NCPA - National Center for Policy Analysis


May 2, 2008

The globalization paradigm has turned out to be very convenient for politicians.  It allows them to blame foreigners for economic woes.  It allows them to treat economic and social change as a great mercantilist competition, with various teams competing for global supremacy, and with politicians starring as the commanding generals.  But there's a problem with the way politicians present the globalization paradigm.  It doesn't really explain most of what is happening in the world, says New York Times columnist David Brooks.

For instance:

  • Some Americans have seen their jobs shipped overseas, but global competition has accounted for a small share of job creation and destruction over the past few decades.
  • 90 percent of fixed investment around the world is local, says Pankaj Ghemawat of the Harvard University Business School.
  • Companies open plants overseas, but that's mainly so their production facilities can be close to local markets.

Nor is the globalization paradigm even accurate when applied to manufacturing, says Brooks:

  • Manufacturing isn't fleeing Asia.
  • The U.S. share of global manufacturing output has actually increased slightly since 1980, according to Thomas Duesterberg of Manufacturers Alliance/MAPI.

The chief force reshaping manufacturing is technological change, explains Brooks:

  • Thanks to innovation, manufacturing productivity has doubled over two decades.
  • Employers now require fewer but more highly skilled workers.
  • Technological change affects China just as it does the America; between 1994 and 2004 the Chinese shed 25 million manufacturing jobs, 10 times more than the United States, says William Overholt of the RAND Corporation.

The central process driving this is not globalization.  It's the skills revolution.  We're moving into a more demanding cognitive age.  The globalization paradigm emphasizes the fact that information can now travel 15,000 miles in an instant.  But the most important part of information's journey is the last few inches -- the space between a person's eyes or ears and the various regions of the brain, says Brooks.

Source: David Brooks, "The Cognitive Age," New York Times, May 2, 2008.

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