Immanuel Wallerstein provocatively begins one of his essays with the following cautionary note: “Globalization is a misleading concept, since what is described as globalization has been happening for 500 years.”
Nevertheless, in a 2000 article, “Globalization or the Age of Transition?,” Wallerstein notes that after WW-II the U.S. was “the only major industrial power whose industries were intact, and whose territories had not been badly damaged by wartime destruction.” He lays out a critical perspective:
This long-term economic development combined with the literal collapse of the economic structures of the other major loci of world production gave the USA a productivity edge that was enormous, at least for a time, and made it easy for US products to dominate the world market.
He then outlines the social consequences of this development: “It made possible, furthermore, the largest expansion of both value and real production in the history of the capitalist world economy, creating simultaneously great wealth and great social strain in the world social system.”
U.S. hegemony during the postwar era was marked by the establishment of a host of organizations to coordinate global order, both political and economic. These entities include the United Nations as well as the World Bank and the International Monetary Fund. U.S. global imperialism came to be known as the “Free World.” The postwar policy of “détente” between the U.S. and the Soviet Union established the “cold war” that froze global economic zones and, while facilitating innumerable local military skirmishes, contained a third — atomic — world war.
Wallerstein states simply: “… the period of true hegemony was quite short. I date it as going from 1945 to circa 1970.” He distinguishes the period by three critical factors:
(i) “that the U.S. is the land par excellence of liberty, and therefore is more ‘democratic’ than any other country”;
(ii) “that the U.S. is more modern, more technologically advanced, and therefore wealthier than any other country”; and
(iii) “that the U.S. has the strongest military in the world.”
This was the era of postwar economic prosperity, of the American Dream. Its marked by
(i) Pres. Richard Nixon ending the gold standard,
(ii) OPEC raising the price of oil and
(iii) Nixon visiting China in 1972.
These developments occurred as the U.S. military was defeated in Vietnam and the nation was wracked by a social uprising involving not only opposition to the Vietnam war but race relations, gender equality and sexual practice.
One consequence of the end of the postwar era was that manufacturing steadily declined as a share of total employment. Paul Krugman assesses the decline in manufacturing during the 1997-2005 period:
Does the surge in the trade deficit explain the fall in employment? Yes, to a significant extent. A trade deficit doesn’t produce a one-for-one decline in manufacturing value added, since a significant share of both exports and imports of goods include embodied services. But a reasonable estimate is that the deficit surge reduced the share of manufacturing in GDP by around 1.5 percentage points, or more than 10 percent, which means that it explains more than half of the roughly 20 percent decline in manufacturing employment between 1997 and 2005.
The St. Louis Federal Reserve notes that “gains from globalization have been quite large and have taken many different forms, specifically, lower prices, higher profits, and increased product variety.” It then adds, one outcome had significant consequences: “The decline in manufacturing jobs had a rippling effect throughout society. It led to what as a “decline in workers’ bargaining power leading to slower wage growth and rising income inequality.” In goes further, noting “the direct impact of declining wages (real and relative) and increasing healthcare costs will likely outweigh the more indirect benefits.”
However, as globalization led to a decline in wages for manufacturing and other hourly workers, it led to an enormous increase in executive compensation. A study of the executive compensation at thousands of U.S. companies between 1993 and 2013 by researchers from the University of Colorado–Boulder and Williams College in Massachusetts concluded that “recent globalization trends have increased U.S. inequality by disproportionately raising top incomes.”
This finding is corroborated by a series of other studies. For example, a 2015 study by the Economic Policy Institute found executive pay had grown by 997 percent between 1978 and 2014, while the average compensation for a private-sector production and nonsupervisory worker increased by just 10.9 percent. Also in 2015, the Pew Center 2015 calculated that upper-income households saw their pay rise 47 percent between 1970 and 2014. Middle-income households enjoyed a median gain of only 34 percent over that window, while lower-income households posted a softer 28 percent gain.
Wallerstein warned, in his 2000 article, “The future, far from being inevitable and one to which there is no alternative, is being determined in this transition that has an extremely uncertain outcome.”