It is difficult to overestimate the effect that increased globalization has had on the manufacturing and food marketplaces, particularly since the end of World War II. Up until the start of the recession in 2008, economic globalization was growing at a remarkable rate, as reported by the KOF Swiss Economic Institute, an organization that measures and tracks globalization (Dreher, 2013). However, as can be seen by the flat economic globalization rate since 2008, there are limits to the growth of globalization. A number of economic commentators have put forth the possibility of deglobalization (Samuelson, 2012). Some have stated that deglobalization is the necessary economic result, given the increased inequity between countries that globalization was producing; with the poor countries showing little to no economic growth and the wealthy countries becoming ever richer (Bello, 2009). Others have decried the process, criticizing the nationalism and isolationism that can result (Coll, 2009). Whether for the best or not, if deglobalization is occurring, it would be seen through increases in investment in local manufacturing and local food production.
Currently, there is concrete evidence that this deglobalization trend has brought some increase in local manufacturing. Specific examples include Apple investing $100 million to do some Mac manufacturing in the U.S., General Electric shifting production of selected appliances back to Kentucky from China and Mexico, Otis Elevator moving elevator production from Mexico to South Carolina, and Wham-O shifting Frisbee manufacture from China to California (Samuelson, 2012). It is predicted that by 2015, the cost advantage of producing in China will be only 7% and because the United States manufacturing remains significantly less expensive than other developed countries, manufacturing here will increase. In particular, a business consulting group has predicted a growth of between 2.5 million and 5 million new factory jobs in the United States by 2020 (Samuelson, 2012). Although this would not replace the estimated 5.7 million manufacturing jobs that were lost in the United States from 2000 to 2010, it is a significant rate of growth and reflective of definite prospects for local manufacturing.
An important driver in the local manufacturing trend is increased transportation costs. The central significance of transportation costs in globalization has been recognized for a long time and pointed to as part of the reason that globalization can result in very poor and very rich nations (Krugman and Vernables, 1995). Because globalization rests on the need to move both components and finished products long distances, as the cost of doing so rises, so does the cost of doing business on a global level. Some specific examples of shipping costs driving more local manufacturing decisions include Tesla Motors producing their batteries in California rather than Thailand, a mini-revival of the furniture industry in the southeastern United States, and the opening of a furniture factory in the United States by the Swedish company IKEA (Rother, 2008). As oil prices continue to rise, this effect will only increase with further local manufacturing a predicted result.
However, one issue with this predicted increased growth in the local manufacturing area is the shortage of skilled workers in the United State to fill manufacturing jobs (Kaslow, 2012). The pool of skilled workers has been eroded by the continued loss of manufacturing jobs over the last decade. If appropriately trained workers cannot be found for future job openings, companies will have no choice but to continue to pay the transportation costs in order to get the goods made and delivered. Thus, to take advantage of the deglobalization process with a benefit to the American workforce, commentators have argued that there is a need to build interest in manufacturing careers and provide training in the type of skills such workers will need, such as the ability to read a blueprint, basic math skills, machine set-up and basic design (Kaslow, 2012). There also needs to be a changed perception that manufacturing is not just for those without the smarts to do white collar jobs or those willing to tolerate dirty work. In fact, high technology manufacturing is basically the opposite of dirty work. Only with a change in perception and an increase in the pool of available skilled workers will local manufacturing be able to rebound.
Another effect of the high transportation costs could be a more “green” global marketplace. Companies such as General Electric, DuPont, Alcoa, and Procter & Gamble have all come out with green policies that help to reduce fuel consumption and carbon emissions during their product manufacturing and delivery. The role of these policies has been stated as “not so much in making money but saving money” (Rother, 2008). Such policies are also very consumer friendly and can provide significant goodwill for the companies. Importantly, such policies have the effect of making local manufacturing look more attractive to the company’s management and may push decision-making in a more local direction, providing a further reason for increased local manufacturing.
One of the first places where the impact of increased transportation costs could be seen by every-day consumer would be in food markets, as the need to keep food fresh pushes transportation to its fastest possible speed, which necessarily increases the baseline cost. Some economists have predicted that increased transportation costs will soon push typical middle-class food items such as off-season fruit and vegetables into luxury level prices (Rother, 2008). One perceived benefit of these issues is that it will support the local food movement that is now popular in many areas throughout the United States and Europe (Rushing and Ruehle, 2013). Local food movements promote the purchasing of food that has traveled a short distance from the field to the table, commonly defined as within 100 mile radius or, in the United States, within the same state. As discussed above, among the cited consumer motivators for purchasing such food is a reduction in carbon footprint (Rushing and Ruehle, 2013), a reflection of a general consumer desire to decrease the impact on the environment of food production.
Although likely resulting from many different motivations including green considerations, the growing popularity of local foods can be seen as evidence of deglobalization. Local food movements have impacted grocery chains and there are indications that groceries are purchasing more of their stock locally. For example, Supervalu, one large U.S. grocery chain that owns Jewel-Osco, Albertsons, and Lucky Supermarkets indicates it buys 25 to 40% of its produce locally and Waltrose, a European grocery chain, is actively advertising its local food selections (Rushing and Ruehle, 2013). The Rushing and Ruehle report, addressed to the supermarket store industry, states that locally sourced items could be “the next big thing in grocery” (2013). With rising consumer demand, and pressures from increased transportation costs due to purchasing food to sell at long distance, there are indications that local food production could become increasingly popular over time as food stores could see synergistic benefits in making more local food available for purchase.
A final issue with the possibility of deglobalization is that in the end, it may not benefit the United States economy appreciably and could be damaging (Hillebrand, 2009). It remains that the United States is located physically far from the Asian economies that are currently moving the fastest globally and that is where the most manufacturing investment and product production continues to happen. It is possible that globalization has progressed to the extent and moved manufacturing and food production so far away from the United States for it to ever return in appreciable amounts. There may be trends toward local manufacturing or local food production, but these movements will grow not larger than just trends, therefore not having appreciable impact on the United States economy. If this is the case, the result will be higher prices for goods and food with the United States consumer having to either pay or do without. Some commentators have even gone so far as to predict a political destabilization with deglobalization and a resulting wide-spread war (Hillebrand, 2009). Although this is certainly not the most optimistic possible outcome of deglobalization, it remains a possibility and has to be included in a thorough review of the topic.
The apparent slowdown and even reversal of globalization due to the 2008 recession has raised the possibility that deglobalization will result in significant changes to the United States economy. One possibility is the reconstitution of local manufacturing and local food production. The paper has documented some of the current evidence of trends as to increased local manufacturing and increased purchase of local food which may be reflective of this reconstitution presently happening. It is possible that these trends are the result of the deglobalization process and will continue to increase over time, particularly as transportation costs continue to rise. However, it is also possible that other factors will confound this process, such as a shortage of skilled manufacturing workers or unwillingness of consumers to pay higher prices for local food and these factors will keep these reconstitution processes to mere trends. Over time, it will become clearer what the true impact of deglobalization on the United States and other wealthy economies will be and presently, it does appear that a rise in local manufacturing and local food markets are a part of it.
Works Cited
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Hillebrand, Evan. “Deglobalization Scenarios : Who Wins? Who Loses?” International Studies Association Annual Conference. 15-18 February, 2009. Web. 14 August 2013.
Kaslow, Amy. “How to secure America’s Future in Manufacturing.” CNN Money. 25 July 2012. Web. 14 August 2013.
Krugman, Paul and Anthony J. Venables. “Globalization and the Inequity of Nations.” The Quarterly Journal of Economics. 110.4 (1995) : 857-80.
Rohter, Larry. “Shipping Costs Start to Crimp Globalization.” The New York Times. 3 August 2008. Web. 14 August 2013.
Rushing, James and Jens Ruehle. “Buying into the Local Food Movment.” ATKearney.com. January 2013. Web. 14 August 2013.
Samuelson, Robert J. “Will ‘Deglobalization’ Be Next Big Trend, As Countries Pull Back on Overseas Trade and Investment?.” Investors.com. 28 December 2012. Web. 14 August 2103.
