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The global recession has led to rising numbers of unemployment in the United States and the world at large. The protest at Granite City, Illinois, depicts frustrations and disappointment of the workers who are not sure of their jobs. Indeed, a myriad others have lost their jobs and are seeking means to address the dire situation. Many corporations have embraced the globalized trade in the aim outsourcing labor in economies where it is cheap. The results have been rise in unemployment and underemployment amongst the Americans. Steve Jobs appreciates the role of global chain supplies and points out that the American jobs are not coming back any time soon. The global chains are to blame for the unemployment rates although little could be done since it would be irrational for Wall Street not to save on the labor costs. The importation of steel from other countries where it is cheap has also collapsed the local steel industry. This in turn has increased the woes of thee American steel workers. Could the authorities do anything to avert the situation considering the number of the American population that is underemployed or unemployed?
Ricardo theory explicates that every nation stands to benefit from international trade. He was convinced that despite the countries experiencing different economic growths, the developed and the developing would reap benefits by engaging in international trade. In his theory of labor, it is critical for different countries to appreciate the law of comparative advantage. For instance, when companies produce similar products at the national level, the company that minimizes the cost of labor has an absolute advantage over its competitors. Nonetheless, Ricardo would argue that the law of absolute advantage rarely dominates the international trade. Rather, the law of comparative advantage comes into play and exposes countries to benefits. He explains that organizing and planning the international trade would remove the law of absolute advantage that currently accrues the Asian countries such as India and China.
He would suppose therefore that the internal economy would be planned rather than allowing the capitalistic greed to prevail. As such, the American steel industry in comparison with the Asian steel industry gives a picture of the latter enjoying the absolute advantage of the former. This has led to the collapse of the steel industry, which should not be the scenario according to Ricardo. He would make assumptions of efficiency in production of steel where workers should all be employed, as idleness would not be condoned in such an ideal global economy. Besides, the factors affecting the productivity are constant and not easily changed.
Hence, planned economy would dictate that the workers assume roles that they are skilled and can perform at their best. This would lead to the need to employ both American and Indian steel workers since they specialize in various tasks. By assigning the American and Indian workers to the roles they are relatively good at, the consumption of steel would increase in the countries with relatively high competitive advantage. Besides, the concept of division of labor between countries stands to benefit all countries due to the principle of comparative advantage. However, the increased unemployment and the collapse of the steel industry in the United States results from the domination of companies at the microeconomic level seeking an absolute advantage at international stage. Ricardo distances himself from the law of absolute advantage at global economy. He would probably accuse the Wall Street of undermining the international trade principles at the expense of the American workers.
However, Ricardo would criticize the changes that are evident at the international trade. While he articulates that the real wages are similar across the entire biological subsistence, he fails to see the role of capitalistic ravenousness that has typified the global economy in the name of Multinational Corporations. He would be dismayed that contrary to his notion that the profits tend to equalize at the local market, the rise of the powerful companies and corporations has led to profitability of firms outside the national economy. This has led to differences in the real wages across the global economy as the corporations seek to take advantage of labor markets dominated by low wages that even fall below the real wages. In the same tune, the policies and laws that govern workers in the American society have overtime increased the wages overtime. Similarly, it has led to the shifts in international labor markets at the expense of the American worker.
The rise of capitalistic motives typical of the current multinational companies such as Apple, Dell and Applied materials to mention but three have led to the negative effects of the international trade. The companies have dominated the policymaking processes of the government at the expense of thee workers. Despite the growing concerns of the steel industry and the consequent rise in unemployment rates, the multinational corporations are reaping immensely from the liberalized trade. The government ought to scrutinize its policies and understand the areas that it has high comparative advantage to limit the outsourcing that the companies are making. Besides, it would ensure a comparative advantage by issuing subsidies to the local industries to protect them from the vicious effects of Multinational Corporation that are motivated by profit motives and capitalistic urges.
It is evident that the American economy enjoys huge advantages in the name of relatively high innovation, skills, sound intellectual property policies and above all, technology. It is therefore possible for the country to protect the local industries by stimulating production in the above areas that it commands substantial comparative advantage. This would be in line with Ricardos theory of international trade that is anchored in the belief that all nations stand to benefit by liberalizing their economies. Besides, this would protect the American worker from the whims of capitalistic objectives without necessarily interfering with free trade.
Essentially, the American economy is suffering from the international trade. Companies have sought to import materials and outsource labor from the countries that commands absolute advantage over the United States. Such industries like the steel industry are on the verge of collapse owing to the increase in the profit-motivated multinational companies. Ricardos arguments that the international trade would benefit every country that participates in the trade have failed to foresee the increase in companies that command huge influence on the course of the global economy. Besides, they have destabilized the real wages across the entire international markets. However, not all is lost as the government still has a chance to ensure that the companies do not outsource labor in areas that it commands comparative advantage. Besides, it can increase its comparative industry through subsidies and other avenues.
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