- Globalization has been blamed for a number of negative economic problems lately.
- In reality, globalization has positively impacted the US economy. Exports is the fastest growing component of US GDP today.
- Recently, the positive impact of globalization is reflected in earnings reports from US companies—those with global exposure are faring much better than those mainly relying on domestic demand.
- It is evident the global economy can be much stronger than its parts. Just as the US fueled growth in other countries through globalization, other countries can help fuel growth in the US.
(Editor's Note: MarketMinder does NOT recommend individual securities; the below is simply an example of a broader theme we wish to highlight.)
Globalization has taken a few verbal shots to the gut lately. It's been blamed for America's abandoned factories, jobless workers, domestic wage inequality, and lost industry competitiveness. Political rhetoric can easily wax poetic about globalization's negative impact on the domestic economy, but it's a discourse based on anecdote.
Globalization allows companies to do business cheaper and more efficiently by providing access to a larger market to find the cheapest and most appropriate production inputs (including labor). The more profitable a company, the more likely it is to expand its workforce, raise wages, and invest in capital. In fact, that's largely what happened in the last decade. Globalization is a two-way affair with growth being fueled at both sides of a partnership. Especially in times when the domestic economy slows, global demand can help offset losses at home. Free trade allows competition—fostering innovation, growth, and competitive prices.
Starwood Profit Beats Estimates on Overseas Gains
By Oliver Staley, Bloomberg.com
International Markets Come Through for PepsiCo
By William Spain, MarketWatch
International Sales Buoy 3M
By Donna Kardos, The Wall Street Journal
Capitalism and free markets, the underpinnings of globalization, promote development and evolution—exactly what the US has seen. Yes, manufacturing jobs have been lost, but the unemployment rate is at historical lows, and the absolute level of employment is higher today than ever before. Over the last 14 years, the US enacted various free trade agreements (NAFTA, FTAA, EAI, various TIFAs, to name a few)—and added a net total of 25 million jobs. By competitively participating in global markets, US companies have been able to create millions of service and high-wage jobs.
It is evident the global economy can be much stronger than its parts. Just as the US fueled growth in other countries through globalization, other countries can help fuel growth in the US. It may be hard for politicians to admit they can't save an industry or sector, but doing so may be what America needs to continue growing and profiting.