Globalization and in particular global trade in balances are probably one of the most important issues facing the world today and America in particular . When the economy is in full recovery, concerns over outsourcing of jobs will likely become the #1 economic issue.
The media seems to be one sided on the issue, globalization is bad for the US economy, it is destroying the domestic manufacturing base, and we need “free trade” not fair trade. I too share this view to a large extent. I am far from even considering myself knowledgeable on the topic. I got a one sided view from a brilliant professor of mine who was very ideologically left wing and opposed to globalization. I did not disagree with him (although we had some debates about US foreign policy, many of which I won). In addition, I read Joseph Stiglitz’s book Globalization and Its Discontents several years ago, and largely reinforced my negative views regarding globalization.
I had been eager to read Bruce Greenwald’s book on globalization for a while and finally got to it recently. I was conflicted before reading the book. On the one hand I have tremendous respect for Bruce Greenwald. He wrote what I consider to be one of the best books on value investing ever Value Investing: From Graham to Buffett and Beyond . I also conducted a recent interview with Greenwald and he struck me as a sheer genius who thinks rationally about various issues in economics and investing that I was willing to be open minded about the book. On the other hand, I had my preconceived notions about globalization.
To do justice to this book I would really have to write a book review on each of the six chapters separately (Maybe I should not have written such a long introduction but I felt it was important to address those points before addressing the book itself) .The book is not a long read, but it is packed with valuable information and data that each chapter deserves its own review. However, I will try my best to address some of the major points of the book in this review.
Bruce Greenwald sees the decreasing domestic manufacturing base in America as an irreversible situation. He compares this to the decrease in agriculture as a percentage of GDP in the early decades of the 20th century. If one accepts Greenwald’s arguments this has major ramifications for future economic policy. While President Obama’s plans to rebuild the manufacturing sector of the economy and focus less on the service sector according to Greenwald’s thinking this will be highly unsuccessful and counterproductive.
Greenwald believes that America should embrace the service sector taking over for the manufacturing sector, like America accepted the agricultural sector decline in the early part of the 20th century. Greenwald argues that the good news is most of the manufacturing jobs have been lost and likely reached a peak.
Greenwald acknowledges that there are problems with outsourcing jobs in the service sector too. Many jobs in the service sector have been lost due to outsourcing to places like India. However, Greenwald believes that all the jobs that have been outsourced have been and many jobs cannot be outsourced. Many service sector jobs require direct interaction with the other party, and they cannot be accomplished by people several thousand miles away. Housing, medical care, education, legal services, utilities etc. cannot be outsourced. You cannot pay someone in India to build you a house in New York. He also notes that most of the recent employment increases over the past several decade have been in higher level position/ managerial positions these jobs are the least likely to be outsourced.
One point I need to mention is that even though Greenwald has a strong opinion about globalization, he is far from an ideologue. The fact that he co-hosted a class with Joseph Stiglitz on globalization is evidence of that. Bruce Greenwald also analyzes countries that transitioned from more socialized to more capitalistic structures.
To read the rest of my book review on Guru Focus click here
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Disclosure: according to new FTC guidelines I must disclose that I have a material connection because I received a copy of this book to review. In addition I receive a small commission if you buy the book (or anything else from Amazon) from the link above. However, it is the same price to buy the book from the above link as it does to buy the book by going to Amazon.com directly.