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the Globalization of Capitalism 357

says, “This new global business system will change the way everyone lives and works”
( Zachary 1995).
Let’s look, then, at how capitalism is changing the face of the globe.

A New Global Structure and Its Effects on Workers Watch on MySocLab
The globalization of capitalism has forged a new world structure. Three primary trading blocs Video: The Basics: Economy and
have emerged: North and South America, dominated by the United States; Europe, domi- Work
nated by Germany; and Asia, dominated by China and Japan. Functionalists stress that this new
global division benefits not only the multinational giants but also the citizens of the world.
Consider free trade. Free trade increases competition, which, in turn, drives the search
for greater productivity. This lowers prices and brings a higher standard of living. Free
trade also has dysfunctions. As production moves to countries where labor costs are lower,
millions of U.S., U.K., French, and Spanish workers have lost their jobs. Functionalists
point out that this is a temporary dislocation, that as the Most
Industrialized Nations lose factory jobs, their workers shift into
service and high-tech jobs. Perhaps. But the millions of workers Figure 11.4 Average Hourly Earnings
searching in vain for jobs that no longer exist would disagree. of U.S. Workers in Current and Constant
Certainly the adjustment has been anything but easy. As the
U.S. steel industry lost out to global competition, for example, Dollars
the plant closings created “rust belts” in the northern states. The $21
globalization of capitalism has also brought special challenges $20.20
to small towns across the country, which already were suffering $20 $19.07
long-term losses because of urbanization. Their struggle to sur- $19
vive is the topic of the photo essay on the next two pages. $18
Stagnant Paychecks $17

With extensive automation, the productivity of U.S. workers $16
has increased year after year, making them some of the most $15 Current
productive in the world (Statistical Abstract 2013:Tables $14 dollars $14.02
1368, 1370). One might think, therefore, that their pay Constant
would be increasing. This brings us to a disturbing trend, $13 dollars
one that bothers Americans and is an underlying reason that $12
so many workers have lost their homes to foreclosure.
Look at Figure 11.4. The gold bars show current dollars. $11 $10.20
These are the dollars the average worker finds in his or her Dollars per Hour $10
paycheck. You can see that since 1970 the average pay of $8.91 $8.78
U.S. workers has soared from just over $3 an hour to over $9 $8.29 $7.98 $7.91 $8.30
$20 an hour. Workers today are bringing home six times as $8
many dollars as workers used to. $7 $6.66
But let’s strip away the illusion. Look at the purple bars,
which show the dollars adjusted for inflation, the buying power $6
of those paychecks. You can see how inflation has suppressed $5
the value of the dollars that workers earn. Today’s workers,
with their $20 an hour, can buy little more than workers in $4 $3.23
1970 could with their “measly” $3 an hour. The question is $3
not “How could workers live on just $3 an hour back then?” $2
but, rather, “How can workers get by on a 49-cent-an-hour
raise that took 43 years to get?” That’s only slightly more than $1
a penny an hour per year! Incredibly, despite workers having $0
more years of college and more technical training, despite the 1970 1980 1990 2000 2010 2013
use of computers, and much higher productivity, the workers’ Year
purchasing power increased just 49 cents an hour between Note: Constant dollars are dollars adjusted for inflation with 1982–1984
1970 and 2013. What can you buy with those 49 cents? as the base.
Actually, after taxes and Social Security deductions, we Source: By the author. Based on Statistical Abstract of the United States
1992:Table 650; 1999:Table 698; 2013:Table 656; U.S. Bureau of Labor
should ask, What can you buy with the 35 or 40 cents? Statistics, “Economic News Release:” Table A-2, September 2013.