The city of Cincinnati, California, is an industrial town known for its production of high-quality computers. In addition, the management of an automobile manufacturing plant in Cincinnati, which employs over 2,000 employees, is considering closing and moving its operations to Mexico to save money. Discuss the positive and negative effects of the global economy on Cincinnati, California, and other communities in America.

Question

What will be an ideal response?

Answer 1

The global economy refers to the growing tendency of the economies of the world to interact with one another as one market instead of many national markets.

The positive effects/benefits of a global economy include speedy travel, mass communications, and quick dissemination of information over the Internet. Many companies also now have a worldwide market for their products. Companies and consumers have access to products of different countries, and there is more influx of information between two countries, more cultural intermingling, and more openness and tolerance toward other people. In addition, foreign firms are building plants in the United States, revitalizing parts of industrial America. In fact, foreign direct investment makes up 16.5 percent of U.S. gross national product.

For Cincinnati, California, the global economy greatly increases the size of its market. It can now export its high-quality computers throughout the world. As demand for its product grows throughout the world, the company is likely to expand, creating more jobs and employing more people in Cincinnati. With globalization, the computer company can tap talent and access resources from other parts of the world, ensuring that it continues to produce the highest-quality computers, continues to innovate, and maintains its competitive edge.

A negative effect of the global economy is the movement, or outsourcing, of formerly well-paying jobs overseas as companies seek cheaper labor costs, particularly in manufacturing. In general, globalization has benefited multinational corporations, but it has not been good for working people (blue collar or white collar), and it has led to the continuing deindustrialization of the United States. U.S. labor markets exposed to Chinese competition lost an estimated 2.4 million jobs between 1999 and 2011; many jobs lost through the recession and offshoring may never come back (though some do). There is also the possibility of unfair competitive practices between countries that have different standards of business than the United States, and the United States must be vigilant about preventing other countries from stealing its technologies.

Cincinnati sees the negative effects of globalization with its auto plant, which is considering offshoring its operations and closing its U.S. plant. While this decision will almost certainly increase the auto company's profits (because the cost of labor is much lower in developing countries than it is in the United States), the closing will lead to the permanent loss of 2,000 jobs. The closing will dump 2,000 people onto the job market, and the local economy may have difficulty absorbing so many workers. Also, companies that relied on the auto plant may also end up losing their customer base and going out of business. For example, luncheonettes and delicatessens that sell coffee, breakfast, and lunch to the auto workers may find all of their customers out of work and collecting unemployment benefits. They won't be at the plant, so they won't need to go out for lunch. Without customers, the luncheonettes and delis will go out of business, leaving even more people unemployed. It is through this process that industrial towns become blighted, depressed, or dead.