Globalization: Fiddling While Rome Burns

Thomas Friedman, the author of “The World is Flat,” explains in this morning’s New York Times that the economic engine in Bangalore, India is reaching a new phase. "We’re going from a model of doing piecework to where the entire product and entire innovation stream is done by companies here," the CEO of a large Indian company told Friedman.

From reading the press, one gets the impression that Americans think that only a few million jobs are leaving America and headed to India and other third world countries. Since most of these jobs are in the tech industry, most American’s feel safe.

Unfortunately, this overly simplistic world view is being challenged by what is happening in India. At first, it was American companies who were hiring foreigners to take tech jobs. But once the people in places like Bangalore learn the trade, the next step is for them to start running their own businesses.

Think what happens here in America. Employees of big corporations get an idea, and then they break off and start their own companies, giving them names like NetFlix, Zone Labs, or even (in extreme cases) Falafel. Some of the worlds biggest companies, such as Intel, were also start ups created by employees who split away from larger companies who taught them their trade. What we are doing in India is teaching people a trade. Eventually they won’t need us any more, and will start their own companies.

Friedman sees part of this cycle, but he backs away from facing reality head on. He still appears to believe that we will remain in control of this process, that we will be running it. “What will be left for the Western companies is the ‘ideation,’ the original concept and design of a flagship product (which is a big deal), and then the sales and marketing,” Friedman says.

But if the workers in Bangalore are already learning to start their own tech companies, why won’t they eventually come up with their own ideas and start their own sales and marketing companies? To claim that only Americans are able to come up with new ideas, or to market them, is to practice an extreme form of racism. If there is one thing that even the early stages of globalization has proven, it is that all people, everywhere, are capable of doing any task on which they set their hearts and minds.

As our corporations hire people in Bangalore, we are beginning an inevitable process in which we train them to do advanced technical jobs. At the same time, we are also showing them how to run companies, how to market products, and how to create new products. The end result is that we will undermine our tax base, our technological edge, and other factors that have made America’s high standard of living possible.

Globalization is Inevitable

I believe that globalization is both a good thing, and an inevitable consequence of life in modern society. However, it is incredibly naïve for Americans to sit back and think that Adam Smith’s invisible hand will automatically guide us through this period to safe shores. We need more than a theory, we need a concrete plan.

Denying the inevitability of globalization would be the equivalent of sticking our heads in the sand. Attempting to create laws to prevent globalization by making outsourcing illegal would be an equally futile undertaking. But simply sitting on our hands and watching mutely while our jobs and businesses move overseas to cheaper labor markets is equally foolish.

America, and all industrialized societies, are facing a crisis now that computers have made it possible to move jobs and business around the globe in search of cheap labor. Those of us in the tech industry have a front row seat, and can watch this process as it evolves.

Many Americans, however, aren’t aware that the crisis even exists. Others think it can be legislated away, and some think we will magically resolve the problem by just sitting back and letting the mystical free market work. All of these ideas are hopelessly quaint and naïve. Jobs are leaving America at a huge rate, and there is no plan for bringing them back. As the jobs leave, then inevitably, so will the businesses. Without the businesses and the jobs, there is no tax base for running a country as large and sophisticated as America.

What we need are intelligent politicians and businessmen who are willing to actively work to solve these problems. We all need jobs, we all need the skills necessary to compete in the modern world. When will we hear important people in this country stand up and address these issues in plain language? We shouldn’t settle for vague promises, we need specific plans.

Summary

Here is how Friedman ends his article:

“Indeed, I now understand why, when China’s prime minister, Wen Jiabao, visited India for the first time last April, he didn’t fly into the capital, New Delhi – as foreign leaders usually do. He flew directly from Beijing to Bangalore – for a tech-tour – and then went on to New Delhi.

“No U.S. president or vice president has ever visited Bangalore. “

I am by no means a supporter of all Thomas Friedman’s ideas. However, in columns like the one he wrote this morning, and in books like “The World is Flat,” he at least tries to come to terms with the consequences of globalization. Most of the rest of the press, and most of our politicians, are completely blind to the importance of the huge changes taking place in our economy, and in the economy of cities like Bangalore. They fiddle, and Rome burns. How long are we going to put up with this foolishness?

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