The Myth of Globalization, Mess in the U.S. & Korea’s Economic Growth Engine

Globalization has generated different consequences for the advanced and emerging economies. Globalization has also affected not only the manufacturing sector but the financial regime. MNCs have formed speculative bubbles around the globe. They could make a country tumble. They could keep competition away from a specific industry. A country has to deal with the tyranny of this global financial force. China seems to have been fully aware of that in the wake of the Asian financial crisis no matter what goes on internally.

In the case of the U.S., globalization has got it into a mess in a way. A lot of its productive capacity has been offshored in the name of globalization. By replacing financial engineering with manufacturing under the pretense of globalization, the U.S. has enriched the few at the expense of the rest. Massive bubbles such as housing have kept the U.S. economy going, while incomes have fallen. Throughout this process, there has been merger of the corporate with state interests. The U.S. is still the number one consumer in the world along with the world’s reserve currency. Yet its economy is teetering on the edge of a cliff.

An epic shift has occurred. Globalization has taken the reigns. Just look at the flow of wealth in the U.S. and the world. There has been a change in distribution of employment and unemployment worldwide. The disappearance of the middle class is a worldwide phenomenon. The wealth has become concentrated in so few hands. The silent coup continues while many economies are showing signs of cracking.

If globalization has helped to increase the size of a country’s middle class, that would be a positive thing. Has globalization helped jobs to expand and wages to rise?

Otherwise, one has to ask what in the world globalization is doing to its economy. What is driving globalization? Who is benefitting at whose expense?

To some extent, globalization has helped Korea to build its industrial base as discussed in prior posts. However, many Korean corporations have moved its manufacturing overseas due to global wage arbitrage and other benefits. Korea is losing its manufacturing as well. What would be economic engines left in Korea? A service economy? Look at what’s been going on in the U.S.

The world economy is in the huge credit bust recession. This is no ordinary cyclical recession.

Korea seems to have fared O.K. for now, but there does not seem to be an engine to have yet appeared that will bring Korea to the next level. No tree grows large without deep roots.