New Directions in Modern Economics series
Chapter 7: Consumerism, Inequality and Globalization
The term ‘globalization’ is invoked in connection with a variety of phenomena. These include the expanding scale of international trade in merchandise and services, the removal of barriers to the transnational movement of resources and ﬁnancial capital, as well as the relocation of production activity to so-called less developed countries (LDCs). The area of overlap between the elements subsumed under ‘globalization’ and the subject matter addressed in the preceding chapters is extensive. The analysis here is restricted to some salient points of intersection. We shall be concerned ﬁrst of all with appraising the view that persistent US trade deﬁcits are largely explained by ‘overconsumption’ or, equivalently, a shortage of saving by US households. Next, we shall take up the issue of the implications of globalization, and more speciﬁcally what is commonly called the global dis-integration of production, for inequality and household saving within the industrialized nations. We shall argue that the rising economic inequality, the debt surge and the decline of household saving are closely connected to the far-reaching push by US-based corporations to improve earnings by shifting production to LDCs. We have argued that the surprising muscularity of the US consumer is partly the result of ﬁnancial innovations and practices that have eﬀectively shifted the demand for household IOUs. Given that a substantial faction of new securities backed by credit card, installment, student loan, home equity, or other consumer receivables is placed in foreign-owned portfolios, is it accurate to claim (as some have) that US lifestyles...
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