Whenever someone asks me what the biggest trend I am focused on, I always say Globalization. I mean this in the largest sense of the word. Globalization, driven by the power of technology and the Internet to shrink distances, is the big megatrend of my life, my generation, my world.
I am jetlagged. I woke up at 5am after staying up to ring in the new year. Everyone in my home will be sleeping for hours. So I’m doing what I always do this time of the morning; listening to music, blogging music, reading, writing, and browsing the web. I love doing random stuff on the web which takes me to new places and new ideas.
I randomly put the word MongoDB into Google Trends just now and this is what I got back:
For those of you who don’t know, MongoDB is an open source datastore for large scale web applications. In other words, a database you use to build web apps with.
Look at those regions, cities, and languages. Russia, Ukraine, China, Norway, Sweden, Taiwan, Israel, and India are ahead of the US. You see similar data on cities and languages.
This is a proxy for web developers. There may be some reasons why this is a problematic proxy but it sure got my attention.
I spent the past two weeks outside of the country. It’s good to do that. You see things. The world is moving fast and the US certainly does not have any kind of lock on innovation.
Vivek Wadhwa wrote an interesting post for Foreign Policy laying out some of these issues. It’s worth reading.
Many, including Vivek, paint this situation as a challenge for the US. Vivek’s headline includes the words “eating America’s lunch.” You all know that I am the consummate optimist. And so it will not surprise you that I do not see Globalization as bad for the US. It is certainly bad for many people living in the US whose livelihoods depends on a closed market for labor/talent. But just because there are a significant number of people whose economic situation is challenged by globalization in our country does not mean globalization is bad for our country. And even if it is, we had better learn to live with it because it is not going away. It’s getting more and more important in our lives every day.
I see globalization and the power of technology to transform people’s lives as the greatest wealth generator since the industrial revolution. It is literally turning people in countries like China, Russia, India, and many many other places, into entrepreneurs who are bootstrapping themselves into a better life, for them and their families. That is a big deal.
I am reading Daniel Patrick Moynihan’s letters. It was a yearend gift from someone, I think Donna and Paul Ullman. It’s a great read for someone like me who is inspired by great men and women who think big thoughts and try to do great things. Moynihan was a student of underprivileged ethnic and racial groups and their struggles to achieve freedom and economic equality. One of his big themes is that freedom and economic equality are not the same thing. But they do go hand in hand.
The US was built upon a simple promise, freedom and equality for every man and woman. And though we have had our challenges living up to that promise (women, african americans, american indians, etc, etc), we have been an icon for that promise in the world for a couple centuries. I believe Globalization, brought on by the forces of technology, will lead the rest of the world in our direction. How can it not?
And with that, we may find a more peaceful earth. And that is something to be hopeful for this first morning of 2011. Happy New Year everyone. I wish you all freedom, equality, and peace in the coming year.
A toast to globalization! Happy New Year, Fred!
Good morning and Happy New YearCurrently working at a distressed debt fund, as I do, I tend to see the more pessimistic view of globalization.The U.S. corporations that did so well for most of the 20th century courtesy of globalization have now hollowed out the center of the U.S. Our work force is ill equipped to compete in the world economy and our school system trans people to follow rules and become factory workers – when no further factories exist – or are ghost towns compared with the past.On top of this – those who have made it out the other side to retirement have been promised so much in terms of pensions and health care and other entitlements that it will be a long hard reckoning that we will see in the future.The question is – can the younger generations pivot (almost pains me to write that word) and start making the changes that allows America to be competitive again in all fields?We still have the best brand in the world because of exactly what we stand for – as you said freedom and equality. But we’ve laden these down with bureaucratic red tape for so long that at times it seems easier to build elsewhere.We are victims of our past success. When you have been on top for so long – it is hard to see the problems you face – it is hard to admit them – and even harder to make the changes – wrenching in some cases – that will allow you to stay on top.Millions of Chinese are leading a better life – tht is true, but I would argue that the cost of that is that millions of folks here in the U.S. are likely to lead a slightly worse life as a result.Globalization is fantastic – but if you follow David Ricardo’s theory of comparative advantage down the rabbit hole – you see that free trade (globalization) benefits the whole – but unless you can keep up your comparative advantage in good and services that the world wants – you ultimately are hurt by it.Unfortunately, I think that is where we are.And I’m an optimist – can’t believe I’m writing this here at 7:20 A.M. on New Years Day!Happy New Year to you Fred – and all the AVC community members.May we press our advantages as a country in the coming year – in tech, in media, in freedom, in equality – and all be happy and healthy.
yup, those are the challenges brought on by globalizationi’d like to see entrepreneurs in those regions use globalization as a way to get back on a growth pathyou can’t fight it, you have to embrace it
Man you are quick – I was only half way through!Sometimes I have found that with Disqus, I can start to type a comment – butit doesn’t scroll down for me – so I end up typing where I cannot see. Thus,I save the comment – then edit it which always brings up the properformatting. Not sure whay that happens – but I think this is the 4th or 5thtime.
Same thing here. Rather than send the comment, try hitting Ctrl+A, then Ctrl+X to cut it. Then cancel the comment. Then restart it and hit Ctrl+V. You should have a bigger text box.Playing with the arrow keys often works to get it to scroll to the bottom too…
I’ve had that problem with Disqus today too. Another problem is that I’m not getting the e-mail notifications about follow up comments.
i’d also like to say the debt loads are a big problemyou can’t reinvent a business when you have to make that debt payment every yeari don’t like debt. never have. never will.
Its a question that comes up with me and my friends from college.So here is part of the answer: Some of them are very conservative in their choices in response to that problem (I see it as hoarding – trying to get all the best as a way of safeguarding against this issue)Others are ok with the risk.(I fall into that category more so than other friends). This group is much smaller. Interestingly, as long as one pushes ahead, the people on the safe side of the equation are some of the most supportive people. (AKA, there is social acceptance for that sort of behavior)So, does that answer your question somewhat?
Globalization, free trade and FAIR trade is the three legged stool which must be sized for the future. One leg at a time.
the one we have to work on is fair trade
Fred, I think the time for us to negotiate fair trade with China and India is already behind us. Not because of anything they’ve done, but because of the dependencies that our companies have set up with their megacorps. If you punish the Chinese manufactures or the Indian software companies with some kind of trade barrier, the US equity markets will pay the price. No thank you!I think we have to wield carrots, not sticks. If we want to protect US jobs, we need a government that will provide incentives for local companies, not barriers to global companies. Incentives can come in many forms – tax breaks, world class broadband, even sensible health care reform.I’m really worried about the future, but I’m dedicated to doing something about it. That includes shedding my mcbeese cloak and ‘coming out’.
Harry, I really resonate with your post.China is cranking out more doctorate students (from high caliber schools) than we are cranking out college grads in total. I get pinged on Skype from Chinese college students wanting to practice their English… how many Chinese locals do you think are being pinged by Americans wanting to practice their Chinese?We will always have a sizable niche American market, but the global impact we’ve had is eroding. We better get used to that. America was once Europe’s red-headed stepchild. That changed and Europe had to reinvent itself. The wave is once again moving west and it will soon be America’s turn to evolve. We should all be trying to elect really bright representatives to help us through the changes.
Happy New Year from a MongoDB user in Ukraine. 😉
MongoDB totally rocks – I especially love the gridfs features! Happy new year from a CanAm programmer in the US 🙂
tangential, but I wrote this one day in college on the ethics of globalization:http://repository.upenn.edu…this post made me re-read it, and realize how much more of a fanatic toward humanitarianism I was as a college student than I am now that the real world has gotten to me.
Nikhil, I’ve just read your paper, and I would respectfully like to disagree that it reflects fanaticism of any kind. Your paper strikes me as an example of brilliantly creative thinking of a kind that’s been sorely lacking, and contains several chunks of pure gold ore. In particular, its concept of ethical efficiency, taking into account the opportunity costs in allocation of money to one form or another of harm minimisation, is nothing short of brilliant.Two particular passages in the paper stand out:(1)”Consider that if everyone in America donated the cost of a single movie ticket per year, we could double our current aid to both Africa and Asia.”That says it all.(2)“Perhaps we could mandate labels, adjacent to health and nutritional warnings that read, ‘The cost of this pack of cigarettes could sustain 5 people on the verge of death. Please donate instead’.“We should make this tradeoff obvious for all products, for all court decisions, for all military spending, and so on. An even more extreme example, the government could bring a starving child from India to America, and enclose him in a transparent case in Times Square, requiring that $5 million be donated by the public in order to save the child, otherwise, the child will be permitted to die unaided in public visibility. This would tangibly (although perversely and controversially) blur the difference between murder and permission of death for onlookers and bystanders. Murder is an inherently emotionally-charged issue. Permitting death is not. Yet it is as much of an ethical breach not to prevent suffering and death through monetary donations and humanitarian activism as it is to murder someone unprovoked.”This is, of course, only another “thought experiment”; but it’s provocative and brilliant.I hope that you haven’t lost the generosity of heart or the creativity that led you to write this brilliant piece.
Thank you so much John. I do still believe these things, but it’s hard sometimes to talk about it because people tend to get defensive when you accuse them of causing harm in the world by being.
Nikhil, that’s an interesting take on the ethical position you raised, which did not, to me, suggest that anybody is causing harm in the world simply by being!It seems to me that those who upset themselves on such a basis have made the mistake of imagining that making the decision to live a selfish life and to ignore the ease with which they could extend lifesaving help to others is tantamount to simply “being”. If, to their minds, the two equate, then their minds are unbalanced. Nobody is innocent who lets others suffer without raising a hand to help.I think that you should make an effort to communicate more thoughts such as those in your paper, which were clear, insightful, imaginative, and searingly relevant to most of those with ready access to this blog.
And now for the bad news….9/11 was an inside job. The trend has been towards poverty, less freedom, and greater international tensions since 9/11.Ignorance is futile. Only the truth can set us free.
Very true that international travel gives you a new perspective and direct insights that you don’t otherwise get.The issue with US education being inferior is something that’s been around for a long time, at least as long as I remember when I entered a US university in 1978. And despite of that, look at the wonderful economic expansion that the US has garnered in the past 30+ years. If education was the only factor at play, then France should be ahead because their education system has been one of the best for a long time.Yes, India and China are graduating hundreds of thousands of engineering/techs per year, but what they can do with that is another story. Aside from the IT Services side where they’ve done very well (but not driven by innovation, but rather by labor arbitrage), India/China is still a ways away from scaling their technology innovation, globally speaking. They aren’t at the product expansion level yet, and there are cultural and capabilities barriers ahead of them.What the US (and Canada) has which no other region will have for a long time, is the proximity to the largest AND most homogeneous domestic market at their fingertips. That helps commercialization of technologies in a BIG way. Having quick access to 50% of a global (addressable) market without any cultural, language or regulatory barriers is an amazing springboard to the world. No single homogeneous market offers that anywhere in the world. North American companies are lucky to be in that position.And as a result, America is still influencing the rest of the world when it comes to technology and its impact, although the variety of implementations will differ around the world.We should all be students of globalization. It’s an ongoing thing.
For a 20 year old kid to tell his/her parents in India that they are leaving college because they have this startup they are working on and its taking off with vc interest etc – trust me not gonna happen in this generation. They’ll receive the beating of a lifetime. While the kid in the US will do it and run with the idea.
cultural change takes a generation at least
FredCultural change for population as a whole might take a generation but there are several pockets of Indian economy that are changing and innovating rapidly. If you travel to India you would see business processes reinvented in every sector from retail to autos. Some of the models will have global appeal.
Yup….They’ve got to work for Infosys/Tata or else!
it is changing, a lot of groupon clones are coming up in India, and there is a pretty well designed amazon clone called flipkart, was just reading about them, the founders were just 25 ha ha just like in the US.
Yes, globalization is a huge trend. What are its main obstacles (from a high tech industry perspective)?I’d say three:* Languages – many apps and Web services are English-only, not quite ready for the global market and its many languages* Content restrictions brought on by XIX century copyright structures: “Sorry, you can’t view this video cuz you’re in the wrong country:”* Payment restrictions: “You can’t buy apps from our Store / Market ’cause you’re living in the wrong country”
i ran into all three of these while in the middle east1 & 3 are big opportunities for entrepreneurs2 is just a royal pain in the butt
Yeah, this is an area that I think is ripe for improvement. All sorts of American startups are mainly aiming to attract US-based users which seems antiquated in our globalized world (for many services at least). I think in addition to the ones mentioned, there are several others:- Reliable international data. There are many services that provide high-quality data for the US, UK, Canada, but don’t cover other parts of the world well. (Or I might just be unaware, but trying to get good location data for the India, Asia, etc)- How to market to international audiences? What is the way to target software developers in China or early adopters in Germany?- Developer / Entrepreneur education. They would have to see it as a worthwhile decision to spend the time/money to internationalize their service and market it overseas. Right now it is easier to “assume a U.S./English-speaking user” when designing a service which simplifies the problems but is limiting.On the flip side, it seems odd to me how few international-based web services I use (DataSift, Spotify, Skype, but a small number). I’d like to think it is because of American strength but seems like this should change over time.
nature is global. humans have to adjust. cannot be avoided.
Interesting post Fred, and I agree with a lot of it with respect to the future, but for now most of the wealth generated in places like Russia and India are by oligarch like enterprises – who control commodities or in the case of India, win favors with a corrupt government(like the recent telecom deal which has caused outrage). I am an optimist as well, and I believe the future remains bright for the US.
RIP, American middle class…
that is certainly the negative view of globalizationi don’t share itwe are undergoing a shift from an industrial economy to an information economy in the USboth can produce middle class jobs
fred, I very much disagree with you on this one. Real wages haven’t increased for working Americans in 30 years, check the BLS data.We’ve found cheaper and cheaper ways to make goods but our wages are stagnant, U-6 unemployment in California and Michigan is north of 20%. Between the coasts, people are suffering. I encourage you to make your next trip to the Midwest if you’re looking for a real eye opener.Washington is slowly finding out that you cannot legislate your way out of a decreased standard of living, although they will of course do their best to suggest otherwise.
the answer is to compete not to complainthink about what india has done with outsourcing work from the USwhy can’t we provide those same services with our highly educatedlabor force that is increasingly unemployed?nobody has the right to ever increasing wages, although i suspect thelabor movement would disagree with me on thatbut jobs are important, people need to work, and we need to get themback to work
Fred, you are RICH! Are you paying attention to the people you pass everyday in NYC, the one’s who are living in the streets. The divide is so broad between rich and poor and the city is a key indicator of this. Do you ever ask yourself how those people got there? No, it’s not the story that the media and city governments want you to believe. So sad that so many people believe this crap. Many people are there due to gentrification, loss of jobs, the need to take care of loved ones healthcare costs, etc.Corporate America will do well and the stock market will fly because corporations don’t need America to survive, they can sell their products to India and China and never place their foot in the U.S.if they don’t want to. They don’t need to worry about paying taxes as they’ve figured out how not to anyway. Execs don’t need to live here anymore they can be anywhere. A corporate logo can be placed on any building in any city in the world. WAKE UP!!!! If you want to do something, figure out how we keep jobs here. Foreigners will own our water, our infrastructure, our country if we don’t think critically. I disagree with you about the transition to the information economy, this transition has been taking place since the early 90’s as the outsourcing game was being played.
yes, i do pay attention to them. i ride the subway with them. i walk the streets with them. i am paying attention.and i came to NYC with nothing in my pockets. Not a dime. but i had an education and a desire to work hard
Your riding the subway with them and sharing other public spaces with them is an example of what Mickey Kaus calls “social equality” (as opposed to income equality; he things social equality is more important). If you haven’t seen this post of his last week, you should give it a read, “Obama and Income Inequality”. Kaus is one of the more original, critical thinkers on the center-left.
thanksi will check his stuff out
NP. Happy New Year, btw.
Great question, Fred.The answer from my perspective (as a US entrepreneur who employs a lot of programmers in India) is this:U.S. programmers would rather stay unemployed and complain – than compete.Don’t believe me? Follow these steps:1) Go to Elance.2) Look at “Fixed price” job postings.3) Study who is winning those jobs. Answer: Overwhelmingly India, China, Eastern EuropeIf U.S. programmers are far better and far more productive (5-10x) as they claim – why aren’t they winning these jobs?Remember these are “fixed price”, not “hourly” jobs. So, delta in hourly rates is irrelevant. * If it takes an Indian programmer 10 hours to do a job and he charges $15/hr – then he will bid $150 for the project.* If a U.S. programmer were 10x better, then it will only take him 1 hour to do the same job. He can bid it for $100 and make a killing on Elance.Real truth (from my perspective) is this. U.S. programmers are no better (and no worse) than Indian programmers. Yet, they want to be paid 5-10x more. Why?
fred -I agree with the necessity to compete. But we need to set realistic expectations.We like to think of our nation being reinvented as an R&D/engineering powerhouse, and to let ’emerging nations’ do the assembly of our ingenuity. The problem is, we can’t generate enough wealth to maintain the same standard of living under this framework.An article on HuffPo titled ‘The Innovation Delusion’ explains this in better detail – http://www.huffingtonpost.c…and we also need to realign our expectations with ‘competing’ in countries such as China who really have _zero_ interest in letting our multinationals create markets and compete with their Chinese counterparts. Skype getting blocked out this past week/General Motors parterning with SAIC, who then goes on to use the expertise they’ve gleaned from their ‘partner’ to create a model that now competes against GM…the list goes on. China will not let our multinationals compete on a level playing field. And that’s fine, China is a sovereign nation and can decide what is best for their country.But we need to stop deluding ourselves about what is and is not possible in a globalized world.
The other issue is that R&D requires workers of above average intelligence and, by definition, half of Americans are below average in intelligence. They need jobs too.
Fred,”nobody has the right to ever increasing wages”Perhaps not, but the status quo is worse than that. Real median wages in the U.S. dropped 5% from 1999 to 2009.One perverse aspect of globalization is that it lowers the wages and increases unemployment among middle class and working poor Americans (via immigration/insourcing and outsourcing), but not among those in the highest-paid profession (medicine).Wouldn’t it make more sense to do the reverse — invite fewer lower-skilled workers and more qualified foreign physicians? Instead, physicians are able to fight off insourcing and outsourcing by requiring even fully qualified foreign physicians to re-do their residencies in the U.S.
Note that there is a correlation between open source and developing nations for two reasons. First cost and second a lack of desire for dependence on US companies, which most packaged and Saas software companies are currently.Agree that Russia’s wealth is created by oligarchs. There are hundreds of thousands of developers in Russia but not many entrepreneurs.
i think that can and will change. developers can become entrepreneurs.
A few years ago I was in Germany and was talking with a guy from Russia. We were there for an international coaching seminar in one of the Olympic sports. He was telling me how he had invented something that was useful in that sport, and that he had made a sold a few.I’m an entrepreneur and I got fired up about what he was telling me, and started saying, why don’t you do this and do that and get a business started. And he just shook his head and said, oh no, can’t do that. Why? Because if he was successful and started selling a lot, he would be ‘noticed’ by the mafia and they would come around and extort money from him. So he was purposefully staying below the radar, only a making a few items.I would not want to try and be an entrepreneur in Russia or China.
* Time Shift – both an obstacle and a benefit. Arranging real time interaction with a globally diverse team is a challenge, but the same team can stay productive 24/7…
I am an optimist too. I think that as a country we (the US) try to have it both ways. Let’s have the whole world advance (as seen in the graph), but at the same time we get alarmed when they do… It benefits us all, the real successful ideas become international anyway (see Skype and facebook).
that’s what i was trying to sayyou said it better and more succinctly
china has blocked facebook and about to block skype
Equality?”Champions of globalization portray these developments as the natural consequences of market forces, which they believe are not only benevolent (because they increase aggregate wealth through trade and make all kinds of goods cheaper to consume) but also unstoppable. Skeptics of globalization, on the other hand, emphasize the distributional consequences of these trends, which tend to confer tremendous benefits on a highly educated and highly skilled elite while leaving other workers behind.”From Why the Rich are getting Richer by Robert C Lieberman | FOREIGN AFFAIRS http://www.foreignaffairs.c…
Hi Tim,That is a fair point about the problems with globalization. My question is: how do you mitigate this? In the past, many in the developed economies were focused on the outsourcing of manufacturing jobs. Then we saw that basic service jobs like call center operators had their positions outsourced. But as Internet bandwidth increases and storage costs decrease, an increasing number of things that were done locally can be done remotely. That puts cost pressure on labor in a number of service industries.In my view, even the highly skilled and highly educated elites of developed economies will face this pressure. For example, in the finance business, an MBA from the Indian Institutes of Technology could be as smart, as knowledgeable about markets and as well-written as an MBA from Wharton. Is it not possible that more research analysis will go to those IIT grads in the future in part because of cost?Technology serves to bid away ‘excess’ profits. This is true in retail where you can do in-store price comparisons online on the fly but it is also true in an increasing number of labor markets.
Globalization and the division of labor are both wonderful things!I am a little irked by the term “economic equality” though…After all, we are all different with different skill sets. Naturally we cannot be “economically” equal since some have advanced entrepreneurial skills while others do not (& have no interest in it whatsoever).Those with the keen entrepreneurial skills & the ability to anticipate & efficiently solve problems will naturally be better off “economically”.I contend that America was not built with the promise of freedom & “economic equality” … but instead freedom and equality *under the law*…In other words, no special favors because you were politically connected at the expense of your competition. You were free to anticipate & solve the imbalances to the best of your ability. You could profit (but you could also lose). You didn’t have to ask your government about every economic move you made.Now this was not carried out perfectly (special favors did still exist, as did slavery) but relative to today, political favors were not the norm. Much because in Britain & in all of Europe it was.Today, we’ve gone so far from that promise, that the idea seems foreign to most people. Now you lobby, you get in good with those that write the laws. You get subsidies…force new competitors to get expensive licenses to do business. You can profit (but get bailed out by taxpayers if you lose). And the irksome words of “economic equality” is impossibly attempted by a massive state apparatus, which has bankrupted itself making such an unnatural promise.Those countries that follow what America was will reap the crops…And today it’s in Asia, where it’s very attractive to be an entrepreneur.America’s best chance is the technology sector…where you can still become an entrepreneur with little to no red tape. We should not take this for granted and should cherish it…because the lobbying, licensing, subsidies, bailouts, & alphabet regulations can start innocently small and consume it as well.
This is going to be a painful transition.In the short-term, a lot of people who lost jobs in the recent financial crisis will likely not enter the workforce again because they have built careers doing jobs that are now outsourced, and do not have enough working years (or the education) left to re-tool their skill set.In the mid- and long-term, because we’ve neglected our public education system for so long, it may be difficult to re-tool our younger population to perform the “new” jobs, if they ever show up.The idea that both economies (industrial and information) can produce middle class jobs is true. But with the relatively low capex required to set up an information-based company, an uneducated U.S. middle class has no real competitive advantage or defensible barriers to entry. This will likely drive information-based wages to marginal cost, at which point an educated foreign population should be able to compete and win by being a lower cost provider. We see this today with developers.I’m generally an optimist as well, and I believe that globalization is a net positive for us all, but I struggle to find a way that it benefits the U.S. middle class when it comes to jobs and wages.
location can be a defense. for example a lot of what gets outsourced to india by US companies would be better done in the US if the costs were close.development is also better done with a team sitting inside your officeas wages rise in the rest of the world and stagnate in the US, there are going to be big opportunities for entrepreneurs who want to compete with outsourcing
All true if costs were close, but the price delta is massive. I think we may see real changes in quality of life before they equalize. As an example:Freelance LAMP developer in the U.S.: $150/hourDeveloper ex-U.S.: $25-$50/hourSpeaking generally, it’s far easier to work with a U.S. developer. There’s usually a better understanding of the business requirements, the communication is faster and they work on the same clock (sometimes a good thing). I’ve seen lots of companies shoot themselves in the foot by taking the low-cost option and not putting the management in place to get the job done correctly.But is the benefit worth $125/hour? It really depends on the project, the budget, the timeline and the requirements. In order for these wages to equalize, the U.S. developer has to take a big hit. I think we see the same trend in a number of professional services.
the cost deltas are much lower for other jobs though
Yeah, but where do those other jobs come from?Consider: over the last decade, outsourcing of “low-level” development has expanded hugely, especially in startups (I’ve been doing startups for my whole career – almost thirty years now). It’s now common.It’s also getting very, very hard to hire engineers low- to mid- level engineers in the US. And that seems healthy, right? The job market is hopping! But just as you pointed out in your RIM post, what appears to be healthy on the surface can be rotten to the core if you don’t change something.In this case, what’s rotten to the core is that we are not generating entry level people. How can we? They are, quite rationally, not choosing to go into CS in the numbers we need, because why should they? They will be competing for jobs with people who will charge a small fraction of what they will. Might as well flip burgers, or become a lawyer or what have you. Go ask 20 software engineers if they’d send their kids into the field. I have, it’s not pretty.So the industry ages (and yeah, it has, from my perspective.) But what’s critical is that while we have the know how *now*, we aren’t mentoring young people and we’re shifting the know how overseas.So we look great right now, but in 10 years…? When the current crop of senior people phase out, who will replace them? What then?Some steps are glaringly obvious, like giving a green card to anyone who graduates from a US college. Keep the smart people while we can. Maybe this is already too late. Maybe not. Go to any of our leading technical schools and see who is opening campuses in Hong Kong or what have you. Hmmm.Of course, the logical extension of this is that in 10 years or less, the entrepreneurs just won’t be in the US anymore. The technical talent they need to operate will be elsewhere.So, as a VC, learning Chinese or Hindi would appear to be the logical next career move. Probably moving to the far east would be even better.Now, all of this is fairly pessimistic, which I’m not, but I think we do need to think long and hard about doing something – now – to stem the losses. That almost certainly means being somewhat to very protectionist in order to manage the transition. So be it. I’m not even sure that some of the needed steps even are protectionist – currency realignment may be all that is really needed, and it may be that if the various currencies in question actually were floating, we’d see a very different situation.And it may well be that all of this is as healthy as can be for mankind as a whole, just really, really bad for the US as a country.
when i said “other jobs” i was thinking of things like back officework, accounting, clerical, support, etcthe kinds of things we have outsourced to india and elsewhere butcould easily be done in the US in economically challenged regions
Fred, not discussed: People my age are trying to flee those regions to ones that are newly developing or already economically rich.
“there are going to be big opportunities for entrepreneurs who want to compete with outsourcing”I wonder if creating more virtual workforces in the U.S. might be one way to do this.I’m thinking of a particular company that employs 800+ (and expects to triple this year) that provides outsourced call center and concierge services. Their entire call center is staff by people working from home — all in the U.S.
Aren’t you talking from the POV of a VC ? for a VC I guess fundamentally globalization is a good, you just invest in great companies anywhere in the world, wherever you find a good opportunity. But when the millions of middle class Americans start losing jobs and stay that way, won’t that impact the politics ? won’t they then change the political reality. I feel the situation is unstable, there has to be demonstrable and fundamental change for the better for the middle class Americans due to globalization, else the situation won’t last. Democracy I guess is a system which makes sure that majority of the country prosper.
Fred, like you I’m obsessed with globalization but I think we’re at a stopping point whereby American culture which was at the crux of globalization stopped generating revenue.America is losing its what Harvard political scientist Joseph Nye called, “soft power.”The early 90s was the acme of American soft power. Our nation had the global phenomenon in Michael Jordan, we justifiably intervened in Kosovo, our global political standing was good as was our dominant entertainment industry.9/11, China’s quiet entry into the WTO, the mobile Internet, while bringing the world closer together (flattening opportunity in the world) has also torn us farther apart. Wikileaks exposed the flaws in our foreign policy. Needless to say, I hope 2011 is a revival year for America.
9/11 gave a lot of sympathy to US I guess except for a few rather stupid folks in Palestine, but the US then wasted all that by invading Iraq, to this day I don’t know why US invaded Iraq ? genuine intelligence failure, due to OIL, due to the threat of Saddam turning to Euro(seems unlikely) or maybe personal revenge of Bush.
I have mixed feelings:I see a hard time ahead for the major part of the people in US (and the developed world), like in the industrial era (machines replacing humans) I think we are near a post knowledge or knowledge commoditization and arbitrage era. Surely knowledge has the highest importance but it can be handled by fewer people with the “right” tools/products. If the only path is entrepreneurship we are in trouble since entrepreneurship is one of the riskiest way of life, we also need more security on different jobs. It’s impossible (at this time) to have hundred of millions of entrepreneurs with a good end.What’s happening is that the developing/non-developed countries are catching up because they use more advanced tools of communications (mainly based on IT tools), but they have major issues on education, transport, legal, accounting, security, democratic infrastructure. So US has a unique ecosystem for business but a lot of jobs will continue to drain offshore.The solution (for US)?: Selling the “US business ecosystem product” and going beyond startup visas: better ways to move established companies to US. I see US as a product to sell.
why is entrepreneurship the riskiest way of life?i think it is the safestyou are in control of your destiny, not some institution that doesn’tcare about you
I don’t see it in that way. Very few entrepreneurs succeed in the world vs the success (whateve it means) in working for the government, academia, big companies. There are few leaders in a war and it’s not an easy job. You know more than me that the entrepreneur traits are scarce, and many many times being an entrepreneur is confronting a Grove’s >= 10x force. In some way this is the subject of your blog, we had Altavista, we “had” Yahoo, we “had” MySpace, we had Lotus 1-2-3, Quattro Pro, and so on. They confronted a huge force against them.This is also a big subject to discuss around Schumpeter’s Mark I and Mark II theories and beyond.My opinion was not pessimistic, I tried to be realistic. I love the entrepreneur’s life and this blog is the place to be optimistic, but for the major part of the entrepreneurs life is an Odyssey!Also, I think sometimes everyone feel in control of their destiny, but something happens like the dot com era when macro events are outside of your control even when you have all the entrepreneur’s traits.
I agree with Fred. But then I look at “success” not from a momentary perspective but from that of a lifetime.Taking a BigCo job can be like keeping your money in a savings account — it’s nominally “safe”, but its value gets consumed by inflation. Being an entrepreneur, yes, you’ll encounter setbacks and temporary failures. But you get up and dust yourself off and keep fighting and learn from your mistakes, and that learning is like earning a high rate of compound interest — better, even, because nobody can take away what you’ve learned.
It depends: sometimes your failure implies going bankrupt, divorcing and other conflicts. The stats say that starting your own business is a risky venture beyond the optimism we can put in our own company.This is not black and white, you can work for a BigCo and have an amazing hobby that fills your whole life.BTW, my favourite movie about entrepreneurs is Rushmore http://www.imdb.com/title/t…
Steve Blank had a good post that touches on this – http://steveblank.com/2010/…. (I think it was Fred that actually turned me on to it ..).Here is a snippet that touches on the risk issue:<steve_blank>When It’s Darkest Men See the StarsThe economic downturn in the United States has had an unexpected consequence for startups – it has created more of them. Young and old, innovators who are unemployed or underemployed now face less risk in starting a company. They have a lot less to lose and a lot more to gain.</steve_blank>
Steve is right about facing less risk now, but it doesn’t mean that the risk is depreciable.And you’re competing with more businesses facing less risk, less barriers to entry.May be in the near future big companies [finally] realized it and they take advantage of the situation in detriment of entrepreneurs.
Ironically, lowering the corporate tax rate might be a help. It seems like that could level the playing field between domestic companies and the multinationals who pay a much lower effective rate; along with promoting more startups, innovation, etc.
Great post. To me, the key to making globalization successful for the US middle class is fixing our education systems.I haven’t seen a formal study on this, but my guess is that the inequality in wealth distribution has a huge correlation to where someone spent their first 12 years in school.That didn’t use to be the case: we had brilliant US Presidents educated in one room public schools with large class sizes.I’m a free market conservative who believes there ought to be equality in opportunity, not guaranteed equality in outcome. Yet the smartest free market people worry about the wealth distribution problem, because you need great customers to grow an economy.Lots of challenges but I’m optimistic we’ll find our way. America usually does.Happy New Year Fred and the AVC community!
when i think of economic equality, i am thinking about opportunity, not outcomei’m not a communist even though prokofy accuses me of that from time to time 🙂
Oh I definitely knew you meant equality in opportunity. I pointed it out simply because many free market people think it’s wrong to care about income inequality.It’s impossible to fix that problem with legislation – but it doesn’t mean that it’s not an important problem.Every free market capitalist should care about having great customers. 🙂
“To me, the key to making globalization successful for the US middle class is fixing our education systems.”What does that mean, exactly? We spend more per student on education than almost any country on earth, and if you adjust for demography, American students generally score as well or better than students anywhere else (e.g., Asian-American students score as well or better than most students in Asian countries).
I haven’t seen any data to suggest that we have a high-performing education system in the US.The studies of the world’s top 25 industrialized countries have us ranked near the bottom of the pack on math and English. The joke in the “Waiting for Superman” trailer was that we only rank high in one area – self-confidence.To graduate high school in California, you need a C on 8th grade level work. And many of our students fail to pass that test as high school seniors.I sit on a community college board in an area of socioeconomic affluence. Yet 48% of our students come to us needing remediation for math, English or both.
Here you go: “The amazing truth about PISA scores: USA beats Western Europe, ties with Asia.”.
Not sure where you read that but it isn’t true.We were #30 in Math and #23 in Science in the 2009 PISA scores. China was #1 in both.http://en.m.wikipedia.org/w…
I couldn’t tell that was a link from the Disqus e-mail. I just clicked through to the blog post and read parts of it.All I can say is, I’m not a member of the “liberal left” nor do I believe the fundamental problem with our educational system is a lack of funding.But changing the methodology based on race and trying to say that we’re doing just fine because white students can somewhat hold their own is pretty misleading and wrongheaded.The bottom line is: the world is kicking our butts when it comes to our kids’ education. That much is clear from both data and from real world experience.Right now, some stakeholders in our political system seem more interested in keeping public employee unions happy than fixing the system.I disagree with President Obama on a lot of things, but this is one issue where he’s generally right.
Aaron, what’s misleading is ignoring demographics and immigration in discussion that compares the U.S. to homogeneous countries with little or no immigration such as Japan, Korea, or Finland. For example, America gets more immigrants from Mexico than any other country, by far. Guess what country came in last on the 2009 Program for International Student Assessment (PISA)? Mexico.”Right now, some stakeholders in our political system seem more interested in keeping public employee unions happy than fixing the system.I disagree with President Obama on a lot of things, but this is one issue where he’s generally right. “Is it your impression that President Obama has been taking on the teachers unions or public employee unions in general? If so, what do you base that on?
I wasn’t expecting this post on 1/1/11 but it’s epic. Thank you for leading the New Year this way.I just had breakfast with some older friends (age-wise). They have had decades longer than I to think through things, and discuss lovely global topics like the tyranny that exists around the world today. I then see myself in the conversation talking about technology and how I plan to use it because of the realization of the potential of change it has, will have, does have. Like you state, how can technology not improve things – through ease of communication, socialization via expression and sharing everything good in the world and everything that must have an eye kept on.Happy 2011. Make it epic.
Love it — great way to start off the year. Let me know when you want to pop down to Panama ;).
I mostly agree with Fred in the fact that globalisation is essential to growth and innovation. I do though, have a problem with the fact that regions beyond USA are expected to play the role of markets and dont work on any largescale innovation.As an indian, who believes he can do things differently, it does hurt me to think that we have become only a low cost destination. People say that outsourcing was a boon for India. I respectfully disagree. I think the influx of jobs hasw created an environ,ent which does not promote innovation. The MBA has become the most preferred qualification. It’s all about big packets and a lucrative foreign posting. In turn the innovator does not get a venture capitalist who is willing to back an exciting idea, since, he looks at a 3-month revenue model. I hope something major happens and some gr8 idea comes from India. This is necessary for world balance technologically.
@Fred:”why is entrepreneurship the riskiest way of life?”i think it is the safest”you are in control of your destiny, not some institution that doesn’t care about you”Well, yes. BUT: There is an illustrative, striking comparison: At present in the US, an electrician’s license is a better foundation for such entrepreneurship than a Ph.D. EE. Why? Because the electrician has two barriers to entry, (1) a license and (2) geography. Also his business has enormous ‘technological inertia’ that means his ‘skills’ and what is in his panel truck don’t have to change very fast. Also he has many customers from just the broad economy and not just a few niche (even if huge) customers. Last, to really use a Ph.D. in EE as mostly intended, have to be an employee of “some institution that doesn’t care”. Actually such a Ph.D. COULD be good for entrepreneurship but mostly only for an effort at a big splash that is more risky then just being an electrician.In the US now, a geographical barrier to entry is hugely important: In my project, there is little chance that anyone else in the world will reinvent my ‘secret sauce’ (thanks to the US DoD that paid for my Ph.D., not in EE!). Moreover, my Web site has next to nothing to do with English and, thus, if it is successful in the US has a good shot at being successful around the world. But to make use of this ‘secret sauce’, I have to go in a direction where I’m either absurdly rich or flat broke and destitute with nearly no middle ground. Net, I’d advise anyone in the US to pick a career that has a geographical barrier to entry so that no one farther away than 100 miles can provide competition.For the US, ‘globalization’ has next to nothing to do with economics for the US. Instead the effort has been essentially JUST ‘US foreign policy’. The Foggy Bottom types wanted to give away to Japan, Pakistan, South Korea, China, etc. ‘market power’ of several important US industries as an ‘addictive carrot’ that would make those other countries ‘behave’. It is just a Foggy Bottom guess that such trade will cut down on the chances of war. A guess. An expensive guess for the US and not well founded. No other major country in the world is so eager to give away ‘market power’.”And with that, we may find a more peaceful earth.”I believe that, instead, ‘globalization’ will lead to a more violent Earth. Why? Because it’s unstable, in part because there is no global government. It will be a long time until a global government will work. In particular, globalization lets economic problems in one country spread to other countries. We saw that from 1929 through 1945: When the US stock market bubble popped in 1929 and the US economy collapsed, the US quit buying from other industrialized countries, e.g., Germany, whose economy got even worse (it was already bad from WWI, the Versailles reparations, and the Weimar inflation). Similarly, a major spark for the war in the Pacific was the US cutting off oil (likely also scrap iron, etc.) from Japan as another Foggy Bottom effort.One lesson: One hundred years ago, the US worked hard to throttle monopolies, ‘predatory marketing practices’, collusion in restraint of trade, etc. Okay. But with globalization, the global economy is now wide open to just these problems.Another lesson: Also 100 years ago, the US worked hard for safety in all of labor practices, buildings, houses, products, etc. It was more expensive but people went along because it was ‘the law’ and everyone else also had to go along. So it was okay and, net, better. Now with globalization, there is no effective way to enforce such standards. Again there is not and will not be the global government that would be [email protected] DeMott:For “David Ricardo’s theory of comparative advantage”, there are some examples where it works. E.g., the US needs a little tin and has little or none but has a lot of advanced products, and Indonesia has lots of tin but needs advanced products. So, we swap. Fine. The tin is the ‘advantage’ for Indonesia. Similarly for the Saudis and oil.But such ‘advantage’ is not why the US trades with Japan, Pakistan, South Korea, and China, and for that trade “David Ricardo’s theory of comparative advantage” has been a snare and a delusion: According to this theory, China is sewing instead of South Carolina because of some ‘advantage’, e.g., Chinese women with 20 fingers on each hand and, thus, able to sew several times faster. No: The difference is that the Chinese women have a much lower standard of living. ‘Advantage’ has nothing to do with it. Gee, we might also have mentioned Pareto optimality; that also has nothing to do with the dreams of the US Foggy Bottom types. Maybe I should also drag out the Kuhn-Tucker optimality conditions (e.g., as in Arrow, Hurwicz, and Uzawa) and J. Nash’s result on ‘bi-matrix’ games. Again, the issue is US Foggy Bottom widly foggy, destructive thinking and has nothing to do with economic theory.Yes, if we let China sell us clothes and put people in South Carolina out of work, then maybe we will be able to sell China high end industrial goods. Then sure: China will study our products, reverse engineer them, make their own products in violation of patent laws, and tell us, “Would you like to buy machine tools, IP routers, and cars from us?”So, Buick goes to China, makes and sells some cars, and shows China how to build a world class car factory and, thus, gets China a big start on shipping cars to the US.Just why are we so eager to devastate Detroit and much of the US ‘Rust Belt’? Apparently the Foggy Bottom people believe that all the auto workers will get jobs with Microsoft or get venture capital? Has venture capital funded many laid off auto workers? Steel workers?Uh, just what is it about our trade with China we like so much? E.g., now that they are ‘industrializing’, they are raising world oil prices. Just why do we like that? I believe the US was much better off with respect to China before Nixon went there. Nixon was, what, hoping for a nice retirement villa in China? Look, Dick, I’ve got a really good recipe for Moo Shi Pork right here in the US.Yes, there is a big theme: Globalization is helping the world. Well, likely it’s helping a lot of people in China. But here in the US, my concern is, what is globalization doing to help the US? My answer is, net, it’s a disaster for the US. Again, it was never intended to help the US economy and was only a Foggy Bottom effort.Is globalization here to stay? Not like the US does it: Again, no other major country is so eager to throw away ‘market power’ in major industries for just silly ‘foreign policy’ objectives. Uh, we’re running out of more ‘market power’ to throw away.Finally we come to the worst: Where is the support for the ‘US social contract’? Why should I feel ‘part’ of the US? Why should I give a darn about the US? The US, especially via Foggy Bottom, is ‘save the world’, ‘help the world’, ‘manage, control, and police the world’, destroy the US economy with absurd ‘foreign adventures’, expose US companies and workers directly to unfair business and ugly labor practices from large state-backed companies around the world, have the US immigration policies mean that US citizenship is nearly meaningless, and have the US be ‘dog eat dog and may the devil take the hindmost’.So if I get rich, I’ll very much look to leave the US and go to a country that actually cares about its citizens. Maybe then I’ll invest in some public information efforts to help cut way back on most of globalization, especially as practiced by the US Foggy Bottom types to the great harm of US citizens.Net, it’s long past time for the US to pay attention to the financial security of US citizens inside the US instead of having Foggy Bottom throw it away on absurd foreign adventures.
You make an astute point, one that Ian Fletcher made as well in his piece I linked to elsewhere in this thread:Back when protectionism was American policy, it enjoyed a broad popular consensus. Only the left- and right-wing extremists of the day dissented. Extreme right wing Social Darwinists like William Graham Sumner—who published a fuming book in 1885 entitled Protectionism, the Ism That Teaches That Waste Makes Wealth—saw protectionism as a subsidy for the incompetent and an interference with the divine justice of the free market and the survival of the fittest. At the other extreme, Karl Marx, who was alive in those days and keenly watching American capitalism, wanted to see American capitalism break down and therefore favored free trade for its destructive potential.Unfortunately for Marx, this was the golden age of American industry, when America’s economic performance surpassed the rest of the world by the greatest margin. It was the era in which the U.S. transformed itself from a promising mostly agricultural backwater, pupil at the knee of European industry, into the greatest economic power in the history of the world.What happened to America’s long protectionist tradition? In the end, America only seriously turned away from protectionism as a Cold War gambit to prop up capitalist economies abroad and tie them to the U.S. Geopolitics trumped domestic economics.
One of the things that changed America was that millions of GIs got to see a bit of the world — places they might never have gone in their lives absent the War. Small point but an important one.How you gonna keep them down on the farm when they been to Paree?
That may be true, Jeff, but it doesn’t explain our radical change in trade policy post war. The geopolitical calculations Fletcher refers to do.
Good post, Fred… discussions of globalization remind me of sitting in my Int’l Relations classes at SUNY Geneseo. Your post seems to echo Fareed Zakaria’s “The Post-American World.” Have you read it?
yes and it has shaped a lot of my thoughts on this topic
I always think of one important thought when it comes to globalization – while generally powerful and a force for good, its effects are extremely disarming. Innovation can wreck social havock until people absorb them.I keep thinking about the introduction of paper money and early banking in the west. With the likes of the Medicis. At the same time, they sponsored many thinkers and artists – who ended up spreading ideas that caused the Protestant reformation. Same with issues about shipping.We’re going through a similar problem. I don’t think Ricardo really answers about how we answer to developing change very well – he only talks about comparative advantage, not where it comes from, and how it changes societies. We’re in for a massive social change, and absorbing that change will take some time and energy from us.
“Work” in the U.S. is facing disruption.
If Fred Wilson’s right, then it’s hard to argue with that.But what’s the best measure of the trend? Is it the number of small businesses that start up in a poor country? The number of businesses that make more than a certain profit?It seems to me that there’s one kind of measure that’s of overriding importance in considering the effects of any policy and it alternatives, and that is the kind that looks at its effects not on the country’s economy, not even on those in small business, but on the worst off. Only when you’re paying attention to the worst off can you really begin to glimpse the true effects; without that, you’re able to see only a distortion: a version of the truth that excludes the most important consideration.Who is measuring this effect, and what’s the result? Anybody can claim anything before testing the claim. Maybe technology is allowing everybody to get into the act, giving everybody a teaspoon for a dig at the pie. Or maybe it is once again helping some percentage — 60%, 80%, even 98% — at the top and leaving the worst off even worse off.
Thanks for bringing up the (clearly thorny) subject of Globalisation. Everyone is worried about national economic issues, not many comments here address the ways in which technology is benefiting the billions overseas living far less fortunate lives.Best selling consumer electronic item ever? The Nokia 1100. 250 million units sold. Changed the lives of millions of people for the better. It’s not sexy, it has no apps, no browser even, but using SMS and services like M-PESA it has lifted the quality of life in many of the world’s poorest regions. The Nokia 1100 has empowered millions of entrepreneurs at a ‘hyperlocal’ level.Now, using your favourite search engine, enter these keywords: Android SMS bug. Or if you will: Android SMS bug not a high priority for Google.
It is certainly bad for many people living in the US whose livelihoods depends on a closed market for labor/talent. But just because there are a significant number of people whose economic situation is challenged by globalization in our country does not mean globalization is bad for our country.How large does “a significant number of people” have to be before you start to question whether our current approach to globalization is really good for our country?And even if it is, we had better learn to live with it because it is not going away.Globalization has been around as long as America; what has changed (in addition to technology, obviously), is our policy toward it. For most of this country’s history, protecting and nurturing American industry was our policy. It’s worth reading Ian Fletcher’s piece on this.
The internet is not only creating global opportunities for entrepreneurs. Affiliate networks/ebay/odesk job markets and others create new employment opportunities for small businesses with a global audience.
You guys in the US are indiscriminately blowing away your energy which is the most important asset that transforms raw materials into physical goods. Look at http://en.wikipedia.org/wik… and http://en.wikipedia.org/wik…You blow away so much energy in spite of being a services economy!!!. Look at a country like Germany that is more manufacturing focussed than u guys… and they spend lesser energy towards their GDP.To meet that energy need you guys conquer energy producing countries hoping u’d make a profit. You get your own men killed and handicapped and pay up huge sums to compensate and treat them. You burn away your own wealth and that of others and hope to live happier life!!!Capitalism 101, your awesome methods of creating wealth like innovative startups is diluted by wasting that wealth on not creating more wealth. Why do u need so many people driving a single car with no other occupants? Why do u need to keep annoying the other nations with a bloated armed force? Defense is necessary. But you guys are acting like a high school bully. Bullying does not create wealth. It just redistributes it. It is a brains v/s brawn thing… Every Kg of brain is far more valuable than every kg of muscle.If you had spent that money u spent on all those wars into technology, probably each average american would be wealthier by now.
I’ve just arrived back in Singapore after 6 days spent off the grid on the tiny island of Nikoi in Indonesia, where I was riveted by ‘When China Rules The World: The End of the Western World and the Birth of a New Global Order’ by Martin Jacques:http://www.amazon.com/When-…You might find it an equally fascinating read. It argues the complete opposite to the last sentence of your second to last paragraph 🙂
Fred, great topic. A thought I’d like to add is that we need to expand our thinking of “technology” beyond information technology. Unless and until we start producing “things” and “stuff” that people here and abroad want to buy, we will find ourselves in an unsustainable and overly leveraged economic position.One of the little known factoids of the world economy is that in any given month, it is Germany, not China, that has the most favorable net trade balance (which doesn’t factor in all the paper that China holds). Why? The German economy produces technology people want and need – but not necessarily consumer products. They produce the machines and equipment that are used by other manufacturers, utilities, etc. Add to that a reasonably well educated workforce and it’s a successful formula.We need to double down on our investments in education here in the USA, as I passionately believe that it is the single most important long term solution to our challenges. Continuing to welcome the world’s best and brightest as US citizens is another component. Ultimately, however, we need an economy that creates more broad-based wealth and opportunity, similar to the impact that manufacturing had on the nation over the past century and a half.The current “hot” industries (software, consumer electronics, etc.) aren’t inherently the solution, as they tend to create highly concentrated wealth. They can be a catalyst, however, when we start redirecting our best and brightest (and our entrepreneurial energies) to solving the more difficult problems of our age.
“We need to double down on our investments in education here in the USA, as I passionately believe that it is the single most important long term solution to our challenges.”Every time I see smart people repeat this pablum about us needing to spend more on education, I feel like banging my head against the wall. We already spend plenty on education — 7% of GDP, versus 4% for defense. We spend more per student on primary and secondary education than Japan does. We spend more per student than Germany does.You correctly point out that Germany has a positive trade balance and vies with China as the world’s leading exporter, but “doubling down” on education isn’t how they got there.
I completely and totally disagree, Dave. When I speak of doubling down our investment, it doesn’t necessarily mean only in terms of government spending. It includes a prioritization from businesses, parents, social and religious organizations, and so on. As an example, a manufacturer of wind turbines in Germany who I have met with had a skills shortage that was limiting their growth potential. They worked with the local community and started/funded their own technical school to make it happen! It is when all of the consituencies are committed and work together that great things can result.Do we need education reform? Absolutely yes. Teachers, administrators, businesses, parents, and the students themselves all need greater accountability. Does every child need a college education? Not necessarily. Should we place as much value on pursuing a trade such as welding or machining as an “intellectual” pursuit? Most definitely. Is the breakdown of the family unit just as influential a cause in the failure of a child to achieve his potential? Highly likely.However, when you place into context the total cost of kids who get crap educations here in the USA, particularly in our urban areas (but now the disease of mediocrity is spreading fast), including the absurd amount we spend on prisons, social support programs, and other very real fiscal and social costs associated with the problem of children falling by the wayside, it’s staggering.Why not help a responsible, loving single parent be able to spend more time at home with their children instead of working two jobs? Why not offer any teenager who spends 2-4 years in the service of their country (doesn’t have to be military) full tuition to any university they wish? In the end analysis, it is a no-brainer. It costs $100K a year to house a max security prisoner.So to summarize, I think you’re dead wrong that we don’t need investment in education – it just might need to be an investment in commitment, time, expertise, and support, not just money.
“As an example, a manufacturer of wind turbines in Germany who I have met with had a skills shortage that was limiting their growth potential. They worked with the local community and started/funded their own technical school to make it happen! It is when all of the consituencies are committed and work together that great things can result.”This sort of company-directed worker training, specific to particular jobs, makes a lot more sense than throwing more money at general education. Why don’t we see more of it in the U.S.? A letter writer in the FT recently noted that German companies spend 5x what American companies do on worker training because German labor markets are less flexible than ours (i.e., some labor market inflexibility is actually a good thing, despite what laissez faire proponents might think, because otherwise there’s little incentive for a company to invest in training a worker they might be laying off in 6 months). Thomas Geoghegan who I’ve linked to elsewhere in this thread, has made a similar point.”Should we place as much value on pursuing a trade such as welding or machining as an “intellectual” pursuit? Most definitely.”That much I heartily agree with, and this is another thing Germany does well: track students and respect and value excellence in the vocational track.”Why not offer any teenager who spends 2-4 years in the service of their country (doesn’t have to be military) full tuition to any university they wish?”Most teenagers don’t have the aptitude for college, and college educations aren’t an economic panacea. And there are already programs that will get a teen who does have the aptitude a tuition-free education.”In the end analysis, it is a no-brainer. It costs $100K a year to house a max security prisoner.””Yale or jail”? That’s a false dichotomy.I’m all for reducing the number of future max security prisoners, but there are a lot more cost effective ways to do that than throwing full college scholarships at any kid who spends a few years in some sort of Civilian Conservation Corps. For starters, we could enforce our current laws against illegal immigration, since the children of illegals tend to end up in prison at higher rates than other Americans. We could also provide financial incentives for parents of at-risk kids to have fewer of them.
The example you use of community colleges offering targeted job training programs is fairly widespread in the US as is state college based programs for technical training.
Much of what you say in this and subsequent posts is well received and certainly well intentioned. It must be evaluated in the context of a bit of reality.The US does not need one more English major, jobs as poets being scarce to come upon these days. The idea that “college” is the right answer for everybody is just not true.It is really a matter of focus. Community colleges and vo-tech schools which can focus training and education on those areas which can generate jobs — real jobs, not Peace Corps type jobs, are worthwhile.The harsh reality of the future is that the it will not be determined by the AVERAGE education, it will be determined by the top 5% — our top 5% v the world’s top 5%.If you are going to use government funding, then you have to ask yourself — will this program produce taxpayers or dependents?The GI Bill remains perhaps the most successful college program in history.
Yes, I agree. Something we can agree on. Our education system is falling behind and needs some pragmatic overhaul. We need our colleges aligned with our industry. If poetry isn’t our industry, that should be reflected in our nationally supported curriculums.
Interesting to read today’s New York Times piece on Europe’s most educated class, underutilized. Timing couldn’t be better for globalization. http://j.mp/her9Pz
Howard and I got our MBA’s at a quirky but cool school called Thunderbird. I loved it. They managed to stitch Globalization into every single course.Globalization is the main factor I made my career around the Internet– it makes the world a much smaller place.There are so many important sub-topics to explore around the G word. Looking forward to doing that on this blog.
Fred,I like to be an optimist also but the realist part of me looks at the real potential for globalization to tip the world in a different direction than “our direction” of equality, liberty, innovation.You say… “The US was built upon a simple promise, freedom and equality for every man and woman. And though we have had our challenges living up to that promise….we have been an icon for that promise in the world for a couple centuries.I believe Globalization, brought on by the forces of technology, will lead the rest of the world in our direction. How can it not?”I agree with your premise of the US having been mostly a shining light for a globalized future. But I am dubious, sadly, of your conclusion of the direction things will tip.The answer to your question might be….We could tip the other way because there are WAY more people who live in societies/cultures where our American style ideals of liberty, equality, risk-taking, individualism and climbing the ladder of social status are not only NOT valued, but are actively suppressed. I’m not talking just about the countries with oppressive governments like Iran, etc. I’m talking about the countries where the majority underlying culture is still very largely one of submitting to one’s “fate of birth”. (India, China, etc.) Even western europeans have a fairly fatalistic view of social standing and social climbing.For every newly globalized Chinese entrepreneur in Shanghai/Beijing and for every Indian entrepreneur in Bangalore/Mumbai there are literally millions of Chinese/Indian people from low status families with zero chance to get the education needed to participate in an optimists vision of globalization. They simply have no “ladder” to climb the way we in the US have had in the past, and still have to a degree.I say “in the past” because with our accelerating economic and achievement separation in the US between people who can and can’t afford quality grade school and college educations, we are headed in the wrong direction ourselves. Our US “ladder” that allowed the lowliest poor to rise to the highest rank of wealth and social status, that was once the envy of the world, is rotting out at the bottom in a toxic pool of human greed.The top 1% of US citizens by wealth have more net worth than the bottom 90 percent. This is the greatest separation of wealth since the 1920s.The reality is that despite the many positives of globalization the downside of globalization is it allows the most wealthy in the US to accelerate their accumulation of wealth to a point of no return where the US middle class standard of living will drop off a cliff.Wealthy people in every age of history become convinced they should hold and wield all wealth. But they are corrupted by wealth to the point they believe their wealth makes them separate and better from the middle and lower classes and that the poor deserve to be poor. When they are questioned for accumulating ever more immense wealth they argue they can be trusted, even to the point of being chosen by God to be wealthy, to use their growing wealth to sustain a middle class standard of living that allows people to move from being poor to middle class to wealthy via hard work.But they always fail to do that due to the fact that they are not in fact more moral or more compassionate as a result of their wealth. Quite the opposite, they become less moral and less compassionate. Money, for humans, really is the root of all evil.This state is always a precursor to revolution by a disaffected and “left behind” middle class that eventually cannot find jobs to feed and cloth and house their families. This becomes a powder-keg situation ripe for violence.So, the point…The ideal and the vision of a utopian globalized world is a wonderful and fantastic goal that I support.But the devil in getting there is in the details. The key detail is if the American and European middle class cannot find good paying jobs that allow them to raise well adjusted and educated children then our newly global human society will collapse in a way so violent and destructive as to make all past human societal collapses look tame.Today according to WoldHunger.Org there are 925 million hungry humans on the planet… http://www.worldhunger.org/…That’s up from 775 Million in 1995. From 1969 to 1995 the hunger number was gradually getting smaller despite the growth in total global population. If hunger invades the first world economies to a significant degree you will see revolution, war and collapse.The growth in the American middle class standard of living from 1950 to 2000 was the most important force in the dynamic of reduced hunger worldwide. In effect, the American Middle class is the center tent-pole that is the critical element of our current global economy “Big top” tent.But for the past 20 years the wealthy in the US started actively chopping away at that tentpole by offshoring both their accumulated personal wealth and also American middle class jobs. That pole was very thick and strong so only now are we seeing it wobble and creak.If that pole cracks the entire tent that is this nascent global economy will collapse. It almost did in 2008 except the US government pumped air into the tent lightening the load on the tentpole for a while. But that ability to pump in air, (printing money), can only last so long.We have to recreate the tentpole of middle class jobs in the US that allow us to recover our education prowess for our youth so we can again have the most educated and productive workforce on the planet. Without that the global economy will not be sustainable.China and India are currently in no shape to replace the US middle class as an economic tentpole able to sustain overall global growth. Both of their nascent first world economies are fully dependent on the combination of US and European economies. The best they could do if the US economy collapses is to try and close their doors and try and keep their national tent up and stable. But neither would be capable of succeeding even at that.Without the net wealth influx from the US and Europe they simply cant support their massive populations and they would both succumb to food riots.The fact is the US is the center tentpole in this global economy. Without a stable, educated and actively spending US middle class we will go rapidly backward from globalization into regional wars over resources that could get very ugly, very quickly.We need a few simple things to solve this problem.1. An open door immigration policy that sorts for the best and brightest from all countries. (If you get accepted by a US university you get a visa that converts to a green card immediately upon graduation from an accredited 4-year program at a US university.)2. Significant regulation of US companies with yearly revenues larger than $10M that requires them to hire US-based workers or pay taxes on offshore workers that make the offshore workers as expensive as US based workers.3. A “Manhattan Project on Public Education” that invests $100B/year into remaking US public schools into top performing public schools on the planet and makes a university education free to those who sustain their grades.4. A “Manhattan Project on renewable energy technologies” that invests $100B/year on developing green energy technologies and industries that cut our use of fossil fuels in half by 2025.5. A new “Civilian Conservation Corp” program funded at $100B/year that can re-employ the US unemployed in jobs ranging from manual labor on public works projects up to high tech work needed to support the education and energy projects.The $300B a year spent will be offset partially by taxes paid by the re-employed.Follow this recipe for 10 years and you’ll see a very rapid turnaround in the direction we are currently tipping.This is not rocket science. The above five priorities would completely right the US economy and solve all the core problems we face. It will allow the global economy to continue developing in a way that allows society to avoid a massive societal collapse that, if allowed to happen, could mean the death of up to half the human race by 2050.The time for focus and solutions is NOW.Roger
“An open door immigration policy that sorts for the best and brightest from all countries.”What about the ‘worst and the dimmest’? Do you plan to exclude them, or keep the door open for everyone? And how will flooding America with more job seekers (most of these folks will be job seekers and not creators, right?) affect unemployment? Hint: supply, demand.”Significant regulation of US companies with yearly revenues larger than $10M that requires them to hire US-based workers or pay taxes on offshore workers that make the offshore workers as expensive as US based workers.”What about U.S. headquartered companies with operations in other countries — does this mean that YUM brands needs to pay fast food employees in China what they pay their workers here?”A “Manhattan Project on Public Education”OK.”A “Manhattan Project on renewable energy technologies”How about whale oil? That’s a renewable energy technology, no?”This is not rocket science.”That sentence, after you call for two “Manhattan Projects”, is priceless.
@Rick – You are so correct regarding the production of “things” and the importance of education. The US is falling dangerously behind in those areas. The current generation will probably be the first to have a lesser standard of living than their parents. This trend will become more difficult to reverse as time passes.
“world is moving fast and the US certainly does not have any kind of lock on innovation.”Did you notice that MongoDB was created by an American company based outta nyc? and what about google trends? was that developed in the ukraine? that is what you call innovation. far more advanced than what your typical “web developers” can crank out.
we are investors in the company that created mongoDB so i know verywell where it was createdwe have a lot of innovation here but not a lock on it
One correction Re: “The US was built upon a simple promise, freedom and equality for every man and woman” Wrong. The simple promise is freedom for all and “equal treatment under the law (translating to equal natural rights)”. Not guaranteed equality. Otherwise a good post.
But where does all this technology create greater ‘net value’ instead of just shifting jobs overseas? Clearly, that a guy in India can do my taxes now is maybe a good thing, but a really good thing?The industrial revolution made it so that we could take oil, put it in a machine, and do the work of 1000 men.Does globalization create that kind of value? Or is mostly about spreading things around?The side effect of empowering a few billion people with knowledge – so that even if their actions are not related to ours, they can still enhance themselves is great…But I don’t see how globalization is such a ‘win win’ as we think it is, and it has so many drawbacks.
the economy is not a zero sum game. a rising tide lifts all boats
The economy certainly isn’t zero sum, but it’s not always a win-win proposition either. Shortly before he passed away, one of the leading advocates of globalization, the Nobel Laureate economist Paul Samuelson (uncle of Larry Summers, incidentally) acknowledged this:”Free trade is not always a win-win situation,” Samuelson concludes. It is particularly a problem, he says, in a world where large countries with far lower wages, such as India and China, are increasingly able to make almost any product or offer almost any service performed in the United States.If we trade freely with them, then the powerful drag of their far lower wages will begin dragging down our average wages. Our economy may still grow, he calculates, but at a lower rate than it otherwise would have.
Capitalism is wrong
I wish a vacation like you just had upon many Americans, I think inspired this great post.
Amazing discussion on a topic that will stay hot because it is generational.
Fred acting “moderator” – as in, he does read every single comment – really seems to add to the quality of discussions here at this blog. This topic and the resultant flareup reminded me of that. Keep them coming, people.
Interesting post, as usual. This is the first time I am commenting here. Most likely that you are discussing something which relates to me, my country Pakistan.Pakistan is usually in headlines due to political turmoil but Fred, talent is Pakistan is abundant and is not less capable than any other country. Take a look at this post:http://kadnan.com/blog/2007…What is your advise for developers/entrepreneurs in Pakistan? I myself have worked as a developer. I have fewer ideas which I want to work. I am already working on an app for creating social layer around Google Search. Now since I *dream* that Google acquire it and give me money, how someone out of US can do things like people do in Valley? Sometimes I feel that fewer apps get fame just because they were started by people in Valley otherwise they don’t worth it. Just because I and others are not in valley, does this mean we can’t make money and be successful?
see if you can get seedcamp to do a mini seedcamp in Islamabad
hey Fred,Thanks for your response. Can you please elaborate what do you mean by that?
check out seedcamp, particularly their mini seedcampshttp://www.seedcamp.com/
Political things aside, American companies moved to China/India strictly for labor-arbitrage reasons. These Low-Cost Countries offer a global marketing advantage to US companies who maintain their profit margins. Last quarter was a record in US corporate profits.But the US is passing the lower levels parts of their value chain to these countries, not the upper levels of innovation. Take even Apple. There is no doubt where innovation and design is taking place. But their products are manufactured in Asia. As a result, the US keeps moving up in terms of value and wealth creation, and they have the control levers to other parts of the world. That will continue for the foreseable future.
good points. more generally, it is an arbitrage. an arbitrage that is not kind to too many workers in us right now, especially the old middle class. as fred says, now we need to do something about it as it is not changing.
There continues to be a huge difference between the way business is conducted in a global marketplace and how nations are governed and relate to each other.China is a dangerously totalitarian regime which has decided some form of capitalism serves its own internal objectives — putting its people to work. This is a purely pragmatic compromise and one that the US leadership could learn from.Americans and American companies, on the other hand, want the benefit of cheap Chinese labor and materials to produce products for the American marketplace — not truly global capitalism, just accessing cheap labor.Illegally cheap labor in most instances given comparable American regulations for the inclusion of labor into a finished product.While Apple and others are willing — no, I guess “enthusiastic” would be a better word — to have their products made in China, they are not willing to do without American securities laws, stock exchanges, Courts, taxes, contract law, banking laws, intellectual property protections, physical safety, criminal laws and other financial infrastructure that enables them to protect their wealth in America.There is something patently unfair about having products made FOR America and enjoying all the American wealth protections and doing it while employing labor at rates and rules which would not pass muster in the US.American politicians are responsible for these abuses and should be held to task on these matters. If you export all the good jobs and still allow access to the most powerful market in the world — that would be the US — the outcome is inevitable.
They can’t peg to the dollar forever, and we’re efectively devaluing that dollar (and its working when it comes to the economy). The WSJ reports that there are some economists talking about that as China’s currency rises, we’ll actually go back to out manufacturing and out saving them.That, and I still deeply love this one podcast by planet money (which I wish more people would listen to: they are truly among the best educators of economic theory out there as many issues arise)http://www.npr.org/blogs/mo…
great post, spot on.In our rush to compete, we’ve really lost focus of strategic (long-term) national interests.
I hate seeing it, so I’m stating a correction.The US has never been, never will be, and as the founding fathers pointed out should not even play with the idea of a democracy. The US is a Republic, plain and simple. Always has been, probably won’t be too much longer, if one can consider it that.
hate to be cynical here, sure Apple and its shareholders are wealthy, but Apple employs only 40K people, but most of the manufacturing jobs shift to China. US is a large country you know, 300 million +, we need a thriving middle class, not just a bunch of very very rich tiny upper class.Mid level jobs are shifting to India, China, Russia or whatever.
It’s unfortunate that Apple can’t hire 300 million people.
I think there is interesting movement at the “lower end” of the value chain too (ala Cristensen’s Innovator’s dilemma ). I see a lot of DIY and local food here in the Portland area. It seems as though a bunch of this innovation involves both low and high tech and often uses non-tradable skills.We have so many brewery’s, farmers markets and buyers clubs ..its very encouraging.
William, you just described the first step in the demise of the integrated steel mills in the Innovator’s Dilemma, except on a national level. It might take a generation before these foreign providers start their drive towards the northeast quadrant of the value chain, but I doubt it.
“But the US is passing the lower levels parts of their value chain to these countries, not the upper levels of innovation.”That’s not quite true anymore: “China Drawing High-Tech Research From U.S”.In general, it’s often helpful to put R&D facilities near manufacturing facilities. Apple may be more of the exception here than the rule. If we’re going to be sanguine about the offshoring of American manufacturing plants, we shouldn’t be shocked when R&D facilities follow them overseas.
Absolutely and patently untrue that labor cost *alone* was the reason for moving manufacturing to other parts of the world. Relaxed regulatory environments, rigidity of work rules in many unionized industries, the desire to be perceived as a “local” supplier to nations where there is a huge growth in consumerism/consumption, taxation advantages, and *MANY* other factors weighed into the exodus of production activities to other parts of the globe.
Google is more profitable than Apple actually, on a per employee basis, and they have half of Apple’s employees.Globalization benefits more than it harms. It’s a transitional thing for everybody involved. If you don’t recognize what’s changing with it, you’ll be stuck analyzing the past.As for the middle class, I’m not sure I totally understand how globalization hurts it. Big Co’s and growing start-ups alike create new jobs which contribute to wealth creation in all social levels.
One of the great canards in the political debate today is the myth that the middle class is not thriving in America today.What is changing is the definition of the middle class.When President Obama makes war against those who make $2-250,000 as the “rich” he is simply showing his ignorance of what it costs to live and raise a family in urban America.Let me make a spirited defense of the rich — in particular those who come to work early, stay late and take risks with their OWN capital. They deserve their success because they have earned it.It is unworthy of our nation to implement confiscatory tax policies and policies which seek to redistribute the wealth of “better” folks. Success is typically earned through hard work and the idea that a successful person is somehow responsible for one who is either less motivated, less interested or less capable is sheer nonsense.The reason we have no real job creation in America today is because of the odious and incipient class warfare unleashed by the Obama administration. If you are sick, you do not de-motivate the doctor — not if you REALLY want to get better.Of course, NOW President Obama is truly focused on jobs and not the nonsense of such ridiculous political initiatives such as DADT. How many jobs did DADT create? None.
yupwe are seeing a lot of that in NYC too and we (gotham gal and I) areselectively investing our own capital in this movement
Yes, but they aren’t reaching the poorer, walmartized ends of the US. And that is where the problem starts.
Thats totally awesome Fred!
The New York Times had an interesting article about the burgeoning culinary/entrepreneurial movement in Brooklyn back in ’09. I blogged about it at the time, “Lessons from Brooklyn’s New Economy”.
WalMart is delivering a more affordable life to everyone and should not be demonized. I do not embrace their overseas production but I do embrace their value proposition.
Thats a really good point – and really serious issue. The the sea change in mentality about local production, food, diy and quality is sending a message to the big corps and spreading.Question though, why do you think the problem starts in the poorer, walmartized ends of the US? ..especially when the solutions appear to be sprouting up elsewhere.
Interestingly enough, with all that has gone on, with all the chatter about trading oil in some basket of currencies, with the nonsense that Russia & China are going to settle accounts in their own currencies [LOL, which truly has the possibility of leading to war] — the dollar is still THE currency in which the world measures value.America is still THE market for the world.We need to stop beating ourselves up and get back in the game. We ARE the United States of America and we ARE running the world and underwriting its global safety.Stop being embarrassed to be an American.
I actually like being an American. And under certain circumstances, itmakes sense to devalue the dollar. It helps manufacturers export! (Thoughit makes importing harder)
I’m American and proud of it but I’m embarrassed by the naivety of some of my fellow Americans.Posts like this one by JLM make me cringe.It fails to recognize how much ownership of the country moved offshore during the Bush administration. Check out the national debt… it’s a matter of record.It fails to recognize how much the value of the US dollar is propped up by China. The tide has already changed… India-China will be the biggest market within a couple of decades… best to start preparing for that reality now.It fails to recognize that the concept of military domination of any other first world nation is an obsolete concept. America is WAY overspending on the military. Our oil wars should be funded by the oil companies.It fails to recognize that our underwriting of global safety only happens when it’s in our best interest, i.e., South Korea and Iraq, NOT Rwanda, Darfur, Ivory Coast, etc., etc., etc., …. America isn’t as noble as you portray. I’m not saying that’s right or wrong, but let’s be realistic.I’m a conservative guy… I’m not a liberal at all except when it comes to human rights. I get passionate when I see blind idealism as in this post.
not what I meant, I apologize.yes they do help people live a more affordable life (up there with cosco, ifone knows how to buy from cosco correctly)It is more that while locally sourced organic food is great, the reality isthat it is not cheap (yet) and it isn’t hitting the vast majority of areasthat Walmart hits. To have the vast majority of americans to have locallyproduced organic product, one would have to figure out a way to do whatWalmart did for a vast amount of goods.In this case, I like walmart’s ideas. I don’t want to have very expensivelocally produced food. It makes food much much less affordable.
Yeah, better to create, highlight and seek out alternatives than demonize.Beer and local produce seem like interesting case studies in quality and local production that beat low cost non local alternatives.Speaking of quality – my wife recently received a family heirloom – a singer sewing machine that we think was made in the late 1860s. My wife remembers her grandmother using it back in the 70s and it still works today!I wonder if I’ve ever touched a more “green” piece of machinery 🙂
“One of the great canards in the political debate today is the myth that the middle class is not thriving in America today.What is changing is the definition of the middle class.When President Obama makes war against those who make $2-250,000 as the “rich” he is simply showing his ignorance of what it costs to live and raise a family in urban America.”Jeff,Real median income in the U.S. was $49,777 in 2009, 5% lower than it was in 1999 (See p.15 of the latest census PDF on this). That the middle class isn’t thriving in America is no canard. That $200k-$250k doesn’t qualify one as “rich” in the most expensive cities in America is true, but a separate issue.Only ~2% of Americans earn $250k or more; by definition, the top 2% can’t be the middle. What muddies the waters here is that there’s such a long tail to the right: one word (“rich”) can’t accurately characterize someone making $250k per year and Bill Gates. I’m not defending Obama’s class warfare rhetoric, which is unhelpful, just pointing out that you can’t redefine the middle class as those earning $250k when 98% of Americans make less than that.
It seems to me that these R&D transfers are not widespread, and still- they are owned by US firms, so not same as native R&D.
Whether or not they are owned by U.S.-headquartered firms, the jobs are in China, not the U.S. The salient point is that American jobs at the upper levels of innovation are no longer safe from offshoring.As for native R&D, that brings up another issue: increasingly, China has demanded foreign companies give up their IP if they want to land contracts in China. Then China takes that IP and competes with them, free-riding on foreign R&D.
If your population is not viscerally engaged in both R&D and production activities your national skill set, self sufficiency and security are all vastly diminished.Who really owns the skill sets?Chairman Mao was wrong!Power does not come out of the barrel of a gun.Power come out of productive capacity.
As I said earlier, the good parts of globalization are much greater than the bad parts. We’ll work through the bad stuff eventually.
When it comes to economic matters, China is still a lawless thugocracy posing as a civilized nation.Capitalism is only a convenient tool to achieve the totalitarian regime’s objectives — the employment of its population being the most important — which are not in conflict with its governing philosophy.When a country does not recognize the worth and rights of its people, how could it possibly recognize the rights of a corporation.Espionage of all types — economic and otherwise — is a Chinese value.
Exactly.Charlie,I’m not sure if you’ve seen this yet (and don’t remember if I mentioned it to you before), but it’s worth reading Thomas Geoghegan on how Germany has maintained a larger percentage of its workers in manufacturing, without engaging in a race to the bottom on wages. Excerpt:Higher labor costs can make a country more, not less, competitive. In many ways, the United States and the UK got out of manufacturing because their labor costs were too low. I have spent my life watching plants close in Milwaukee and Waukegan, where skilled labor was paid $26 an hour, only to reopen in Georgia and North Carolina, where it was paid $8 an hour. While still fighting over severance two years later, we get the news: The company is bankrupt. The products it makes so cheaply are now crap.In the United States, our elite, scoffing, says that there is just not enough labor-market flexibility in a country like Germany to allow it to adapt to globalization as we do. But it’s precisely because of our flexibility that we can’t compete. What the laws manage to do in Germany is to keep people together and to hold onto their skills in groups. Co-determination and works councils — in other words, worker control — keep people in groups, rubbing elbows with each other, and all this rubbing of elbows helps build up human capital.[…]German worker control contributes to a group interaction that over time not only builds up but also protects a certain amount of human capital, especially in engineering and quality control. This kind of knowledge is not just individual but group knowledge. It’s the kind of group knowledge that our efficient, “flexible” labor markets so readily break up and disperse. It’s our flexible labor markets that make it so hard for the United States and the UK to compete. We spend vastly more on basic research than the Germans do — U.S. companies are unrivaled. We spend far more on higher education. But with our flexible labor markets, we’re unable to capitalize on this research and education.
Oh yes! Our new network economy, global scale, organic creativity, a revolutionary technology platform on which to play out the same tired old themes of political divide and conquer.It will take some very revolutionary political social graph topographies to solve our collective global economic prisoners dilemma. Social graphs technologies clever enough to organically redistribute political power and banking control structures.Are we there yet or am I turning blue?
It is not just wealth creation but the stabilizing effect of well distributed wealth, power, education and control that is the key issue here.Globalization does no come with a Midas muffler guaranty of success.Successful globalization is inherently dependent on a complex web of interdependencies. The key word being complex. A mandatory attribute of all stable complex systems is distributed redundancy of function. This is a core statistical strategy for dealing with the inevitable system failures endemic to complexity.The assumption that our old linear political, industrial and economic institution and behaviors constitute an adequate set of prerequisite building blocks on which to erect this revolutionary global network economy of scale and organic complexity seems a little premature.
Google may be more profitable (I doubt it, but I have not checked) but if so, it’s partly because Apple pays US income tax and Google does not. Using foreign tax loopholes, Google pays low single digit tax in this country. People need to know this and object. Google is not giving back – Google is screwing America.
Ok, I should have said “primarily” instead of strictly. When IBM is the largest tech employer in India, it isn’t because they are serving the local market,- it’s because they are serving global markets from India. Regulatory/mandatory localizations are typically secondary factors. Localization/Regulatory depicts internationalization more than globalization.
I’m not sure we have to solve the scale problem – at least in the same way that walmart does.A lot of the folks i know that buy local, expensive produce and buy less of the other stuff we often think we need these days.They’ve basically scaled back their lifestyles and will slowly scale back up with the different mindset regarding what they want/need.
Wow. Interesting discussion in the comments here. Primarily from a protectionist US perspective though. I think some of you should read Naisbitt or Mahbubani. Or Kennedy for the really big historic perspective.Simply put: The U.S. (or the West) forever dominating the world is really not the natural market economy global shift…Food for thought.http://english.cntv.cn/prog…
I find nothing to be bashful or embarrassed about in being a bit “protectionist” as it relates to US trade and economic interests. We are perfectly entitled to protect the largest market in the world. Why not?The US actually provides unfettered access to its marketplace while other countries simply do not return the favor. Is that fair?I am also hugely critical of American companies who want access to that same marketplace but feel no obligation to employ Americans.There is nothing wrong with free trade as long as it is also fair trade.American blood and treasure has insured the safety of the world against unspeakable evil for a century. When the rest of the world spends the same amount of money as the US on international security, then we can discuss global economic issues on an even basis.
The population growth of the US in the period you indicate suggests that more folks are above the median because there are more folks.I did not intend to suggest that $2-240K was middle class but rather that it was not, as you correctly indicated, rich.
It is an “all of the above” answer.
Pretty much any strategy based on local beers is going to get my support. LOL
There is a huge difference between “devaluing” the dollar — which implies an active campaign — versus allowing the dollar to find its own footing in the world currency markets.While dollar exchange rates are fairly rigorously set and tested, the PPP (purchasing power parity) approach shows time and again that the dollar is really undervalued.
Agreed & that clears it up.
while it is probably an undervalued curency in general – I still think theQE program is purposely “devaluing” the dollar.
That’s definitely an option, however, getting a lot of this food out toplaces still creates questions of scale.
The US marketplace is hardly ‘unfettered’. There are many barriers to doing business in the US. The US market is only unfettered when the US market is hungry for what you’re selling… and who’s issue is that?I do agree with your criticism of American companies who exploit the Global marketplace at the expense of the American people and Google is near the top of my list of companies in that regard. Google would not exist if it weren’t for the advantages they reap from the American market and yet they avoid paying income tax by using foreign loopholes. Google can afford to pay their fair share. I think they are traitorous for avoiding their contribution.As far as ‘American blood and treasure goes’, I think America can hold its head high for what it has done for the world in the past century. But again, the record is not as shiny as many would believe. Where was America in World War II pre-Pearl Harbor when Europe was being subjugated by Hitler’s Germany? Turning a blind eye? Even little Canada was fully engaged for years before America. What was America doing when the Soviets were trying to clean up Afghanistan? Arming the Taliban! And of course, George W Bush has greatly tarnished America’s reputation abroad by fighting Exxon-Mobile’s war for them in Iraq under the guise of anti-terrorism. Total sham. And if you’re about to defend the action by suggesting that Saddam needed to be removed, please start by explaining why the much greater genocide in Rwanda and Darfur wasn’t as important. Let me give you a hint: no oil.So… let’s all take our rose-colored glasses off and recognize that global markets are here to stay and that geopolitical boundaries are eroding. Denial won’t make it so. The greatest contribution of the Internet to mankind may be its unstoppable unification features.
Unfettered access?? Check the U.S. / Japan constant trade wars in the last couple of decades for access to the U.S. semiconductor market for just one exemple of a reality check.. The U.S. is no better at free trade than anyone else.”Insuring safety of the world against unspeakable evil” is the job of the U.N. and not one, single military aggressive nation acting primarily based upon its own national interests and military power.
“The population growth of the US in the period you indicate suggests that more folks are above the median because there are more folks.”There are also more folks below the median: by definition, half of those additional folks are below the median.
QE is arguably a program for domestic consumption and impact with a few intended external results and some unintended consequences. The impact on the dollar’s valuation arguably falls under the column titled — unintended consequences.
The value of the dollar is hardly propped up by China — a country who generates its dollars by unfettered access to the American market, whose appetite for dollar denominated oil is almost unquenchable and whose currency itself is of questionable quality.What would you have China hold other than dollars? What?The Chinese have no other choice than to hold dollars.The fact that they hold their dollars in American treasuries is simply common sense on THEIR part and while it lends stability to the dollar, it does not do it by “propping it up” rather it is a pragmatic and reasonable decision given their economic realities.While it creates for an interesting story line, it obscures a pragmatic reality — the Chinese are fully invested in America’s success.India and China should become huge markets and they will. Remember there are 1.3B Chinese and 1.2B Indians while the US is 311MM Americans. It is trite to keep repeating the obvious — that 2.5B Chinese and Indians will ultimately represent a larger market than 311MM Americans. That’s just math.It is important to note that much of this population growth has happened since the 1960s and these countries are like gangly colts trying their legs out. They are also poor countries with many regional economies rather than a unified and centrally focused economy.The American miracle is productivity and the industries which it dominates. A “small” country like America is the world’s largest marketplace because of its wealth, attendant buying power and its productivity.You will get no argument from me that the military could reduce its spending dramatically. Having been a professional soldier and having spent a bit of time around the Pentagon, I can assure you that Eisenhower was right. Beware the military – industrial complex. It is the weapons systems and their development and procurement which is where the money is going.We are developing weapon systems able to deter threats which do not even exist yet.Having said that — beware China’s military growth. Because of the comparative low cost of everything comparable in the Chinese defense budget, a fairly small expenditure in their military budget is comparable to a much, much greater expenditure in the US budget.China is developing a satellite destruction program par excellence, silent submarines from a well protected sub base, an aircraft carrier, an enormous cyber warfare capability and MRV ICBM capabilities. These are not defensive actions.China is a despotic regime and despots ultimately use all of their toys. This was the mistake w/ Saddam Hussein, letting a shithead have 6K tanks.
What planet are you on?One has only to review the history of foreign automobiles in the US to see that the US is so unbiased toward foreign access to our markets that we allowed that access to literally destroy our domestic automobile industry. Or did you miss the GM debacle?Isn’t it fair to say that the Japan v US technology wars have a bit more to say about closed access to Japan than to the US? Even WalMart has had a doosey of a time getting into Japan.Insuring world peace, the job of the UN? LOLWhat was the last war that the UN undertook without being a proxy for the US? Or won? Or did not employ the US military as its field force?The UN is a flight of fancy which has never served the interests of the world when it comes to ensuring the world’s safety from evil. It has given unwashed despots a seat at the table of democratic countries and allowed them to be taken more seriouslly at the UN than any other place in the world including their own countries.You want the UN to drill a water well in Africa — hell, yes. They are your boy!The UN is a joke. If you were in Haiti right now, would you want help from the UN or the US? Your pick, my friend.
That’s the thing, I’m definitely less sure about if it just about ourdomestic consumption. We’ve been complaining so long about theYuan/Remimbi, it sort of makes sense that we may be sneakily trying to playtheir tricks….Plus, in an odd sort of way, readjusting trade balances would affect ourconsumption to have us and others buy more of our own stuff….
If China didn’t hold US dollars, the dollar would collapse. To me, that means propping up the US Dollar. I don’t debate that it’s a symbiotic relationship because (at the moment) China’s industrial machine would collapse without access to the US market. Doesn’t it remind you of Europe and the USA during the last century?We use our military to protect our interests abroad, not to defend ourselves. China is gearing up for the same mission, in my opinion. China is going to need a lot of oil in the next few decades and I’m sure they’ve learned a lot from watching our aggressive plays in the Middle East. The next time we think we need to invade a country on behalf of Exxon, China might be there to say “not so fast, we have leases there”. Or if we (or the Russians) start to get possessive about oil and water rights in the Arctic, China might be there to say “Hold on, we’ve negotiated deals with Canada. That’s our supply you’re messing with.”In addition to offshore activity, I also think China has some major internal challenges to deal with. They have a billion people who want to share in the prosperity of the country but aren’t yet. That can lead to some serious unrest and a need for some serious domestic control.China is not at all what you perceive it to be, IMHO. It is a far more complex and interesting puzzle.
Your provide an interesting and thoughtful line of discussion as it pertains to the dollar and China but I think the entire discussion devolves to simple semantics.If you suggest that China has an alternative other than to “hold” the dollar, then sure China is “propping up the dollar”. Reality suggests that China is neither that charitable nor is their any philanthropic motivation at work here. It is simple business.China wants to hold their sovereign wealth in the best available currency and the dollar fits that description while also providing the funds unique to the commerce of oil. The fact that it is derived, in great part, by trade with the US is just another simple reality.It all begs the most important question — if not the dollar, then what? The Swiss franc? Gold? What currency is large enough to “float” these reserves?Whatever currency is selected — assuming it is not the dollar — is going to be subjected to currency and exchange risk when converted into dollars to buy oil. Oil trades in dollars.Remember also that the Chinese currency is not really a currency with a world market. It is not only suspect from an exchange perspective but also because of sovereign risk.There is no altruism at work here.You seem to think that the notion of protecting “our interests abroad” is not the same thing as defending American interests. For goodness sake, what would you have the US do, only unleash military force when the bad guys attack the US mainland? Of course, we are going to use US military power to protect our economic interests.The Chinese inroads into S America and Mexico bear watching.During the last century, American blood and treasure twice paid the mortgage on European foolishness — their inability to get along w/ each other and the unspeakable evil of despotism allowed to grow unchecked.Our interests in the Middle East are only caused by the inability of politicians of both parties to wean us from a dangerous and expensive habit — importing oil from folks who are at best neutral and at worst our most committed enemies.When you fund tyrants, directly or indirectly, they can afford their worst habits and ideas.
And here’s my correction of your comment: the U.S. is a representative democracy. In almost any discussion of politics, it is understood implicitly that democracy refers to representative democracy (exceptions are when the discussion is about ancient Athens, or some small Swiss canton).Since a republic is a type of representative democracy, and since the rest of us understand that democracy is a shorthand for representative democracy in most political discussions, suggesting that republic is an antonym of [representative] democracy is obtuse.