Increasing specialisation in production has been a major driver of human welfare in modern times.
The late eighteenth century pioneer of modern economics, Adam Smith, called it the division of labour. Smith argued that splitting production into a series of tasks, each performed by a specialist, whether a worker or a company, would raise productivity and growth.
Henry Ford took Smith's ideas to their logical conclusion in the early twentieth century, revolutionising car production with production lines in which workers specialised in discrete tasks executed with reliable efficiency.
Specialisation has taken an increasingly global form in the last 50 years. Companies in different countries specialise in different stages of the production process. Modern manufacturers tend to be groups of interdependent firms, often operating in different parts of the world.
"Competing in a Flat World" describes the process two Hong Kong entrepreneurs faced in coordinating the production of running shorts for a US retailer. The yarn was spun in Bangladesh and woven into fabric and dyed in China. The product was stitched together in Pakistan using buttons from China and zips from Japan. More complex products can contain components from dozens of countries and scores of companies.
This sort of specialisation has given consumers cheaper, better goods at lower prices.
In the UK globalisation has contributed to a more than halving of clothing prices in the last 25 years; the price of computer equipment has fallen a staggering 98% over this time.
In the 1970s British consumers were on the receiving end of some famously bad home-grown cars. My father was the unhappy owner of a notorious specimen, the Austin Allegro. On delivery its paint was flaking off in places and its electrics worked unpredictably. With reason owners and the press dubbed the Allegro the "All Aggro".
By the 1990s the Allegro was a distant memory. Globalisation and foreign capital and ideas had reinvigorated the British car industry giving consumers reliable cars at keen prices.
These days you don't hear a huge amount of positive news about globalisation. Last week YouGov published a survey on attitudes to globalisation across 19 countries. Support for globalisation was lowest in France, with fewer than 50% of respondents seeing it as a force for good. What amazed me was that Britons and Americans showed similar levels of scepticism about globalisation as the French.
The strongest support for globalisation came from emerging economies including Vietnam, the Philippines and India.
For these economies trade has created opportunity, jobs and rising living standards. In the West it is widely blamed for the inequality, job insecurity and stagnating incomes.
For Donald Trump the culprit is trade liberalisation deals, such as the North America Free Trade Agreement (NAFTA). But such deals do not seem to have been decisive in boosting trade. Tariff levels and barriers have been falling for decades and were at low levels by the 1990s. Even before NAFTA was signed in 1994 40% of Mexican trade already entered the US duty free.
The big driver of globalisation has not been recent liberalisation but other forces - the industrialisation of China and other emerging economies, falling transport costs and new technology.
More fundamentally, job losses have far more to do with shifts in demand, the organisation of work and technology than with globalisation. The Organisation for Economic Cooperation and development estimates that fewer than 5% of job losses in Europe are due to outsourcing to cheaper production centres.
Nonetheless, Mr Trump talked in his campaign of imposing tariffs on imports, scrapping trade deals and bringing manufacturing jobs back to the US. In a world of globalised production such policies are likely to have unintended consequences.
Take Apple's production of the iPad. Apple has kept the high-value functions including product design, marketing and software development in the US. The labour for assembling an iPad is primarily Chinese.
In a 2011 study, the Personal Computing Industry Centre (PCIC) estimated that, as the assembler, China's share of an iPad's total wholesale price was just 1.6%. The main beneficiaries of Apple's success are not Chinese assemblers but Apple's predominantly American shareholders and employees. Apple demonstrates that the real value in electronics lies in design, development and marketing, not in low value added assembly.
Even if Apple were to bring its offshore assembly jobs back to the US it is hard to see Americans signing up for the long hours and, by Western standards, low pay, seen in China. If forced to repatriate low value, labour-intensive processes, Apple would doubtless employ machines, not large numbers of well-paid Americans, to do them.
Unwinding globalised supply chains would not create a flood of high paid jobs returning to the West. But it would mean higher prices and less choice for consumers. Anyone for an Allegro?
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