3
WHAT THE
GLOBAL ECONOMY
MEANS TO YOU
Today events on the other side of the world affect your paycheck
and your prospects. The globalization of the economy has created
a single worldwide standard for industrial productivity. Freer
movement of goods and services across national borders places
all American workers in competition with wage earners in very-
low-income areas. An overall increase in income from American
jobs is very unlikely any time during this generation because cap-
ital and technology are far more portable than labor.The press started talking about the global economy in the late
1980s as if it were a recent invention. Yet Marco Polo returned from
China with silks and spices in 1275; Spanish gold doubloons circu-
lated freely in China in the 1500s; French champagne has been
served at stylish American weddings for centuries; we have been
drinking imported coffee, tea, and liquor since before anyone can
remember. Nevertheless, the American economy has become much
more global since the 1970s.
Figure 3.1 shows how the reduction in American tariffs has re-
sulted in significant increases in international trade as a percentage
of the total American economy. Globalization became much more
prominent in the mid-1970s, about the same time as the purchasing
power of wages of Americans began to decline.
With the exception of the World War II years, trade has repre-
sented slightly more than 10 percent of the U.S. economy since
the 1930s. This trend continued until the 1970s, when trade as a
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