Computers make the case for globalization

The United States has long been sliding towards trade skepticism, a process that has merely been exaggerated by the recent troubles in financial markets. Low-cost computers and its associated market size makes one of the best cases for globalization, however. Most of us wouldn't have jobs if computers hadn't plugged themselves into a global supply chain for parts.
Written by John Carroll, Contributor

America was on a trade skeptic path even before the financial crisis hit. Ross Perot beat the drum against NAFTA during his election bid in 1992, and might have won had he not been a crazy Texas coot who quit the race in a huff because he felt his daughter was being insulted by those rude Bush people (history sometimes gives one a sense that we have dodged invisible bullets). The .com overinvestment in telecommunications, followed by the .com meltdown, made offshoring of higher tech jobs a cost-effective possibility, resulting in expressions of fear and loathing on technology sites across the Internet. Americans busily inflated a housing bubble in the past decade, tightening their finances and engendering a fear of the accelerated pace of change that globalized markets represent.

On Paltalk, I see a lot of soul searching among mourning die-hard Republicans who are trying to figure out how they went from being the party with visions of a "permanent majority" to one that has lost control of both Congress and the Presidency. Paradoxically, people in conservative chat rooms repeatedly declare their allegiance to capitalism and the principles espoused by Ronald Reagan, all the while declaring their opposition to trade agreements, support for tariff barriers, and a deep seated opposition to immigration, legal or otherwise. This is, of course, fairly incongruous, as Reagan was a champion of opening markets through trade agreements, reducing tariff barriers, and presided over the the last big "amnesty" bill for illegal immigrants passed in this country (in 1986). Further, such anti-market principles are likely shared with people on the other side of the political aisle, such as Nancy Pelosi.

If "free market capitalism" was a contestant on American Idol (which might be the only way to get most people to pay real attention to it), it would be loudly booed by the audience, and phones would be overrun by people trying to vote it off. The problem, of course, is that it is often hard for people to understand the benefits. The bottom 20% of incomes have been stagnant over the past 15 years, a marked contrast to the top 1%, where income growth has skyrocketed due to the wealth created by globalization. That's a reality of the current state of the globalization process, where capital yields more returns.

Globalization, however, does create more wealth, even if it is not evenly distributed (a political and perception problem, and one government can partially alleviate). What is ignored in such analysis, however, is how much costs have gone down for EVERYONE (the bottom 20% included), and what effect that has on job and wealth creation.

I just bought a laptop for $600.00. Well, to be precise, it was a $700 laptop with a $100 mail-in rebate plus a heavy dollop of rich California taxes, but that doesn't alter the equation that much. This is a rather good laptop. It is a dual-core 64-bit machine with 4 gigs of RAM, a 350 GB hard drive, and a beautiful looking screen. Granted, its exterior looks like the plastic cover to a Revlon makeup kit. The machine-carved aluminum exterior of my wife's MacBook screams quality, even if my new laptop beats the pants off it from a performance standpoint (and the fact that I could have bought three of them for the price I paid for her one MacBook).

Computers in general are amazing bargains these days. That has a huge effect on the size of the market, as lower costs drives more to buy computers. More computers means more Internet users, which means that we can have these kinds of conversations on sites like ZDNet, who makes money selling advertisements targeted at visitors to its site.  Google would not have a market if not for the general availability of computers that created a demand for search engines. Computer programmers have more jobs as there are more computers that need software. Tech administrators find more companies who need their services. More sales and shipping jobs exist, too, as more computers must be sold and shipped. Low cost computers, in other words, have a very positive effect on job creation.

Those low prices are only made possible because computer manufacturers are plugged into a global supply chain for parts. Imagine if trade barriers obligated that all the parts of a computer had to be manufactured in the United States. $10,000 per computer doesn't seem that inconceivable, a price level that would kill ZDNet even as it puts most technology workers out of business.

Trade involves change, and change can be scary, particularly at the tail end of a housing bubble that left a lot of people with high per-month mortgage payments and homes worth less than they paid for them. It is important, however, to keep an eye on the benefits of globalization.

The power in my 50s-era West Hollywood apartment often goes out at inopportune moments. I don't, however, choose to do without electricity, as I derive a lot of benefit from it even if it, on occasion, has caused me problems. Similarly, globalization has been a tremendous wealth creation machine for this country. I do hope people around the world keep that in mind as we face the uncertainty of the next few months and years.

To paraphrase something David Alan Grier says in the opening few minutes of his new show on Comedy Central...try not to lose your damn minds.

Anyway, just some thoughts resulting from emails I received after my post yesterday on the subject of lax intellectual property protections in China, and the effects that has on the trade balance.

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