CRITICAL ANALYSIS TEMPLATE 1

Jarrett Davis BUSI 560 Critical Analysis Template

CRITICAL ANALYSIS PROJECT 2

PRINCIPLE: o Globalization o Globalization is thought to be the spread of economic activity both into and out of the U.S. (FRBSF, 2004).

o Initially globalization advocates stated that everyone benefits when nations specialize in producing goods or services in which they are the most efficient. o Many feel the free trade environment is taxing the U.S. economy by sending many jobs to countries that demand lower salaries. PRACTICE: Insourcing, Outsourcing, and Offshoring o The U.S. in-sources more business than it outsources. In 2003 the U.S. bought 77 Billion in foreign services, and sold over 130 Billion to foreign companies (FRBSF, 2004). o Outsourcing is the practice of contracting out functions that were previously maintained in-house within a U.S. firm. o Offshoring is the practice of purchasing goods or services abroad due to lower costs. o One cannot expect the American consumer or business to business agent to purchase from U.S. suppliers when they can be purchased cheaper abroad. PARTICULARS: Productivity

o Globalization can aid the U.S. in increasing their productivity (FRBSF, 2004). o Dell Corp. used off-shoring tactics to revolutionize computer manufacturing. Cheaper labor and services drops retail cost of computer equipment up to 30 %. The cheaper prices helped distribute information technology throughout the US, increasing productivity.

CRITICAL ANALYSIS PROJECT 3 o Historically productivity has always been essential to economic development. The ability of U.S. companies to produce more goods or services in less time than the competition made the U.S. a global power in the following areas: o Manufacturing o Agriculture o Services o Roughly 1 Trillion of annual U.S. GDP results from globalization (Bradford, Grieco & Hufbauer, 2006). o Globalization and the open market brought about the best half century of economic growth ever. Further liberalization could result in the following:

o Liberalization could build a more developed, stronger global market. o Liberalization could yield declining tariffs and transportation cost. o Further liberalization could open historically closes foreign markets. PERSONS: Oliver Wendell Holmes stated The globalization tax largely buys higher incomes for the already better off (Bivens, 2007, p. 6) Alan Blinder stated that between 22-29 % of US jobs will become off-shorable over the next 10-20 years (Bivens, 2007, p. 7) The problem is that most beneficiaries from globalization dont really know they are beneficiaries or how much they benefit (J Bradford, DeLong)

PERIOD: o In the 1970s-1980s The U.S. share of world manufacturing declined. (Pearson, 2010) o In the 1990s The U.S. economy rebounded, due to US technological innovation. o 1993, The Clinton Administration felt the primary goal of American trade policy is improved market access abroad, rather than protecting domestic markets (Cutter, Spero & Tyson, 2000).

CRITICAL ANALYSIS PROJECT 4 o In 1994 the North American Trade Agreement (NAFTA) signaled a change in U.S. economic position. (Pearson, 2010) o 1991- 2001 U.S. corporations created nearly 3 million jobs abroad. They simultaneously created 5.5 million jobs inside the U.S. Overseas expansion generally means additional hires must be made in the U.S. as well (FRBSF, 2004). o Foreign firms employed almost 6.5 million people in the U.S. in 2001 o Economy growth in 1990s and 2003-2005 did not reduce income inequality in the U.S. (Pearson, 2010) PLACES: o As labor rich nations such as China and India are integrated into the world economy, wages will fall in professionally abundant nations such as the U.S. (Bivens, 2007). o The European Union (EU) utilizes free trade, a common currency, and unified policies. The EU is expected to include Poland, Hungary, Turkey, and others in the future. The European nations are thought to resent U.S. economic, political, and security hegemony (Cutter, Spero & Tyson, 2000). o Rich industrialized nations such as the US, Japan, and West Europe are currently struggling (U.S. Economy, 2011). o However the emerging markets in China, India, and Latin America are booming o China has emerged as a very powerful feature of the new global economy. If China becomes open to a more democratic system it would likely benefit the rest of the world. As dialogue currently continues China is an important factor moving forward (Cutter, Spero & Tyson, 2000). PHRASES: The New Global Economy

o Companies compete globally for advantages in cost of labor, technology, and material costs (Pearson, 2010). o This era began in 1995, triggered by large scale information technology usage. (Lee, Peek, & Rensel, 2008). 21st Century Economy

CRITICAL ANALYSIS PROJECT 5 o Expanding world markets are the driving force of the 21st century economy (BusinessWeek 1998) PICTURES: PROSPECTS: In favor of Globalization:

o Removing all trade tariffs would increase us production by 450-600 billion annually (Bradford, Grieco & Hufbauer, 2006). o Open trade creates opportunities in the U.S. as foreign economies become stronger. o US policymakers should not miss opportunities to fulfill foreign demand for imports by erecting trade barriers. Trade barriers would cause U.S. companies to lose sales, and the U.S. economy to lose jobs. (FRBSF, 2004). Against Globalization:

o Some companies have been forced to become lean and mean, in order to remain competitive in the global economy (Pearson, 2010). o Reduced salaries and wages o Reduced health care benefits o U.S. manufacturing exports are growing but not yielding additional jobs. o Additional financial crisis in Asia, could badly damage economies worldwide (Business Week 1998). o Additional decline in the stock market could slow consumer spending, and productivity worldwide. o The technology market remains oversaturated dragging down U.S. economy. o The threat of war or lack of peace could cause world trade to decline. PROBLEMS: Much of this data is forecasted through mathematical analysis of past data. The data cannot account for changes in public policy, changes in U.S. business practices, or changes abroad.

CRITICAL ANALYSIS PROJECT 6

PERFORMANCE: The following are indirectly caused by globalization: Labor Issues:

o As foreign competition entered the manufacturing sector unemployment issues surfaced. This was followed by a growing trade deficit and a reduced dollar value (Cutter, Spero & Tyson, 2000). Displaced workers:

o Much emphasis has been placed on protecting jobs through tariffs and barriers. However not enough action has been taken to protect people who are threatened by globalization. Displaced members of society should receive greater financial assistance and opportunities to build on their skill sets preparing them for future opportunities (FRBSF, 2004). Adjustment cost:

o The Trade Adjustment Assistance program (TAA) in 2006, allocated 655 million to workers harmed by globalization, and another 200 million was invested in training these people. The assistance is only available to displaced employees for a short time period (Bivens, 2007). o Globalization raises national income yet reduces the income of the U.S. workforce. o Forecasts point out that globalization could erase all wage gains made since 1979 for blue collar workers. o The U.S. exports professional goods and services, and imports goods that are labor related. Slim demand for labor in the U.S. has led to wage inequality. o In 2003 Globalization was responsible for nearly 54 Billion in worker dislocation costs (Bradford, Grieco & Hufbauer, 2006). The U.S. is dependent on global development

o The U.S. is now dependant on international development for prosperity and stability (U.S. Economy, 2011).

CRITICAL ANALYSIS PROJECT 7 o The U.S. trade deficit and additional debts force many to call for policy restrictive of globalization. o The U.S. currently has a need for fiscal tightening, and export driven growth. PUBLICATIONS:

References Cited: U.S. Economy: (n.d.) Beyond a Quick Fix. Vital Speeches of the Day, 77(10), 348-354 Lee, T., Peek, W. A., & Rensel, A. (2008). The impacts of new economy on the U.S. economy: Evolutionary or revolutionary. Journal Of International Finance & Economics, 8(3), 104-113. Bradford, S. C., Grieco, P. E., & Hufbauer, G. (2006). The payoff to America from globalization. World Economy, 29(7), 893-916. Cutter, W., Spero, J., & Tyson, L. (2000). New world, new deal. Foreign Affairs, 79(2), 80. The 21st century economy. (n.d.). BusinessWeek, (3593), 66-67. FRBSF Economic Letter. (May, 21 2004). Globalization: Threat or opportunity for the U.S. economy? Number 2004-12, May 21, 2004. Retrieved from: http://www.frbsf.org/publications/economics/letter/2004/el2004-12.pdf Greenberg, E.S., Page, B. I. (2010). The struggle for democracy (7th edition) Pearson Education, Retrieved from http://wps.ablongman.com/long_greenberg_sd_7/28/7257/1857808.cw/index.html Bivens, J., L. (2007). Globalization and American wages: Today and tomorrow. Economic Policy Institute, Retrieved from: http://www.epi.org/publication/bp196/ Websites and internet Resources: http://libguides.liberty.edu.ezproxy.liberty.edu:2048/content.php?pid=229367&sid=1897090 http://www.epi.org/ http://www.frbsf.org/ http://www.frbsf.org/education/activities/drecon/askecon.cfm http://www.businessweek.com/

CRITICAL ANALYSIS PROJECT 8 http://topics.bloomberg.com/u.s.-economy/ http://www.google.com/ Journals, Periodicals, Brochures: Journal of International Finance and Economics The Institute for International Economics journal compilation Foreign Affairs International Journal of Business Research Industrial and Labor Relations Review Book Suggestions: Isaccson,W., (2011). Steve Jobs Tanous, P., J, Cox, J., (2011). Debt, Deficits, and the Demise of the American Economy Ashbee, E., (2010). The US Economy Today (Politics Today) Swanson, P., (2012). An Introduction to the US Economy