Globalization and the Worldwide Division of Labor

Article excerpt

Globalization and the worldwide division of labor

In the 1950's and 1960's, certain tradeoffs governed where U.S. firms located production: many labor-intensive jobs were shipped offshore where labor costs were lower and where unions were nonexistent or very weak. But, automation was located in the United States where the necessary skills and industrial infrastructure were found. And, in fact, for workers and unions, automating was the alternative to shipping jobs out of the United States. Technological constraints existed in most developing economies that prohibited the easy transfer of complex, sophisticated, and highly automated production processes. Those tradeoffs are now quite different. With the advent of worldwide telecommunications and with the improvement in infrastructure in newly industrializing countries, the most sophisticated and automated production processes can be located throughout the world. In some cases, computers mean that work that was formerly transferred abroad is shipped back to the United States. In most other cases, just the opposite is taking place. And with all the attention on the trade deficit and mounting criticism of Japan, an increasing amount of the trade deficit is attributable to U.S. firms, either wholly owned or joint ventures, transferring important elements of the production process to places such as South Korea, Mexico, and Taiwan.

Transferring production

The issue is not the very pressing need of these countries to develop and to have those laws and trade policies that allow that development, but rather the ability of multinational firms to transfer production with a great deal more mobility and far fewer constraints than existed in the past. It is not simply a question of factory work. Sophisticated design processes and key aspects of services in financial, programming, and other areas are also subject to export.

Take the design of a new car, the Mercury Tracer, that will be introduced in 1987. It is a small, sporty car that typifies the technological changes that are taking place. …