Thursday, October 14, 2010

Is Globalization Good For America? A Review of “The World is Flat” by Thomas Friedman

Globalization has its advantages and disadvantages. While American consumers can enjoy cheaper products and services thanks to manufacturing plants in China and call centers in India, many American workers have lost their jobs. What was an economic change affecting mainly manufacturing workers in the 1980’s and 1990’s has in the last decade, and especially since the Great Recession began, been transformed into a job-destroying mechanism for workers at all levels of ability, in many different fields. Secretaries, computer programmers, and even lawyers have seen their jobs outsourced to India and other countries. Does globalization benefit the country as a whole?

Thomas L. Friedman writes about globalization in his 2005 book The World is Flat: A Brief History of the Twenty-First Century. I decided to read this book because I have read many New York Times opinion columns by the author, and found him to have an interesting perspective on the economy, politics, global warming, and the Middle East. Friedman is a journalist, and traveled extensively to research this book, interviewing business executives from around the world, from Bill Gates to Vivek Paul (president of the Indian outsourcing company Wipro). The book contains no footnotes, endnotes, or bibliography. Most of the material comes from Friedman’s observations and interviews.

Being a computer programmer, I have seen firsthand that many IT jobs have been shipped to India. I was fascinated by Friedman’s account of the history of this outsourcing process. It began with India’s opening up of its previously socialist economy in the early 1990’s, a political change influenced by the fall of the Berlin Wall and the collapse of the former Soviet Union. The computer, telecommunication, and Internet revolutions helped create a platform for globalization of IT. During the late 1990’s technology bubble, companies overinvested in fiber optic networks. The dotcom bust in the early 2000’s bankrupted many companies, but brought down the price of data and phone transmission. These technological and economic changes made India “the luckiest country in the history of the late twentieth century” (p. 103). Finding themselves with cheap fiber optic networks just waiting to be used, Indian entrepreneurs utilized homegrown engineering, computer science, and software talent to outsource American jobs. The Y2K computer crisis that occurred at the turn of the twenty-first century gave Indian outsourcing companies a big project to work on, and programmers there did much of the Y2K upgrade work. E-commerce was another important technology outsourced to India, and pretty soon it would be hard to find a technology or software product in which Indian companies didn’t have a footprint.

The title of the book reflects how technology, business process, economic and political changes have “flattened the world,” i.e. removed barriers that prevented individuals or countries from competing. The above paragraph shows how India benefited from these changes. China, Russia, Eastern Europe, and some countries in Latin America and Asia also benefited. Certain countries, such as many in the Middle East and Africa, have not benefited. Friedman talks about the reasons why Arab-Muslim countries have been left behind in the global flattening. In his view, anger and frustration at the Israeli occupation of Palestine, at the Arab-Muslims having to live under authoritarian governments, and at a decadent and promiscuous West has helped promote religious extremists such as members of al-Qaeda. He calls al-Qaeda terrorists “Islamo-Leninists.” Like Lenin, they have a utopian-totalitarian worldview, one in which their acts of terrorism against the West mobilize and energize the Muslim masses to rise up against their corrupt rulers. Unlike Lenin, however, they want to establish an Islamic state that spans the territory of the former Muslim empire. Desiring life and government to return to the way it was in the Middle Ages is not an attitude conducive to participating in the global economy. Friedman offers a counterexample of Arab entrepreneur Fadi Ghandour, cofounder and CEO of Aramex, a package delivery service company, the only Arab company listed on the Nasdaq. If more Arabs would desire to be like Ghandour, and fewer like bin Laden, the Middle East would be part of the flat world.

Friedman believes in free trade, the economic basis for globalization. Trying to protect certain jobs or industries, while helping one group of people, is not going to help the country as a whole. The wealth of examples he provides of how globally integrated our economy has become is good evidence in support of his view. An example is his description of how his Dell computer was assembled using a global supply chain. His order was emailed to a Dell notebook factory in Malaysia. The notebook was codesigned in Texas and Taiwan. The Intel microprocessor came from a factory either in the Philippines, Costa Rica, Malaysia, or China. The memory came from a factory in Korea, Taiwan, Germany, or Japan. The motherboard came from a factory in China or Taiwan. The hard drive came from a factory in Singapore, Thailand, or the Philippines. Note that the only thing from this list made in America was the notebook design, and it was only codesigned here. Most of the factories are in Asia.

While there may be transition phases in certain fields, in which wages go down, and people lose their jobs, there’s no reason to believe that this downward trend will be permanent. Not everything that can be invented has been invented. New technologies, new types of jobs will replace the ones lost. A good example is the computer/IT/Internet revolution. Fifty years ago, who could have imagined how the computer revolution would take place, how many jobs would be created, and how our lives would change? There will likely be new technologies that come into existence in the future, that no one can imagine now. These technologies will produce new jobs and new companies, just as the computer revolution produced Microsoft, Apple, and Google.

Friedman is sensitive to the plight of workers who become unemployed due to globalization. He would like to see instead of lifetime employment, lifetime employability. Government and business can both help in making a worker employable for his lifetime. Education is the key to this. Tertiary education should be government-subsidized for at least two years, whether at a state university, a community college, or technical school. Employers should help train and cross-train employees so that if their job is outsourced, they have the skills necessary to get another job.

Friedman talks about social problems in America that will make the country less competitive down the road, something he calls “a quiet crisis.” He wrote the book before the Great Recession began. Now, this crisis is becoming noisier than ever. One problem is that fewer Americans are becoming scientists and engineers, at a time when the number of jobs requiring science and engineering training continues to grow. A National Science Board report in 2004 notes that science and engineering degrees represent 60% of all bachelor’s degrees in China, 33% in South Korea, 41% in Taiwan, but only 31% in the United States. The number of American college-age students who receive science degrees has fallen to seventeenth in the world, when we ranked third 30 years ago. Immigrants have filled in some of this gap. 60% of the nation’s top science students and 65% of the top mathematics students are children of recent immigrants.

Another problem is that Americans have a sense of advantage and entitlement that makes them lazier than people who grow up in less affluent countries and homes. It takes a sense of self-discipline, delayed gratification, and long-term thinking to pursue higher education and achieve success in an intellectually-demanding career. Americans seem to have lost the ability to defer gratification and look to the long-term. The best example is the debt-fueled consumption of the recent decades, financed in large part by the disciplined and motivated Chinese. The Great Recession has forced many an American to “wake up” to the new reality, and redirect their lives.

Friedman doesn’t mention a related problem that seems to afflict Americans more than anyone else: the drug epidemic. Nothing represents a national failure to delay gratification more than widespread drug abuse and addiction. The illegal drugs like cocaine, heroin, pot, and ecstasy give the user an immediate high, they feel good for a short time, but then pretty soon they feel miserable until their next fix. The legal psychotropic ones like antidepressants, antipsychotics, benzodiazepines and analgesics help people suffering from a variety of disorders to temporarily feel better. But they don’t provide any long-term relief. As I report elsewhere, many of these supposedly therapeutic drugs make people worse over the long run, suffering from chronic addiction, and physical and mental side effects. Antidepressants and antipsychotics also blunt motivation and emotion, something not conducive to career achievement. Doctors ignore these deleterious long-term effects, prescribing these drugs willy-nilly. A nation of drugged-up zombies and addicts can't compete in the global marketplace.

What should people do to keep from being outsourced? Friedman devotes a chapter to this. One suggestion is for people to work in a specialized field. Examples include specialized lawyers, brain surgeons, cutting-edge computer architects, and robot operators. This type of work cannot easily be digitized and transferred to a lower-wage location. The problem for most people is that they don’t have the skills or education necessary to work in these fields.

Another suggestion is to be anchored, i.e. to work in a service job that cannot easily be automated or outsourced. Robots or Indians can't serve you lunch or check out groceries, at least not yet. The problem with these jobs is that they are usually low wage.

Another suggestion is to be adaptable, to constantly acquire new skills, knowledge, and expertise. If you are a computer programmer and only know the C language, you’re not very marketable. The problem with this suggestion is that older and low-IQ people have difficulties being adaptable.

Friedman doesn’t mention that there is a large group of people who are being left behind in this new economy. They don’t have the intelligence, education, ambition, or skills necessary to work in a specialized field, or to be adaptable. The only thing left for them is to work in a low-wage service job. I have some friends, bright people, people who have worked in good, decent-paying, middle class jobs, who are unable to get a good job in the current economy. They are forced to take low-wage service or call center jobs. Eventually, as robots become more advanced and prevalent, even the service jobs will become automated. Then what will happen to people who can only work in these jobs? Will we have a large group of unemployable people who will have to rely on state assistance to live? How can society afford to support these people? What will being on chronic state assistance do to their inner dignity and self-worth? These are questions that Friedman and others who applaud globalization need to answer.