Globalization and Technological Advancements

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How did globalization affect the US economy in the 1990s?

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The 1990s was a time of increasing globalization of the world economy, mostly as the result of technological advancements, the collapse of the USSR, and new free trade agreements. Naturally, this had a significant impact on the economy of the United States.

One way that the US economy was affected was that imports and exports increased significantly. Most notably, the North American Free Trade Agreement (NAFTA) removed trade barriers between the United States, Mexico, and Canada. This led to more cross-border investment and resulted in the three partners pumping more capital into each other's economy than ever before. There were a number of negative repercussions, however. For one thing, it has been argued that this and similar trade agreements have reduced the American worker's access to competitive wages. Since it became possible to easily relocate American jobs overseas where employee costs are lower, wages and benefits in many sectors of the American economy, particularly manufacturing, have seen little improvement. In many instances, jobs were indeed moved overseas. It is estimated that in the decade after NAFTA's institution, as many as 750,000 US jobs moved to Mexico.

Globalization in the 1990s allowed the American consumer to have access to more cheaply produced foreign goods than ever before. This led to retail becoming one of the largest parts of the US economy and supported a more materialistic-inclined side of the middle class.

This period of globalization also led to a sharp growth in the technology sector in the United States. Although more manufacturing went overseas, there was a lot of room for technological jobs to emerge in the country. As internet and computer technologies improved and spread around the world, the United States became the center of this development.

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Globalization impacted the American economy in the 1990s in several ways. One area of impact is in the category of jobs. While the United States lost some jobs to overseas workers, the United States also gained jobs that increased economic activity within the country. Between 1991 and 2003, multinational companies based in the United States created three million jobs outside of the country. However, they also created over five million jobs within the country. Oftentimes, when a job is created overseas, it also leads to jobs being created in the United States. Finally, when American firms create jobs overseas, foreign firms also create jobs in the United States. Foreign firms employed 1.5 million more workers in 2001 in the United States than they did in 1991. This was especially true in the automobile industry, as foreign auto manufacturers created jobs in the United States.

When open trade policies exist, these policies help foreign economies grow. When foreign economies grow, the people in these countries will demand more products. Some of these products will be made in the United States. This benefits the U.S. economy, as more workers are needed. This will help create more demand from American workers for products made in the United States.

Globalization allowed Americans to purchase products made in other countries at a lower cost. This was especially true for products like computers that were made overseas. While the computers were made overseas, new jobs were created in the United States to service these computers and to develop computer networks within American companies. Also, with the use of computers, American companies became more productive and more efficient.

Globalization has forced American workers and the American economy to be more flexible. American workers were able to move into newly created jobs in different fields. About twenty-five percent of American workers now work in jobs that didn’t exist fifty years ago.

Globalization impacted the American economy in many ways in the 1990s and beyond.

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Throughout the 20th and 21st centuries, the United States economy has become increasingly globalized as the U.S. government has promoted free trade policies and transportation costs have fallen. Economists disagree about whether or not globalization has been a benefit or hindrance to the U.S. economy, but all agree that globalization has permanently altered its nature.

On a macroeconomic level, globalization has seemed to benefit the U.S. economy. The ability to import products from nations with low wages (such as China) has greatly reduced the price of many products; this has increased consumer spending power.

However, microeconomic data indicates that perhaps globalization has not been quite so beneficial. As a recent Economic Policy Institute study found, globalization has increased demand and, consequently, wages for college-educated workers but has also decreased wages for U.S. workers without college diplomas. Since manufacturers can export low-skill jobs to nations which have low or no minimum wages, U.S. workers without college degrees are less in-demand; consequently, their annual wages have fallen 5.5%, or $1,800. The ultimate result of this process is that wealth inequality (the difference in average wages between the rich and the poor) is increasing.

Workers hurt by globalization have begun to push back against it during the 2016 U.S. presidential election. Both Donald Trump (Republican) and Bernie Sanders (Democrat) have vociferously opposed the free trade policies which prompted globalization and have said that if they are elected they will push to institute policies which protect American workers disaffected by globalization. 

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Looking specifically at the United States, globalization had a mixed impact on the economy.

On the one hand, globalization was helpful to consumers in the United States.  Globalization allowed consumers to benefit from lower prices that could be gotten by importing things from low-wage countries.  This process was seen most clearly in the rise to power of Wal-Mart during this decade.

On the other hand, globalization hurt specific sectors of the American economy.  Most specifically, it was workers in relatively low-skill jobs in manufacturing who were hurt.  They tended to be outcompeted by workers in poorer countries.  Manufacturing jobs also declined due to increasing automation as US firms tried to become more efficient so that they could compete with foreign companies.

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