Sunday, September 23, 2018
Opinion

Globalization in retreat

One fateful question for 2013 is this: What happens to globalization? For decades, growing volumes of cross-border trade and money flows have fueled strong economic growth. But something remarkable is happening; trade and international money flows are slowing and, in some cases, declining. David Smick, the perceptive editor of the International Economy magazine, calls the retreat "deglobalization." What's unclear is whether this heralds prolonged economic stagnation and rising nationalism or, optimistically, makes the world economy more stable and politically acceptable.

To Americans, some aspects of deglobalization will seem delicious. Take manufacturing. Globalization has sucked factory jobs from the United States. Now, the tide may be turning. Just recently, Apple announced a $100 million investment to return some Mac computer production home. Though tiny, the decision reflects a trend.

General Electric's sprawling Appliance Park in Louisville, Ky., once symbolized America's post-World War II manufacturing prowess, with employment peaking at 23,000 in 1973. Since then, jobs have shifted abroad or succumbed to automation. But now GE is moving production of water heaters, refrigerators and other appliances back to Appliance Park from China and Mexico. Year-end employment is reckoned at 3,600, up 90 percent from a year earlier, writes Charles Fishman in an excellent article in December's Atlantic.

Nor is GE alone, Fishman notes. Otis is moving some elevator production from Mexico to South Carolina. Wham-O is shifting Frisbee molding from China to California.

The changes are harbingers, contends the Boston Consulting Group, which predicts a manufacturing revival. China's labor cost advantage has eroded, it argues. In 2000, Chinese factory wages averaged 52 cents an hour; but annual double-digit percentage increases will bring that to $6 an hour in high-skilled industries by 2015. Although wages of U.S. production workers average $19 an hour, BCG argues that other nonwage factors favor the United States. American workers are more productive; automation has reduced labor's share of expenses; and cheap natural gas further reduces costs. Finally, higher oil prices have boosted freight rates for imports.

By 2015, China's overall cost advantage will shrivel to 7 percent, BCG forecasts. As important, it says, the United States will maintain significant cost advantages over other developed-country manufacturers: 15 percent over France and Germany; 21 percent over Japan; and 8 percent over Britain. The United States will be a more attractive production platform. Imports will weaken; exports will strengthen. BCG predicts between 2.5 million and 5 million new factory jobs by 2020. (For perspective: 5.7 million manufacturing jobs disappeared from 2000 to 2010.)

Because the United States is the world's largest importer, this shift would dampen trade. Similarly, cross-border money flows ("capital flows") have abated. Banks, especially in Europe, have reduced foreign loans to "deleverage" and strengthen their balance sheets. From 2011 to 2012, bank loans to 30 "emerging market" countries fell by one-third, says the Institute of International Finance, an industry group. "It's the most decisive case of 'home bias' (in lending) being re-established," says economist Philip Suttle of the IIF. Government regulators encourage the shift, he says, suggesting that "if you're going to cut lending, cut there and not here."

Of course, globalization won't vanish. It's too big and too entwined with national economies. In 2011, total world exports amounted to nearly $18 trillion. The same is true of capital flows. Despite banks' pullbacks, those same 30 emerging market countries in 2012 received an estimated $1 trillion worth of investment from multinational companies, private investors, pensions, insurance companies and other lenders — a still-huge total, though down from its peak. But globalization's character may change.

For years, the world economy has been wildly lopsided: China and some other countries ran big trade surpluses; the United States was perennially in massive deficit. Similar imbalances existed in Europe. Now, slumps have dampened the American and European appetite for imports. The upshot is that "China and others are recalibrating their export-led economic strategies" to focus more on domestic demand, argues economist Fred Bergsten of the Peterson Institute. That's good, he says; the world economy will be more balanced. Likewise, erratic capital flows have triggered past financial crises. Slower flows may promote stability.

Not everyone is so optimistic. Smick of the International Economy sees globalization as "the proverbial goose that laid the golden eggs." The search for larger markets and lower costs drove investment, trade, economic growth and job creation around the world. That's weakened, and there's "no new model to replace it." Domestic demand will prove an inadequate substitute. Central banks (the Federal Reserve, the European Central Bank, the Bank of Japan) have tried to fill the void with hyper-easy money policies. Smick fears damaging outcomes: currency wars as countries strive to capture greater shares of stagnant export markets; and burst "asset bubbles" caused by easy money.

These visions clash. In 2013, we may learn which is right.

© Washington Post Writers Group

Comments
Editorial: Florida needs uniform standards for voting by mail

Editorial: Florida needs uniform standards for voting by mail

Vote by mail has been a stunning success in Florida, increasing turnout and making it easy and convenient to cast a ballot with time to research and reflect. But a new study shows that mail ballots cast by African-American, Hispanic or younger voters...
Published: 09/21/18
Editorial: Borrowers need protection from Marlin Financial

Editorial: Borrowers need protection from Marlin Financial

State and federal lending regulations exist to protect consumers from being surprised — and overwhelmed — by ballooning debt. Marlin Financial, a shadowy auto lender doing business around Florida, seems to be skirting those protections ...
Published: 09/21/18
Editorial: Putnam hire stinks of patronage, secrecy

Editorial: Putnam hire stinks of patronage, secrecy

In addition to a lesson on political patronage, Florida Agriculture Commissioner Adam Putnam needs a refresher on the particulars of state public records law.In January 2017, Putnam hired the 27-year-old son of a former Publix executive to a high-pay...
Published: 09/20/18
Editorial: Investigate first, then hold Kavanaugh confirmation vote

Editorial: Investigate first, then hold Kavanaugh confirmation vote

There should be a timely investigation of the allegation of sexual assault against Judge Brett Kavanaugh before senators hear from him and his accuser, let alone vote on whether they should confirm his nomination to the U.S. Supreme Court. The proces...
Published: 09/20/18
Editorial: Immigrants help to make America great

Editorial: Immigrants help to make America great

The heated debate on immigration could benefit from some more facts, which the U.S. Census has helpfully provided. And the facts show that rather than building walls, the United States would do far better to keep opening doors to legal immigrants. Th...
Published: 09/19/18
Updated: 09/20/18
Editorial: FDA acts to keep e-cigarettes from kids

Editorial: FDA acts to keep e-cigarettes from kids

The federal Food and Drug Administration is bringing important scrutiny to the increasing use of e-cigarettes, requiring companies that make and sell them to show they are keeping their products away from minors. Vaping is the new front in the nation...
Published: 09/18/18

Tuesday’s letters: Honor Flight restored my faith in America

Dogs are the best | Letter, Sept. 15Honor Flight restored my faith in AmericaJust as I was about to give up on our country due to divisiveness and and the divisions among its people and politicians, my pride was restored. As a member of the recen...
Published: 09/17/18
Updated: 09/19/18
Editorial: Senate should delay vote on Kavanaugh

Editorial: Senate should delay vote on Kavanaugh

The Senate and the nation needs to hear more about the sexual assault allegation against U.S. Supreme Court nominee Brett Kavanaugh. Setting aside Kavanaugh's judicial record, his political past and the hyper-partisan divide over his nomination, a no...
Published: 09/17/18
Editorial: Tampa council has another chance to show it takes Stovall House changes seriously

Editorial: Tampa council has another chance to show it takes Stovall House changes seriously

The Tampa City Council has yet to hear a compelling reason to allow a private social club in a residential neighborhood off Bayshore Boulevard, and a final meeting on the matter scheduled for Thursday offers the council a chance to show the diligence...
Published: 09/14/18
Editorial: Focus on Hurricane Florence, not defending poor response in Puerto Rico

Editorial: Focus on Hurricane Florence, not defending poor response in Puerto Rico

Hurricane Florence began lashing down on the Carolinas Thursday and was expected to make landfall early Friday, washing over dunes, downing trees and power lines and putting some 10 million people in the path of a potentially catastrophic storm. Flor...
Published: 09/13/18