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By Root 506 0

the unmet economic challenge of the past forty years. Reagan was not only wrong about blaming big government for America’s ills; he was even more mistaken in neglecting the true gathering storm of the 1970s and 1980s. Starting around 1970, the United States and the world began to be buffeted by three global changes: the technological revolution of computers, the Internet, and mobile telephony ushered in by the digital electronic age; the history-changing rise of Asia within the world economy; and the newly emerging global ecological crises. These three changes are the cause of massive and ongoing shifts of incomes, jobs, and investments all over the world, including in the United States. The changes are so vast and pervasive that active direction by the federal government is absolutely required to ensure that the burdens and benefits of globalization are shared widely among the American population and that America’s global competitiveness is maintained.

Every generation faces novel challenges to combine efficiency, fairness, and sustainability. Two hundred years ago in Western Europe and the United States, the main challenge was to promote and humanize the first industrial revolution; 150 years ago, the main challenge was to create a safe and livable urban environment as large industrial cities began to explode in population; 75 years ago, the main challenge was to surmount the Great Depression. Our main challenge is to harness the new globalization. We must find new ways to live efficiently, fairly, and sustainably in a very crowded and tightly interconnected world.

The New Globalization

The essence of globalization is that all parts of the world are now linked through trade, investment, and production networks (wherein a final product such as a computer, mobile phone, or automobile is the result of production processes in many countries, often a dozen or more). In a way, globalization has been going on for several thousand years. Han China exported silks to the Roman Empire in return for gold and Syrian-made glass two thousand years ago. Christopher Columbus and Vasco da Gama initiated the economic linkage of all parts of the world at the end of the fifteenth century by discovering sea-based routes linking Europe with Asia and the Americas, discoveries that Adam Smith deemed to be “the two greatest and most important events recorded in the history of mankind.”1 Still, even with this long history of global trade, there is something qualitatively different about the globalization of our day, different enough to describe our era as a new globalization.

What is new is that a combination of breakthrough technologies and changes in geopolitics has created a far more intensive set of economic interconnections than ever before. The most important technologies of the new globalization are those of information, communication, and transportation. The new globalization is the globalization of the digital age. With computers to store and process information, the Internet and mobile telephony to transmit it instantly and seamlessly around the world, and containerized ocean transport and worldwide air travel to provide low-cost global trade, the world’s economies have become more tightly interlinked than ever before, with a global division of labor that is vastly more sophisticated and intricate than anything in the past. In the nineteenth century, and indeed up to 1950, industrial production was based on the shipments of a few raw materials from various parts of the world to a manufacturing site in Europe, the United States, or Japan. Today, production at all stages of the value chain, from raw materials to final packaging, occurs in a complex network of sites, often linking dozens of production facilities in far-flung regions of the world.

The lead protagonist of the new globalization is the multinational company (MNC), with operations straddling more than one country and sometimes a hundred or more. Among America’s MNC giants (ranked by foreign assets in 2008) are General Electric, ExxonMobil, Chevron Corporation, Ford Motor