THE COMPETITIVE CHALLENGE
The last posting touched upon the stated woes facing many American workers. The nation’s labor force has experienced many transforming changes since World War II from the rise of foreign trade, automation, and an adoption, domestically, of a natural rights view about what ought to prevail in terms of rights and responsibilities. This last element affects the social-cultural expectations that Americans hold as they determine how to conduct their social affairs including labor relations.
A review of those changes is useful. The global framework has drastically changed for the US. The post-World War II condition was extremely generous to this country. That war created a level of US superiority in the world never before enjoyed by any other nation in history. Historically, this was due to the technological advancements caused by the war, the vast destruction suffered by all other industrial countries (except for Canada), and the almost total lack of destruction in the US.
Consequently, the United States created the rules and conditions of international trade that prevailed in the 1945-1975 period. The US kept the high technological industries for itself and allowed the rest of the world to fill in the low technological niches. This distribution was to the benefit of all nations. The exception to this economic balance was the military expenditures (a public consumption element) of the US (a product of defending against the threat of the Soviet Union) and the unwillingness of Americans to cut private consumption to pay for it.
This excess, over the years, ate into the investment levels within the US economy and, in turn, the productivity levels of the nation. The inability of the US to keep up its relative advantage in productivity (even though the US still has the highest productivity levels of the world) and the increasing productivity of such nations as Germany and China, have caused a new competitive world in which vying for the high value market segments in various industries has stiff competitive global markets.
They include specifically seven key industries: microelectronics, biotechnology, and new materials industries, civilian aviation, tele-communication, robots plus machine tools, and computers plus software (e.g., the production of computer chips). One report states,
The political climates in the United States and Europe show that there are different viewpoints on the results of globalization. Many countries around the globe are tightening their immigration rules, and it is harder for immigrants to find jobs in new countries. This rise in nationalism is mainly due to the anger from the perception that foreigners fill domestic jobs [either in their own nations or in the US or Europe] or at companies moving their operations abroad to save money on labor costs.[1]
Unlike the period in the post-World War II years, this is a win-lose competition in which an advantage for one country will be a disadvantage to other major competitors.[2]
Each major competitor comes into the competition with advantages and disadvantages. In summary, Asian countries (China, Vietnam, and Japan) have the advantage of culturally supporting a productive, as opposed to a consumer, mentality (a factor in those countries that has become more Western since the turn of the century), and a relatively disciplined economic strategy, and Europe has created the largest trading block, giving it the opportunities to highly influence trading rules in the 21st century.
The main disadvantages are, for Asian countries, a relative intolerance of foreigners. That hampers those nations from integrating fully their off-shore economic activities (although China has been very active in various parts of the world). Germany and other European countries find it difficult to incorporate fully Eastern European nations, control migration patterns (which include influxes from Africa), and its long-standing cultural diversity inhibiting full political unity (of note the departure of Great Britain from the European Common Market).
As for the US, it still leads the world in all of the economic absolute measures – although one can foresee China eventually taking over that position except for income per capita. But its weakness is that it has lost ground on many measures and that past successes have made it difficult for its populace to understand the underlying dangers.
Here lies the area in which American educational practices contribute to a host of challenges the American economy faces in terms of global competition. As this posting is being written, the US Congress passed an infrastructure law that promises to address many of the elements in which the US has been delinquent in keeping up with its competitors.
Take for example the trend of real wages (wages that account for inflation). The Congressional Research Service reports:
Real wages rose at the top of the distribution, whereas wages rose at lower rates or fell at the middle and bottom. Real (inflation-adjusted) wages at the 90th percentile increased over 1979 to 2019 for the workforce as a whole and across sex, race, and Hispanic ethnicity. However, at the 90th percentile, wage growth was much higher for White workers and lower for Black and Hispanic workers. By contrast, middle (50th percentile) and bottom (10th percentile) wages grew to a lesser degree (e.g., women) or declined in real terms (e.g., men).[3]
In short, unless one finds him/herself in the top wage bracket, he/she is more likely to find one’s economic standing more challenging in relative terms.
Here, the concept of comparative advantage becomes central in many of the calculations affecting international trade. Comparative advantage relates to how a nation or business can produce goods not in absolute terms – in the cheapest way – but how they can produce goods cheaply relative to the costs to competitors. In that, those foreign entities have high levels of such advantage.
Here is how one source describes the importance of comparative advantage:
Comparative advantage has influenced the way economies work from the time that countries first started trading with each other many centuries ago. Globalization has brought the world together by encouraging more trade among nations, more open financial institutions and a greater flow of investment capital across international borders. In a globalized economy, countries and businesses are connected in more ways than ever before … Together, these developments improve economic output and opportunities for both developed and developing nations. These factors also cause greater specialization based on comparative advantage …
[C]ountries such as China have seen exponential growth in their manufacturing sectors in recent decades. Countries with the lowest labor costs have a comparative advantage in basic manufacturing. Globalization has benefited developing countries by providing jobs and capital investments that would not have otherwise been available. As a result, some developing countries have been able to progress more quickly in terms of job growth, educational attainment, and infrastructure improvements.[4]
And this sort of backdrop encourages one to be concerned over America’s ability to compete to its fullest capacity in this continuously changing landscape. Some of these factors have been of concern since the last century, but while some advances have occurred, these factors are still of importance today. The next posting will continue this review.
[1] “Globalization Benefits and Challenges,” Velocity Global (October 6, 2021), access November 4, 2021, https://velocityglobal.com/blog/globalization-benefits-and-challenges-gs/?utm_source=google&utm_medium=cpc&utm_campaign=contact-us&gclid=CjwKCAjwiY6MBhBqEiwARFSCPsSW8zJsRwiKECTu7rZGxsfLc0RqJz-1pXLpcgQ3_zdMik1RoGFamxoCcmEQAvD_BwE&gclsrc=aw.ds .
[2] Today this is pretty much treated as a given in the literature. For accounts of the transition from a US dominant world economy to a more competitive one, the relevant literature can be found in the 1990s. For example, Lester C. Thurow, Head to Head: The Coming Economic Battle among Japan, Europe, and America (New York, NY: MacMillan Publishing Company, 1992). Of course, one can now add China to that list of competitors.
[3] “Real Wage Trends, 1979-2019” (updated 12/28/2020), Congressional Research (no date), https://sgp.fas.org/crs/misc/R45090.pdf .
[4] The Investopedia, “How Does Globalization Impact Comparative Advantage?,” Investopedia (January 18, 2021), accessed November 8, 2021, https://www.investopedia.com/ask/answers/030215/how-does-globalization-impact-comparative-advantage.asp .
