . Science and R&D must be mastered to remain competitive. There is no incentive for corporations to deal with our unemployed, as their goal is to maximize profits.
    U.S. professional skills are matched globally, our educated middle class will become the working poor unless the long predicted growth in global outsourcing is slowed down.

    References:
    Nounou, E. and Yasgur, S. E-Journal: “The Impact of Outsourcing on the American Worker “.
    DRUM MAJOR INSTITUTE FOR PUBLIC POLICY. http://www.drummajorinstitute.org/ library/report.php?ID=17.

    Kripalanum M.,Engardio, P., and Hamm, S. “The Rise Of India”. Business Week. December 8, 2003. http://www.businessweek.com/magazine/content/03_49/b3861001_mz001.htm.

    • Kim, provocative statements!

      If America middle class becoming the working poor and in foreign countries the working poor become the middle class of those countries, isn’t that good overall for the world?

      I’m just asking! Let’s test this logic.

      • When US middle class join the massive number of working poor (or worse…unemployed) there is no win of the US. Survival is will be paycheck to paycheck. The only disposable US income will he held by the obscene salaries of the ultra-rich (which got that way by selling out our labor force). A global win means we all benefit. The US has been sold out to corporate profits.

  4. While education is certainly helping globalization, “there is also a central paradox of American jobs and education. While the benefits from going to college are increasing exponentially, the fastest growing jobs aren’t for high-earning college graduates. They’re for low-wage workers” (Thompson, 2010). In addition, jobs that are already in a high income bracket are continuing to see wages rise. Those in the middle are staying stagnant as they face freezes in pay and promotions, and job cuts. As a result, the low wage population is increasing and the rich are getting richer all while the middle class is falling and watching their opportunities diminish. Unfortunately, globalization is contributing to middle-class opportunities moving to countries that can do more for less. For example, good paying middle-class IT jobs are moving to India where they can accomplish the same quality of work for a fraction of the pay. The middle class earned an education so they could climb the corporate ladder and increase their salaries quickly. If these opportunities are going abroad, why should they continue to get more education?

    Reference:
    Thompson, Derek. September 2010. The Hollowing Out of America’s middle Class. The Atlantic. http://www.thealtantic.com/business/archive/2010/09/the-holling-out-of-americas-middle-class/62330/. February 8, 2011.

      • I do believe that a college education is important and that it does give you an edge in the professional world, however I think that with it comes too many expectations. I say this because people tend to believe that just because they have a degree the world owes them something. Often they don’t couple their degree with hard work, yet they expect to jump into a high paying job.

        Too, people can become over educated for their field. I fear that this will be the case for many students today as they are staying in school longer because of the down economy. They are using school to bide them time until there are jobs available. Really though, this is creating much debt and is making them over qualified when they do enter the job market. If those in other countries are gaining experience as they get thier education, they will out do us Americans every time.

        My point is, I think of education as a diminishing return. At some point (different for the individual), more education may actually hurt you.

      • Jalene, interesting!

        “I fear that this will be the case for many students today as they are staying in school longer because of the down economy.”

        Is there any way that students can turn this into an advantage?

      • Students can turn this into an advantage by interning with companies in their field of interest. Understanding that these jobs don’t pay, many students aren’t willing to “waste” their time unless monetarily compensated. Although companies want you to have the educational back ground, until you some experience under your belt to compliment it, you aren’t worth much to them. This is a hard lesson learned when you graduate and are looking for that first job. Reflecting on myself, I had the same thoughts and wish I’d put in my dues when I had the chance. Maybe I’d be further ahead now.

  5. U.S. organizations do not effectively compete globally while creating a clearly energized and motivated workforce. The middle class is shrinking at an alarming rate. Government should make major efforts to ensure the middle class continues to survive and grow. Without the middle class the rich continue to gain additional wealth while the poor continue to be poor and the number within that group grows by leaps and bounds. The poor make up the majority while the rich who have 71% of wealth account for 10% of the population (O’Halloran, 2011).
    Outsourcing and foreign dependence are killing the American dreams as college graduates do not make much more than their counter parts a generation ago. For middle class modest at best wage increases make it harder and harder to maintain the standard of living much less improve the overall quality of life. The quality of life overall declines as American wages are impacted more and more from global averages.

    Works Cited
    O’Halloran, R. (2011, 2 8). We need to restore the middle class. Retrieved 2 9, 2011, from Oregonlive.com: http://www.oregonlive.com/opinion/index.ssf/2011/02/we_need_to_restore_the_middle.html

      • I do not think we write America off, but I do think as a country we need to focus on taking care of ourselves for a change. While outsourcing is fiercely globally right now it does not mean it is the best course of action. Consider the car industry, for years the American public was led to believe imports were the way to go. American auto producers could not keep up and were becoming obsolete. Fast forward through the government bailout and now American auto producers like GM are in the number one spot both domestically and globally. I think other companies should try and do the same. It would put people back to work and give them pride in the products America does produce. Just because something is cheaper does not mean it is better.

  6. Outsourcing has been an easy way for businesses to save money and become more competitive in the global market. However, outsourcing has blemished the reputations of some companies and damaged the spirit of the American workforce. Offshoring can lower employee morale and in turn, production and quality may decline (Beasley, Bradford and Pagach, 2004). When debating outsourcing, employers must take their human capital into strong consideration. Employees, whom do not worry about disappearing jobs, tend to have higher morale and work harder toward companies goals. Over the past two years, we have witnessed many companies and employees sacrificing pay and benefits to keep companies afloat.

    As other countries quality of life reaches those of the U.S. middle class, we can assume the American middle class wage will suffer. For example, as emerging economies gain more buying power, their middle class will be able to purchase more. Furthermore, the U.S. dollar will be weakened and not as valued in the world market. This will restrict the purchasing power of the U.S. middle class.

    References
    BEASLEY, M., BRADFORD, M., & PAGACH, D. (2004). Outsourcing? at your own risk. (cover story). Strategic Finance, 86(1), 22-29. Retrieved from EBSCOhost.

  7. The quality of life for the middle class will continue to see an impact from globalization. If the middle class continues on the current path they will become stagnant and complacent. China and India are expanding their expertise into areas such as scientific and engineering technologies which will make the US less competitive but these developing countries still are not near the capability of the US (Bhidé, 2009). The individuals that make up this class will need to invest heavily into their future with education and training. I have noticed this in my own company as positions such as mine are eliminated or continued with little to no increases in wages. My education and training will be the item that sets me apart from others in the organization. The US will be able to compete globally in the future by finding the right leadership and efficiently and effectively allocating available resources (Green & Roberts, 2011) This will lead the US into embracing globalization rather than fighting it and appointing leadership that understands the trends globally.

    Bhide, Amar. (2009). Where innovation creates value. McKinsey Quarterly, (2), 119-125.

    Green, Daryl, & Roberts, Gary. (2011). Impending danger. Deer Park, NY: Linus Publications.

  8. The US is changing dramatically; middle class whom we were famous for is almost gone. In the next 10-15 years I believe well have only two classes, the wealthy and the poor. The rich are getting richer and the poor are getting poorer, living paycheck to paycheck. In a lot of 3rd world countries their standard of living is raising, less people are living in poverty while in the US it’s the opposite; most people standard of living is dropping. In the US we just had a too high of standard of living. The globe need to balance it self. China and India are going to pass us because their cheap labor and other reasons, but then in the future its going to flip again because like the US China and India standard of living is rising too fast and eventually their system which they gained that standard of living is going to back fire because then workers well demand higher wages, better health care so then companies well come back to the US because its just not worth it anymore.

  9. Simon Tay of Forbes magazine states, “For a long time, globalization has effectively meant ‘Americanization.’ ” Tay explains that over the last century, America has set the agenda for the global marketplace. For years, countries have been adapting to America’s cultures to benefit from its prosperity and wealth. However, due to recent economical issues and world events, America’s positioning has declined in the global economy enabling other countries like China to make major ground. It is imperative that American companies begin to adapt to the current changes in the global market. Tay writes that American’s must begin to understand the different cultures of the world. By understanding and embracing the cultural shifts, companies will be better equipped to compete in world market. Opposition to this change could be costly to the American people. If we do not make major changes to the way we approach global opportunities, we will see large declines in our job force, reducing our middle class and our current standard of living.

    Reference:
    Tay, S. (2010, September 22). America’s call to globalization. The U.S. must respond proactively to Asia’s rise., Retrieved from http://www.forbes.com/2010/09/22/asia-america-globalization-markets-economy-book-excerpt-simon-tay.html

  10. Compete globally? “Absolutely!” according to Stacey Wagner, Fair Trade USA. Wagner demonstrates Green Mountain Coffee is gaining globally. However, Americans consumption, saving, competition, and sharing power must shift. Goods and services are inflated. U.S. companies are outsourcing, we are losing jobs. Manufacturing companies operate in other countries where wages are low etc. They inflate the value of goods to sell to Americans. Thinking we are getting a good price, it’s still inflated. We see dollar signs, not understanding value of goods/services. The dollar must gain strength. Stop living beyond our means and learn to cut back and save. Donovan Kramer Jr. says, “Americans suffer from declining ambition. We should increase education.” Self sufficiency at home and purchase selectively in the intensely volatile global arena until fully competitive will help. We need a solid futuristic forecast. No addiction to commodities. Americans are innovative and desire “community” to solve U.S. issues. Change our mindset. We haven’t “shot ourselves in the foot” fostering democracy in other countries. Global competition is great. There will be jobs, just all over the world. Relocating to another country to work rather than to another state will be a reality so becoming bilingual will be good.
    http://www.trivalleycentral.com/articles/2011/02/16/coolidge_examiner/news/doc4d5af7fe8b723781660205.txt
    http://www.prnewswire.com/news-releases/usaid-green-mountain-coffee-and-fair-trade-usa-biodiversity-initiative-supports-economic-and-social-development-for-brazilian-coffee-farmers-116224064.html

  11. Mr. Martin and Mr. Mize make issue of happenings that generate tremendous concern. However, let us also examine another – commonly framed as inflation. People rarely question it or its source, for that matter. Consider the following scenarios (the problems) and their results (the fixes): (1) the Federal Reserve prints too much money: inflation; (2) congress spends too much money (courtesy of the Federal Reserve): inflation. So what does this tell us? Our government – quite literally – is its architect. Or as Steve Forbes (2006) states, “excess money created by the Federal Reserve [spawns inflation]” (p. 29). Now ask yourself, what is the consequence? In short, it is a devalued dollar. Though this enhances our country’s ability to manage its national debt and trade deficits – making us more competitive internationally, it can drastically affect our nation’s quality of life. And, now that the Obama Administration’s momentary policies (which will spur unprecedented levels of inflation) have been coupled with the strain of globalization (which is already adversely affecting work wages), it is immensely difficult not to envision the middle class embarking on challenges they have yet to see.

    Reference
    Forbes, S. (2006). We’d Better Understand This Beast. Forbes, 178 (1), 29.

  12. In my opinion, unfortunately many of the countries that say negative things about United States of America such as Iran do not have a voice for themselves. For thousands of years they fought among themselves about anything and everything. They are told what to do and where to go and how to act. How are they innovators? China does not recognize intellectual property; they steal as many ideas from the world as they give. Where is the ethics in this business process? What we need to do as Americans is to focus our labor force on leading innovation and let those countries they have issues work it out themselves. So why is the need for innovation needed today? Three key factors: technology; global marketplace, and personal power. United States must regain its role as a leader. Effective strategic planning clearly requires defined and realistic goals and a commitment to implement the resulting plan. (Martinsons,1993). If we effectively plan for the future, and utilize our vast levels of senior knowledge we can lead in the global economy.
    Reference
    Martinsons, M. G. (1993). Strategic innovation: A lifeboat for planning in turbulent waters. Management Decision, 31(8), 4. Retrieved from http://search.proquest.com/docview/212098392?accountid=41894

  13. As the world becomes a smaller and smaller place, we Americans must adapt to meet the needs of the global economy. While researching this topic, I found a lot of articles describing the doom and gloom on the horizon. Many of the articles made very valid arguments as to why we should be scared. America must now leverage our intellectual and technological assets in order to maintain our innovative edge over other nations. As Derrick mentioned in his post, because new innovations are easily duplicated, we must act aggressively to protect out intellectual property rights in foreign markets. We need to become a nation of well-rounded leaders and educated managers who are equipped to work side-by-side with emerging countries’ labor forces. This can mean fantastic opportunities for Americans who can quickly recognize how to adapt and act. But, with new resources for unskilled labor in conjunction with technology making individual workers more effective and efficient, globalization’s implications and affects on the American lower class are still yet to be fully realized.

    Reference:
    Shapiro, R. J. (2007, June 20). The new landscape of globalization. ndn.org. Retrieved April 17, 2011, from http://ndn.org/paper/2007/new-landscape-globalization

  14. Most corporations believe that in order to compete globally, they have to look at efficiency and cost rather than relying strictly on revenue increased. As companies seek to enhance their competitive positions in an increasingly global market place, they are discovering that they can cut costs and maintain quality by relying more on outside service providers for activities viewed as supplementary to their core businesses. “Globalization is making U.S. companies more productive, but the benefits are mostly being enjoyed by the C-suite. The middle class, meanwhile, is struggling to find work, and many of the jobs available are poorly paid.” the consequences of outsourcing are not limited to unemployment and the loss of capital. It can also result in the deterioration of morale among employees. “When one considers the effect that the Industrial Revolutions of the 19th and early 20th century…The modern bourgeois society that has sprouted from the ruins of feudal society has not done away with class antagonisms. It has but established new classes, new conditions of oppression, and new forms of struggle in place of the old ones.’ (Marx and Engels, The Communist Manifesto)

    http://blogs.reuters.com/chrystia-freeland

  15. US organizations compete globally with the realities of outsourcing and create an American labor force several factors but the main two is the job qualifications and the person’s experience.
    In a September 1997 article in the International Monetary Fund, an economist Kenneth Scheve and Matthew Slaughter states “In other countries, the impact of the demand shift has been on employment rather than on income. Except in the United Kingdom, the changes in wage differentials have generally been much less marked than in the United States. Countries with smaller increases in wage inequality suffered instead from higher rates of unemployment for less-skilled workers”.
    The two assume that people’s opposition to globalization is simply driven by economic motives: the individual skill level determines whether one benefits or not from globalization and, thereby, one’s position toward it; hence the solution they propose: reforming fiscal policy so as to distribute the gains of globalization more evenly and, thereby, make it more politically viable. Building on this logic, they claim that “there is greater support for engagement with the world economy in countries that spend more on programs for dislocated workers.”
    This will leave the middle class continually seeking for ways to stay currently stable.

    Reference:
    Slaughter, M. J., & Swagel, P. (1997, September). Does Globalization Lower Wages [Electronic version]. International Monetary Fund, 11.

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