As products roll off the line at Caterpillar’s recently expanded East Peoria, Ill., factory, every one is marked with a flag that designates its final destination. There are a lot of Chinese, Indian and Australian flags. But there are plenty of American ones too, and their numbers are growing.
“We put those flags on a few years back. I wanted our workers to understand that globalization isn’t necessarily about someone taking your job,” says Caterpillar CEO Doug Oberhelman, who thinks less about a single world market than many regional ones. The company is global, but where it can, it sources and produces locally, which is a natural hedge against everything from oil prices to currency risk to customer tastes.
The bottom line: jobs and growth are split more or less equally between the U.S. and the rest of the world. That doesn’t mean the pressure is off labor — witness the company’s union squabbles — but it challenges conventional wisdom about the global economy.
Until quite recently, globalization was seen as a one-way street. American companies, which led the charge four decades or so ago into growing global markets, were its ambassadors — and American workers, whose wages and upward mobility were flattened, were the victims. The core idea was that globalization, technological innovation and unfettered free trade would erase historical and geographic boundaries, making the world ever more economically interconnected and alike. (Foreign-affairs writer Tom Friedman famously shorthanded this notion with the title of his book The World Is Flat.)
In this vision, all nations would sit on an even playing field, and the U.S. would come under more and more competitive pressure from eager upstart nations. It worked something like that from the mid-1980s to 2008, a period of unprecedented market calm that economists call the Great Moderation. Not so much anymore.
We’re now in a new age of volatility, with new rules of the road. Bankers will become less important, manufacturers more so. Complex global supply chains will give way to a new kind of regional economic hub. Blue collar jobs will go high tech. Robots will replace Chinese workers. Private companies will become educators. And mayors will be the new economic power players.
To read more about the five rules that will govern this new global economy, check out my feature, “Go Glocal,” in this week’s TIME magazine.