on May 24th, 2007Globalization and the Uneducated Developing Nation Worker
The rush to send U.S. manufacturing jobs abroad is a devil’s deal that totally sells out our country’s competitive advantage in the global marketplace. Companies have been seduced by the low cost of labor in developing countries, but they are missing the big picture: they are transferring their intellectual property for free. Once developing nations acquire this knowledge (”the world is flat”) and gain access to capital markets, they are now in a position to leverage this intellectual property for their own gain at the expense of U.S. citizens.
In countries where intellectual property laws are weak, the exploitation of U.S. knowledge happens even faster. China and India have been sending their best students here for years. Once they return home and start running U.S. corporations operating abroad, they quickly figure out that knowledge plus access to natural resources and capital equals dominance in the global marketplace.
What’s that mean? It means the U.S. labor pool is being put out of manufacturing work under the assumption that future U.S. workers will migrate to higher paying information economy jobs. But in a “flat world,” where information and know-how now flows freely around the world, that assumption is nonsense. Jobs will go to the better educated no matter where they are in the world. Where education, capital and natural resources come together, so evolves the future economic superpower.
Our country’s access to natural resources, based on our competitive advantage of knowing how best to exploit those resources in the most efficient way, is nearing an end. You have to wonder why Saudi Arabia hasn’t used their vast wealth to buy engineers that would transfer the knowledge of how to extract oil from their reserves so they can keep even more of the oil profits. Owning the natural resource, combined with the knowledge of how to exploit it, and having the capital to make it happen is the golden triangle.
There’s a sad reality to the fact that a corporation is a legal entity that thrives based on a set of man-made rules. When it comes to making money, though, there’s nothing that says that entity needs to be nationalistic, except in so far as it allows them to play the wolf in sheep’s disguise. The assumption that U.S.-based corporations operate in a nationalistic way is bunk.
How long before our elected Congress wakes up to this fact will determine whether our country becomes an economic ghost or an emperor with new clothes.
How does globalization boost inequality? The question is too fresh to have definitive answers, but it’s clear that international competition forces local firms to add skilled workers who can handle newer technology and shed workers who can’t. Foreign firms bring new technology to developing nations and boost demand there for skilled workers by paying 10% to 20% more than domestic firms, says Dirk Willem te Velde, a research fellow at the Overseas Development Institute, a United Kingdom think tank.
Globalization’s Gains Come With a Price