Reconstituting Local Manufacturing Essay
Reconstituting Local Manufacturing
Is it possible to reconstitute local manufacturing and local food markets, or has Globalization ultimately made this impossible?
The global economy and marketplace have impacted local industry and local manufacturing harshly. With consumers having choices from international companies able to import their products, a common market pool for the whole world, it has become more difficult for the local merchants to thrive. Also, many Western companies have established themselves in developing countries, such as McDonalds and Starbucks, with over 31,000 and 18,000 locations operating worldwide respectively. While the influx of multi national corporations has created economic opportunities for many in the communities that they operate within. However, with this prosperity has come the evaporation of local industries. What are some of the factors that could help or inhibit the reconstitution of local manufacturing and local food markets.
One enormous problem could be the price of doing business and the amount of capital it takes to operate in these markets. These international companies have vast reserves of capital to fund their operations in various countries, even buying up local enterprises to reduce their competition. These corporations also spend an enormous amount of cash on advertising. Thus they are able to extend their brand recognition into their new destinations. This is the formula that has also worked well in American cities. Companies are able to buy out their competition with less expensive production costs or less overhead. These companies can operate on a smaller margin than the local merchants, who do not have the benefit of mass produced overseas inventory. (Kantor, 2002).
On a political scale, globalization has had an effect on the policies put into place by local entities that have an impact on the local manufacturing and food market. Through the increased surge in international competition, national policies that are aimed at preserving the structure of local communities and upholding social equality have dwindled and been phased out. Looking to nurture economic growth, many local governments invite foreign investments (Held & McGrew, 2012). While these foreign investors infuse currency into the local economies, the toll they take on the local markets, may not be worth the tradeoff. Could the local governments be taking or mismanaging the funds?
Perhaps the cash infusion could be put to better use to help stabilize or revitalize the local manufacturing and markets. The case could also be made that the concessions that the local governments make to entice international companies into their country make it difficult for or at the least do not address the local manufacturing companies and their concerns. Because of the problems caused for the local manufacturing and food markets, wages and income for the local population also suffers, which influences their purchasing power. This creates a circular effect because without purchasing power the local community cannot support more local manufacturing. This is certainly a way in which globalization has hindered local manufacturing and will make it difficult to reconstitute it in the future.
Some of the ideals championed by those who favor globalization will naturally work against the reconstitution of local manufacturing and food markets. For example, the principle of economic advantage commonly referred to as the iron law, demands that the best of the countries that initiate competitive strategies is deemed to outdo other competitors from the market. Put simply, if a particular foreign country grows a particular local product more efficiently, then there would be no need to grow the product locally (Davis, 2012).
This would force the importation of the product from a foreign country which would obviously hamper the ability of local establishments to be able to compete in that market. In fact, some experts think that because of globalization, in the future all food consumed in America will be imported from elsewhere. It has become financially beneficial to import food instead of growing it locally. This change in economic patterns in response to globalization has hampered the growth of the local industry (Obstfeld, 2000). And functioning in this way will certainly hamper the local manufacturing and food markets to be reestablished and flourish.
Another factor of globalization that is well documented is that of outsourcing jobs to developing countries with a cheaper labor force. Much of this outsourcing has come in the manufacturing sector with many American workers losing their jobs to countries such as China and India. This outsourcing has a great negative impact on the local industry as it deprives it of a reliable workforce (Kantor, 2012). Without stemming the flow of such work overseas, it would make it very difficult to reconstitute the local manufacturing. For those countries that receive these workers however, there is an enormous benefit to their manufacturing sector. The influx of capital from foreign companies investing in their country and the employment opportunities they provide for the workforce give a boost to the local economy. With continued investments coming in and plenty of jobs for their workforce, globalization has actually strengthened the local manufacturing of many foreign countries.
Thom Hartman makes some interesting points in his Huffington Post article. Mr. Hartman describes how globalization is destroying the United States’ wealth through multinational corporations transferring all of their manufacturing overseas. He points out that in the late 1940’s and 1950’s manufacturing accounted for 28 percent of the United States total gross domestic product. Even during the Reagan administration is was at 20 percent. However, today it is about ten percent of our GDP (Hartmann, 2010). By shipping so much of our manufacturing overseas, the US is no longer self sufficient and able to create much wealth.
By not generating wealth, but rather spending it on all of the foreign manufactured goods, there has been a slow degrading of the nation’s middle class. Of course, we as consumers love the idea of paying less for our goods, but it has to be realized that it comes at a cost. Many companies have cut jobs or reduced salaries, so those “cheap” goods are not such a bargain anymore. For this trend to stop and be reversed, nations such as the United States must rebuild their manufacturing base and become locally self-sufficient again (Hartmann, 2010). The idea would be for the country’s consumers to buy products manufactured by their own workers. While no answers or even ideas for reversing the problem globalization has caused were offered, it paints a clear picture that something needs to be done quickly.
Kantor Paul, (2002). Cities in the International Marketplace: The Political Economy of Urban Development in North America and Western Europe. Princeton University Press Hartmann, Thom, (2010). Globalization Is Killing The Globe: Return to Local Economies. Retrieved from http://www.huffingtonpost.com/thom-hartmann/globalization-is-killing_b_454091.html Held, D. & McGrew, A. (2012) Globalization Theory: Approaches and Controversies. (2012), Cambridge. Davis, C. L.(2012). Why Adjudicate? Enforcing Trade Rules in the WTO. Princeton: Princeton University Press. Retrieved January 30, 2015, from Project MUSE database. Obstfeld, Maurice (2000). The Global Capital Market: Benefactor or Menace? The Journal of Economic Perspectives , Vol. 12, No. 4., pp. 9-30.