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Difficulty: HardThe Digital Revolution and Economic Globalization

"The spread of digital technology has dramatically reduced the costs of transmitting information and coordinating production across long distances. As a result, firms have reorganized their operations globally, outsourcing routine tasks and concentrating high-value-added activities, such as research and design, in areas with a highly skilled labor force. While this has driven national economic growth, it has also widened the wage gap between college-educated workers and those with high school educations or less, shifting the domestic labor market's demand toward analytical and technical skills."
— Council of Economic Advisers, *Economic Report of the President*, 1997

Which of the following developments in United States history during the 1990s was most directly a response to the economic shifts described in the passage?

  1. A
    Attempts by the federal government to return to absolute economic isolationism by banning all foreign trade and investment.
  2. B
    The creation of new federal welfare programs under the Great Society to directly employ displaced manufacturing workers.
  3. Political debates over the approval of multilateral free trade agreements.Answer
  4. D
    Calls to utilize supply-side economic reforms to nationalize the burgeoning digital infrastructure and communication networks.

Answer

Political debates over the approval of multilateral free trade agreements.
The economic globalization described in the passage, characterized by the reorganization of production across borders and the digital integration of markets, directly fueled political debates in the 1990s over trade policies. Proponents argued that agreements like the North American Free Trade Agreement (NAFTA) would stimulate growth and open new markets, while critics (including labor unions) feared the outsourcing of jobs and the downward pressure on wages for non-college-educated workers.

Step-by-Step Solution

1
Analyze the stimulus passage.
The passage describes the economic effects of the late-twentieth-century digital revolution, which reduced communication costs and facilitated the global reorganization of production (outsourcing), resulting in national growth but also widening domestic wage inequality.
To identify the core themes of the digital revolution and economic globalization in the 1990s.
2
Identify the historical context and timing.
The citation is from the 1997 Economic Report of the President, which places the trends in the mid-to-late 1990s.
To filter out options that belong to other historical eras.
3
Evaluate the political responses to globalized production and trade during this era.
The integration of markets and outsourcing led directly to intense political debates over free trade agreements, such as NAFTA, as different domestic groups weighed the benefits of market access against the loss of domestic manufacturing jobs.
To select the option that represents a direct political consequence of the described economic shifts.

Key Concept

The economic and political impacts of late-twentieth-century globalization and technological innovation.
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Topics

The Digital Revolution and Economic Globalization

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