The Globalization Time Bomb

By Greider, William | Global Finance, November 1997 | Go to article overview

The Globalization Time Bomb

Greider, William, Global Finance

The globalizing economy, though wondrously dynamic and wealth-creating, is heading toward some sort of calamitous reckoning, if things don't change.

The core dilemma confronting the global system is that of companies creating surpluses. Surplus labor is an obvious by-product of corporate efficiency-too many workers around the world bidding for too few jobs, suffering depressed wages or joblessness as a result. But the more ominous threat is the growing surplus of productive capacity in the industrial system.

Across major sectors, from cars to chemicals to aircraft, manufacturing capacity is expanding faster than the global base of available consumers-too many factories chasing scarce buyers. This supply/demand imbalance drives down prices, for sure, and eventually profits. It also closes hundreds of viable factories and destroys invested capital. Taken to its logical conclusion, overcapacity invites a devastating deflation or even a breakdown of the global business system itself.

For my book One World, Ready or Not, I interviewed managers from a dozen nations on three continents. Many of these executives, who actually manage global production, live with a cloud of gross overcapacity hanging over their markets.

My case gained plausibility when the Asian economies swooned over the summer-a financial crisis driven by the buildup of excess supply (too many office towers, too many factories). While some blame the overcapacity on misguided managers, I attribute a far deeper malaise to the internal dynamics of the global system.

The perverse paradox is this: As individual companies take measures to defend or enhance their market positions, managers become stuck on an efficiency treadmill that never stops and, indeed, accelerates. They take smart and sometimes harsh measures to compete, then find they must do more of the same. Companies move production from expensive labor markets to cheaper emerging ones. This reduces production costs, but it chips away at real wages and creates unemployment back home. Workers in the emerging markets, to be sure, enjoy rising incomes-though rarely to the degree that the company benefits. But the global system's potential base of mass consumption erodes in the exchange.

The United States' supposedly booming economy is the central example: While celebrating lower unemployment and declining inflation, after five years of expansion the US median family income still has not returned to its 1989 level. So Americans keep buying by borrowing. Household debt has reached an astonishing 91% of disposable personal income, compared with 53% in 1970. When American consumers tap out, who will replace them?

Europe approaches globalization from a different perspective. It protected key industries for many years, but unification has exposed gross redundancies in labor and plant capacity. Japanese industries purposefully created gross overcapacity for export; now Japan, too, faces deep crisis. In short, who will be the locomotive if the United States falters?

Enthusiasts imagine that affluent consumers in emerging markets will fill the gap. But their wages are hostage to the same global jobs auction. Capital can move quickly to the next labor pool where workers are even cheaper. Thus, Malaysia and Thailand bump up against Vietnam and China. Governments suppress labor rights to keep factories running. Companies demand wage protection in exchange for investment.

In 1913 Henry Ford took the radical step of paying auto workers $5 a day. An industrial system cannot endure, Ford explained, if workers cannot buy the things they make. His warning was confirmed by the depression of the 1930s. Social values aside, rising economic inequality undermines a healthy economy by debilitating the basis for mass consumption.

The imbalance has also deepened on the production side. Technological reforms reduce labor input and other costs. Such innovation also typically creates new output capacity faster than companies can destroy obsolete capacity. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)


1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

Cited article

The Globalization Time Bomb


Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.