IS GLOBALIZATION INEVITABLE?
To continue with this blog’s presentation of a unit of study
development, this posting will begin with a list of more relevant
factoids. These following facts are
offered because the developer judges them pertinent to the topic, foreign trade
and that trade’s effect on job availability in the US. Overall, this demonstration, which is in real
time, is an attempt to share with the reader what a teacher would do to be able
to present lessons that bring to the classroom content that is logically
derived from the principles of federation theory.
As suggested
in the last posting, this instruction could be augmented by listing these facts
on some visible area of the classroom, e.g., black/white board or on an
overhead projector. Another option would
be to pass out, on a sheet of paper, each day – like a daily newsletter – a
batch of information notices. The last
posting began this list, here are some more information points:
·
A 2016 Pew Research Center report stated
that 203 of the 229 major U.S. metropolitan areas it surveyed between 2000 and
2014 showed a decline in the number of middle-class families. This results from
families either moving up the socioeconomic ladder due to securing work in more
specialized jobs paying higher income or them falling into a lower-income
bracket often due to losing a middle-class income jobs such as in manufacturing.[1]
·
Middle-class households’ income has
nominally risen modestly, but in inflation-adjusted basis are stagnant during
the years from 2000 to 2014. This
reflects what has been going on for decades stretching back to the 1960s. That is, when factoring in the effects of inflation
over 50 years (1964-2014), real wages grew by less than 8% – this is a yearly
rate of 0.16% and is considered stagnant growth.[2]
·
Certain costs, that are relatively
important to quality of life, have been facing inflationary growth. Specifically, college costs and medical care
costs outpaced Consumer Price Index (CPI) between 2005 and 2015 except for one
of those years. For example, between
1978 and 2008, college tuition rose 1,120%.
Of course, a college education is even more important when manufacturing
jobs are going abroad. Medical care is
essential for good health and, in turn, to allow for a person to be competitive
in a job market.[3]
·
The debt levels of the average
middle-class household are significantly high.
For example, in 2013 it is nearly twice as high as it was in 1989 at a
rate of 122% of annual household income.
High debt levels make it more difficult to save for retirement. Also, a loss of a job and/or a downturn in
the economy would be more detrimental with a high debt level to satisfy.[4]
This posting will now return to the
other path this development is taking; that is, identifying relevant insights
and lesson ideas that informs or otherwise engages the student to reflect on
the significance of the insight. To this
point, the development has identified three insights (in the last posting) with
accompany lesson ideas. Here is a
fourth:
The economic shortfalls to certain
groups of workers in the US is not due to globalization – the overall policy
set that encourages and enables foreign trade activities – but the inability or
aversion of the US government to adjust to the newer economic realities
attached to globalization. One can argue
that given the technological advancements that facilitates foreign trade and
the aspirations of poorer countries – with their supply of cheaper labor – one
can say, globalization was inevitable.[5]
A lesson could begin by holding a
question and answer session with the class that begins by the teacher asking students
to imagine they are an owner of a business that meets a payroll. The teacher basically poses the following questions: Would they do X if by doing so they would drastically
lower a cost of production?
Would they do X if it means their present employees will lose
their jobs?
If they do not do X and their competitors do X, allowing the
competitors to drastically lower the price by which they sell their goods,
would that further encourage them to do X?
The point of this q & a is to see
how overwhelming the argument is to move a business to another country – or to
at least move the manufacturing element of their business – when the other
country has large numbers of people willing to work for a mere fraction of what
American workers earn. In the
underdeveloped nations of the world there are many workers who are willing to
work for these lower wages.
For example, a country where many
products today are produced that were produced by US plants in the past is
China. Recently, China’s wages have
experienced healthy increases, but as late as 2015, the average yearly salary
among 32 major cities in China was 6,070 yuan which equates to $922.64. Stated another way, based on a 40-hour week
and a year with 250 days of work (50 weeks x 5 days a week), that rate of pay equals
less than ten cents an hour.[6]
The teacher can also point out that
modern technologies – mainly all the activities that the computer allows
business people to perform today – the whole prospect of shifting one’s
manufacturing needs to far off lands has become relatively easy and cheap. Of course, this insight further makes the
case that global trade and its proliferation in the years since the early 1970s
was inevitable.
With that lesson idea, this posting
will now shift gears and offer a conceptualization lesson idea. There are three key ideas or concepts a study
of international trade needs to operationally define. They are comparative advantage, productivity,
and balance of trade/payments. Each of
these ideas is a sub idea of a more encompassing idea.
So,
for example, comparative advantage is a sub idea of the idea, trade. Starting with the “larger” idea, like trade,
the teacher writes the verbal symbol of the idea on the board (e.g., writes
“trade” on the board) and begins asking students a series of questions that are
meant to have them conceptualize the larger idea by using inductive reasoning.
With
the verbal symbol on the board the teacher first asks: what do you know about this larger idea
(trade)? The teacher writes on the board
what the students suggest – perhaps he/she uses short hand to advance the
process. Using his/her judgement, the
teacher ends this phase and then asks:
which of these ideas go together?
The teacher should remember, the aim is to get the students to identify
and define the sub idea that is the purpose of the lesson. In terms of trade, that can be comparative
advantage or balance of
trade/payments.
After
the group of ideas are formed – each can be considered attributes of the larger
idea – the teacher can ask: how would
you label each group? The label
identifies a title for the attribute.
Then take the attribute that comes closest to the targeted sub idea –
relative advantage, balance of trade/payments, or productivity – and through
directed questions arrive at a definition for each.
To
make this a bit clearer, here are a definition for each:
·
Comparative advantage is that advantage in
a trade exchange when the degree to which a product or service is more
advantageous to the customer(s) than a competing asset or product.
·
Productivity is a measure of the value of
a production process relative to the costs or depletion of assets used to
produce a good or service in question.
It can also include the same measure for collective production, e.g.,
the productivity level of a nation’s economy. An added concern with productivity is that
since labor usually accounts for businesses highest cost factor, cutting labor
costs most significantly raises productivity assuming the same amount of goods
are produced.
·
And balance of trade/payments is the
difference in value – money amounts – of goods and/or services that are
exported (a positive amount) and imported goods and/or services (a negative
amount). This is usually applied to the
balance of trade for a nation’s economy.
These definitions can be a bit
sophisticated for a high school class.
To give them a more understandable language, a short story type example
for each can be helpful. In terms of comparative
advantage, for example, the teacher can provide the following: suppose there is a highly skilled physician
who can also type 130 words a minute.
Should he/she hire a typist, who probably types at a rate of say 70
words a minute, to type out his/her reports?
This was better example before word
processing came about, but it probably still stands. The answer to the above question, using comparative
advantage, is no. Why? Because to do his/her own typing, the doctor
would have to sacrifice time in which he/she can make a lot more money than
he/she would spend hiring a typist to do the typing.
Therefore, in terms of the typist,
he/she has a comparative advantage over the doctor in terms of typing. This is true even though the doctor has an
absolute advantage over the typist in terms of typing – 70 words a minute vs. 130
words a minute.
This idea is important in
international trade in that it helps to explain why some countries that have
absolute advantages in the production of some goods, will import those products
from countries that have a lower level of absolute advantage in the production
of those products.
The question or concern becomes: what does the one country give up –
opportunity costs – in producing that good?
In the conceptualizing exercise described above, perhaps the teacher can
use the doctor/typist example to guide the student to this realization and gain
further understanding of the idea, comparative advantage.
This posting is getting a bit long,
so this demonstration will be picked up in the next posting.
[1] Sean Williams, “7 Reasons the Middle-Class Is in
Serious Trouble,” The Motley Fool, September 22, 2016, accessed September 28,
2016, http://www.fool.com/investing/2016/09/17/7-reasons-the-middle-class-is-in-serious-trouble.aspx .
[2] Ibid. In
nominal (unadjusted for inflation) terms, wages rose over 700% during the years
between 1964 and 2014. This finding is
based on statistics offered by the Bureau of Labor Statistics.
[4] Ibid.
[5] Edward Alden, Failure
to Adjust: How Americans Got Left Behind
in the Global Economy (Lanham, MD:
Rowman and Littlefield Publishers, 2016).
[6] Wu Yan, “Average Salary in Major Chinese
Cities Is $900 and Growing,” China Daily, accessed September 7, 2017, http://www.chinadaily.com.cn/china/2016-01/21/content_23183484.htm .
