Globalization

Ensuring demand for, and investment in, American workers

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Overview

Globalization has produced a radically different result from the widely shared prosperity that its advocates promised. Instead, production shifted from some countries to others, taking labor demand with it and leaving behind a weakened industrial base, collapsed communities, and poor employment prospects. These shifts result not from genuine comparative advantage, but rather in response to aggressive government subsidies and the availability of exploitable labor in countries like China. Uncontrolled immigration and temporary work programs have a similar effect in reverse, flooding some countries with additional labor that releases the pressure on employers to pay good wages or invest in higher productivity.

This form of “free trade” is not the epitome of free-market capitalism; it is the antithesis. Economists and policymakers who believed that capitalism is “just another word for economic freedom” assumed that the free flow of goods, people, and capital across borders would automatically generate prosperity. But capitalism relies upon the mutual dependence of a nation’s capital and labor to produce good outcomes for both, and for consumers, too. Globalization has severed those bonds, urging the owners of mobile capital to forsake the interests of their fellow citizens and pursue higher profits through labor arbitrage abroad. American workers, their families, and their communities paid the price. The nation’s industrial strength, capacity for innovation, and economic resilience declined.

China poses a particular problem. Globalization’s rise coincided with the Cold War’s end, in part, because a global free trade system that incorporated the Soviet bloc was unthinkable. But the “holiday from history” of the 1990s created a presumption that liberal market democracy was on the march everywhere, and globalization’s proponents argued that incorporating China into a global marketplace would accelerate its own liberalization. They were wrong. Instead, China changed us—corrupting the free market, distorting investment flows, capturing valuable industries, and even exporting its authoritarian politics through campaigns of economic pressure.

At American Compass, we work to understand why globalization has failed and what alternatives exist. We develop approaches through which policymakers can rebalance America’s role in the global economy.

The Regaining Our Balance collection presents a comprehensive critique of how globalization has gone wrong, including Oren Cass’s seminal essay, Searching for Capitalism in the Wreckage of Globalization, and Senator Jeff Sessions’s reflection on how conservatives, himself included, were led astray. In Wrong All Along, page after page of quotations from an overconfident elite exposes the flawed ideology that has driven globalization; in Where’s the Growth, chart after chart depicts the negative economic results. Other essays dig deeper on particular facets of the failure, including Senator Marco Rubio’s assessment of China’s ascension to the WTO and Michael Pettis’s economic analysis of how free trade theory has broken down in practice. The Guide to the Semiconductor Industry provides a concrete example of these forces eroding American leadership and prosperity.

While evidence for globalization’s success is scarce, the market fundamentalism prevalent on the right-of-center has traditionally ignored this reality, instead pushing a narrative in which America has always embraced an open economy and any alternative would be worse. The Rebooting the American System collection confronts these myths. In fact, the American economic tradition historically resisted global entanglement and the economy developed into an industrial colossus with the help of aggressive public investment and high trade barriers. Oddly enough, as John Burtka observes in Don’t Trade on Me, free trade dogma was imported to America by the antebellum, secessionist South. The Reagan-era quota on Japanese vehicle imports, which strengthened domestic manufacturers and gave birth to a massive new industry in the American South, provides compelling proof that a different approach can work.

Examples like these point toward possible solutions today. The Balancing Act provides a comprehensive overview of interventions that could help bring American trade, immigration, and investment flows back into balance. The Moving the Chains collection details a range of strategies for reshoring American industry and innovation, including Willy Shih’s proposal for pre-competitive consortia and Michael Lind’s proposal for local content requirements. Fortunately, the unthinking consensus that encouraged mockery of anyone who questioned globalization’s wisdom has collapsed, and policymakers are beginning to act.

Start Here
3/9/2022
Searching for Capitalism in the Wreckage of Globalization

Mutual dependence between capital and labor, not mere “economic freedom,” is what Adam Smith so ably described. Globalization destroys it.

Featured Content

Browse all content in the Globalization library

Collections

Rebooting the American System

5/4/2020

The comprehensive, conservative case for a return to robust national economic policy

Regaining Our Balance

3/9/2022

How to Right the Wrongs of Globalization

Moving the Chains

6/8/2020

9 Strategies for Retaking Global Leadership in Industry and Innovation

Essays

Searching for Capitalism in the Wreckage of Globalization

3/9/2022 Oren Cass

Mutual dependence between capital and labor, not mere “economic freedom,” is what Adam Smith so ably described. Globalization destroys it.

Conflicted Party

3/10/2022 Jeff Sessions

The problem was that the powerful and wealthy saw no problem. They benefited from closing American factories and moving jobs abroad. They benefited from lower wages. This was their agenda from the start.

Bad Trade

10/7/2022 Michael Pettis

“Bad competitiveness” results in weakening demand, which either reduces global production or requires surging debt to maintain demand and production at its existing level. Perhaps that rings a bell, because it is the world we live in.

Don’t Trade on Me

9/16/2022 John A. Burtka IV

America grew wealthy not from free trade, but behind some of the world’s most imposing protectionist barriers. In fact, the principal tradition of free trade one finds in American history was born in the Confederate South.

Trading It All Away

12/10/2021 Marco Rubio

Adapted from remarks delivered by Senator Marco Rubio on the 20th anniversary of China’s ascension to the WTO.

After Hegemony

11/19/2021 Elbridge A. Colby

After decades of foreign policy debates centered on dealing with states and actors far weaker than ourselves, the United States has lost the “finger tip feel” and grammar for determining how to respond to a nation that is comparable to us in power.

Research

The Import Quota that Remade the Auto Industry

9/29/2022 Wells King, Dan Vaughn, Jr.

President Reagan negotiated a quota on Japanese imports that bought Detroit time to retool and spurred massive foreign investment in a new manufacturing base in the South.

A Guide to the Semiconductor Industry

4/22/2021

A guide to what is happening in the semiconductor industry and how the U.S. fell behind its competitors in the global race for leadership.

Where’s the Growth?

3/15/2022

The era of globalization has coincided closely with the onset of precisely those problems that a clear-eyed analyst might have predicted and delivered outcomes contrary to the ones its ideologues envisioned.

Policy Proposals

Policy Brief: The Global Tariff

10/19/2022

Levy a tariff on all imports that rises until trade is balanced

The Balancing Act

3/23/2022

Policymakers can act on several fronts: market access and investment rules to govern the flow of goods and capital; sovereign actions taken in relation to global institutions; and immigration policy that affects labor market composition.

On Domestic Sourcing

6/9/2020 Michael Lind

Local content requirements offer a simple intervention with benefits that its prohibitionist detractors ignore.

Conversations

Policy in Brief: Balancing U.S. Trade

10/19/2022

On this episode of Policy in Brief, Oren Cass is joined by American Compass policy director Chris Griswold to discuss how U.S. trade fell so far out of balance—and some ideas for how to rebalance it.

Capital Markets R’Us

6/16/2022

Oren Cass joins David Bahnsen to discuss the state of American financial markets, private equity and venture capital, what is going wrong, and potential solutions.

Has the Right Gotten It All Wrong?

3/3/2022

Oren Cass joins David Bahnsen to discuss globalization, market orthodoxy, and much more.

Commentary

The American Camry

9/29/2022 Wells King, Dan Vaughn, Jr.

Wells King and Dan Vaughn, Jr. on how Reagan showed it was possible to wrangle foreign manufacturers to the U.S.

Pass the CHIPS, Please

7/19/2022 Oren Cass

Restrictions on investment in China are a good idea, to be sure. The taller and stronger the guardrails, the better. But holding incentives for domestic investment hostage to tougher restrictions on foreign investment may not be wise or necessary, for two reasons.

Have I Got a Bridge to Sell You: The Limitations of Econ 101

11/20/2021 Oren Cass

American Compass executive director Oren Cass reviews Glenn Hubbard’s new book, The Wall and the Bridge, and discusses the limits of market fundamentalism.

Trade After Trump: A Post-Mortem with Former USTR Robert Lighthizer

1/29/2021

Ambassador Robert E. Lighthizer joins American Compass executive director Oren Cass for a conversation about his work as the U.S. Trade Representative, the overhaul of America’s economic relationship with China, successes achieved and lessons learned, and key challenges facing the Biden administration.

The Immigration Shimmy

1/25/2021 Oren Cass

Immigration expansionists face a difficult challenge: they support high levels of immigration—including many more less-skilled immigrants—for a variety of legitimate reasons, but the less-skilled immigration has detrimental economic effects on Read more…

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