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NB's The Nyle Magazine

Monday, October 08, 2012


The Economy

Published September 8, 2011-Updated October 18, 2011

“Globalization and the Benefit to the American Economy”

by Nathan’ette Burdine-Follow on Twitter@nbnylemagazine

Globalization is a word generally associated with third world countries and not first world countries like the United States.  The U.S. is seen as being amongst the few nations controlling the globalization process and setting the rules for such things as free trade amongst nations.  However, the U.S. is like other countries in the world in that it is not an island amongst its self and it needs the assistance of other nations in order to survive.  Job growth evolves within the country and outside the country.  The strength of the economy is determined by the amount of products being made, the amount of products being shipped out, and shipped into the country.  And by sharing knowledge and talent, the U.S. opens its door to other innovators who can assist with keeping the American economy going.  However, foreign investment is often overlook because it is associated with the “needy” countries.  So it is difficult for those who view America as a global superpower to have a need for foreign investment of any kind.  The importance of globalization beyond a third world country’s doors is being revealed in the important role foreign companies are playing in helping to boost the American economy.

Foreign Direct Investment (FDI) is one of the ways to measure globalization’s importance to the American economy.  FDI is determined by the amount of stock, bonds, and property ownership a foreign country has in another country.  According to the U.S. Department of Commerce’s Economics and Statistics Administration division, foreign owned companies employed 5-6 million workers between the years 2000-2010.  In 2010, FDI totaled $194 billion and $1.7 trillion during the last ten years.  The countries together totaling 84% of the FDI in the U.S. are Switzerland, the United Kingdom, Japan, France, Germany, Luxembourg, the Netherlands, and Canada.  While other European countries comprise 6% of the FDI, the remaining 10% comes from the Caribbean, Brazil, and Australia.

Manufacturing is the industry that foreign companies have had the most impact on the American economy.  According to the U.S. Department of Commerce’s Economics and Statistics Administration division, foreign direct investment has supported 2 million manufacturing jobs.  Unlike the domestic manufacturing jobs, the foreign manufacturing jobs have suffered a slight blow of unemployment.  These are high skilled jobs in which workers receive 30% higher pay than those workers who work for American companies.  As for other industries, FDI supported 489,000 jobs in retail trade, 453,000 jobs in administrative support and waste management, 420,000 jobs in wholesale trade, and 415,000 jobs in finance and insurance.

Southern states, like Georgia, have turned to foreign companies in order to boost their economy.  The Atlanta Journal Constitution’s writer Leon Stafford stated in his article, “State looks abroad for jobs,” that foreign companies comprised 23% of Georgia’s new jobs with British companies employing the most Georgians.  Germany, Japan, the Netherlands, and France follow Britain in their employment of Georgians.  Japan has the largest investment, and England has the most facilities in the state.  Other Southern states doing business with foreign countries are Texas and North Carolina.  According to the U.S. Census’s Bureau Foreign Trade Division, Mexico is Texas’s biggest trading partner with oil being the largest commodity traded.  Amadeo Saenz Jr., Executive Director of Texas Department of Transportation, stated that in 2009 the Texas-Mexico trade totaled $208 billion while the U.S.-Mexico trade totaled $306 billion.  As for North Carolina, Canada is its largest trading partner.  According to the Government of Canada’s website, the North Carolina-Canada trade totaled $7 billion dollars with a large amount consisting in the area of medical supplies and pharmaceuticals. 

According to Stafford, Chris Cummiskey (Commissioner of the Georgia Department of Economic Development) stated that Texas and North Carolina have more foreign investors because their incentives are slightly better.  So in order to close this gap, Georgia is using the international importance of Hartsfield-Jackson International airport and the port of Savannah as a waterway to import and export foreign goods in order to persuade more foreign investment in the state.  In particular, Governor Deal is looking to persuade South Korea, China, Singapore, and Dubai.  Governor Deal will be traveling to South Korea and China during the month of October, while his economic commissioner will be traveling to Singapore and Dubai.  The state is looking to attract more jobs in the areas of aerospace, alternative energy, and automotives due to the higher salaries these jobs pay.  Hence, the state is banking on the assumed direct relationship between higher salaries and consumer purchasing.  Basically, if people are paid more, than they will buy more.  Therefore, the money will go back into the economy because consumers will be working jobs that pay them a high enough salary that will allow them to purchase more goods in the open market.

Like Governor Deal of Georgia, Governor Snyder of Michigan sees the benefit of foreign investment.  According to the Pure Michigan Blog, Michigan is amongst the top ten states receiving FDI from China.  In 2010, Michigan sold greater than $44 billion dollars worth of goods to China.  This represents a 36% increase of sales from 2009.  According to the Detroit News’ writer Paul Egan, Governor Snyder will be traveling to China on September 24 as well as to Japan and South Korea as a way to promote Michigan as a good investment state.

         The United States is not an island amongst its self and it cannot survive in the global community without the assistance of other nations.  In fact, the heart of the U.S. economic principal, capitalism, is commerce without borders or free trade.  The U.S. used this principal during its earlier days, as a young country, in order to grow.  Britain and France were the U.S.’ biggest trade partners during its earlier days.  Today, these countries continue to contribute to the U.S.' economy through foreign direct investment.  Due to the U.S.’ earlier embracement of globalization, the country was able to cement relationships that proved to be beneficial in providing the means to grow the U.S.’ economy, strengthen its military, and broaden its reach in the international community.  Therefore, without globalization, the U.S. would not have evolved into the superpower it is today.







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