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Globalization as One of the Main Causes of Economic Inequality in America

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This essay will focus on how globalization is a major cause of inequality and is destroying the middle class in the United States and allowing the rich to thrive. Globalization includes the spread of products, technology, ideas, and culture, among other things between countries. I will be discussing how specifically economic globalization has been a major factor in the cause of the severe wealth inequality in America. Globalization has allowed the United States, and its businesses and people to become more connected and dependent on the rest of the world in terms of trade for goods and services. At the same time, economic inequality is at an all-time high in the U.S., with the richest 0.1% making 188 times as much as bottom 90% annually (Saez, 2019). There is a correlation between the two. Economic globalization has caused a labor migration away from America to poorer countries, allowed rich business owners to exploit inefficiencies in U.S. markets, and allowed outsourcing of entire industries.

Globalization allows U.S. businesses to move labor into developing countries where the working class can afford much lower wages. This makes U.S. low skilled workers obsolete as they are uncompetitive with the wages of abroad workers. As the demand for low skilled workers decreases, millions of Americans are left jobless and without any potential opportunity. In the introduction to Shock Waves, by Barry Lynd, he writes, “The outrage comes mainly from Americans who have watched their employers hire workers in other countries to do their jobs”. Due to increasing globalization, manufacturing abroad has never been easier, which has caused this massive migration to Asian labor: “It is that Americans must now compete for their jobs to a degree we never had to before with people in Guangdong, in Karnataka, in Kuala Lumpur” (Lynd 7). Naturally, business flows to where prices and production is the cheapest, and with recent globalization standards, American workers simply cannot compete. These low-wage and low-skilled people are either left unemployed or in even lower paying jobs, setting the conditions of persistent poverty. As major retail companies such as Apple, Nike or Walmart and more use oversees manufacturing, the American middle class is disappearing, and the wealth gap is widening. It is this sentiment that has led to the election of Donald Trump, who campaigned to protect the American worker and fight bad trade deals.

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While globalization is decreasing the average income of the working class, it is increasing the success of the rich. With one side of the inequality decreasing, and the other increasing, the wealth gap only becomes wider. U.S. business owners are thriving under globalization as they have unlimited access to unbelievably cheap labor and production as compared to U.S. standards. As market trends predict, the lowest labor and production costs will prevail, “This new and intimate interdependence with other nations was forged not in the name of love. It was almost literally manufactured in the name of efficiency” (Lynd 8). While the efficiency of using outsourced labor is destroying the working class of the U.S., the business owners continually become richer as they can now take advantage of lower labor and production costs abroad. By increasing margins with abroad manufacturing and labor, the businesses are becoming richer than they ever could in the U.S. In addition, American workers have no chance of competing, even with the use of labor unions. “…outsourcing has long served as a strategy to reduce the power of workers, especially those in unions, as Bennet Harrison made clear a decade ago in his book Lean and Mean” (Lynd 7). Globalization has given U.S. businesses free rein over their use of labor, continually making margins larger and owners richer as they easily move to the country or area where the costs are the cheapest. Only legislature would be able combat this issue, as even labor unions are becoming obsolete. The richest 1% have had an income growth of over 250% in the last 30 years as opposed to no income growth by the bottom 50% (Growth in U.S. before-tax income, 1979-2019). The convenience of globalization has only benefited the rich, and therefore made them richer. Globalization causes the wages of the often low-skilled segment of the work force to drop, while increasing the wealth of business owners who can utilize the benefits.

Globalization has caused the outsourcing of entire industries away from the U.S. plunging businesses, cities and people into poverty and causing economic inequality. American businesses were once known for the method of vertical integration such as “Ford’s immense River Rouge complex of the 1920’s where oceangoing ships unloaded ore and coal at one end to be spun into complete Model A automobiles that were rolled onto rail cars at the other’ (Lynd 9). Additionally, many of America’s biggest industrial corporations, including IBM, DuPont, and General Electric, used a similar method. As globalization increased, it directly caused the disintegration of vertically integrated firms. For example, United States automobile manufacturers began to outsource parts after adopting a new method to mitigate all responsibility for production. Soon, nearly every part was outsourced and imported from a different specialized firm, absolutely destroying the U.S. automobile manufacturing industry. This destroyed cities such as Detroit, central to U.S. auto making, as the population dropped by 600,000 in 50 years due to hundreds of thousands of people losing their jobs as the auto industry went through these structural changes (Beyer, 2018). Detroit never recovered. This is one example of the effect of globalization on the working class of the U.S. and a manufacturing-based city and how the working class was put out of work as the business owners became richer. There are endless examples, in auto manufacturing, retail, pharmaceuticals, and many more. Globalization is a major factor in American inequality.

Globalization is one of the main causes of American inequality in recent times. An outsourcing of labor and production has deemed American worked useless as they cannot compete with abroad prices. As these workers lost jobs and quality of life decreases, the rich become richer as they take advantage of these global opportunities. The wealth gap has only widened in the last 50 years and continues to do so. One solution would be to train low-skill workers, but they cannot afford this, and business owners would not want to give them a claim to higher wages. Globalization may be inevitable but is at the detriment of the U.S. middle class.

Bibliography

  1. Barry Lynd, End of the Line, (New York, Doubleday, 2005). (Introduction)
  2. Beyer, S. (2018, August 1). Why Has Detroit Continued To Decline? Retrieved from https://www.forbes.com/sites/scottbeyer/2018/07/31/why-has-detroit-continued-to-decline/#5a990f743fbe.
  3. Income Inequality. (n.d.). Retrieved from https://inequality.org/facts/income-inequality/.
  4. Read ‘Automotive Fuel Economy: How Far Can We Go?’ at NAP.edu. (n.d.). Retrieved from https://www.nap.edu/read/1806/chapter/7#95.
  5. Saez, E. (2018). Striking It Richer: The Evolution of Top Incomes in the United States. Inequality in the 21st Century, 39–42. doi: 10.4324/9780429499821-8.

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Globalization as One of the Main Causes of Economic Inequality in America. (2022, August 25). Edubirdie. Retrieved November 27, 2022, from https://edubirdie.com/examples/globalization-as-one-of-the-main-causes-of-economic-inequality-in-america/
“Globalization as One of the Main Causes of Economic Inequality in America.” Edubirdie, 25 Aug. 2022, edubirdie.com/examples/globalization-as-one-of-the-main-causes-of-economic-inequality-in-america/
Globalization as One of the Main Causes of Economic Inequality in America. [online]. Available at: <https://edubirdie.com/examples/globalization-as-one-of-the-main-causes-of-economic-inequality-in-america/> [Accessed 27 Nov. 2022].
Globalization as One of the Main Causes of Economic Inequality in America [Internet]. Edubirdie. 2022 Aug 25 [cited 2022 Nov 27]. Available from: https://edubirdie.com/examples/globalization-as-one-of-the-main-causes-of-economic-inequality-in-america/
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