The Post-Industrial Economy

It seems to me….

Our working hypothesis is that the status of knowledge is altered as societies enter what is known as the postindustrial age and cultures enter what is known as the postmodern age.” ~ Jean-Francois Lyotard[1].

Over the past 50 years, the countries that have grown the most are those that have opened themselves to global markets. Globalization substantially benefited the U.S. economy by providing access to new markets and supporting growth in areas of our national strength. While some low-end jobs such as in some manufacturing areas were lost, they were primarily in fields easily automated and subject to job elimination.

The public’s wariness toward global engagement also extends to U.S. participation in the global economy. Nearly half of Americans (49 percent) say U.S. involvement in the global economy is a bad thing because it lowers wages and costs jobs; fewer (44 percent) see this as a good thing because it provides the U.S. with new markets and opportunities for growth.

While some workers were displaced, the vast majority of people in the U.S. benefited from lower-cost products and a higher standard of living. While there have been some recent gains in wage compensation, recovery from the economic crisis of 2009 has been slower than desired (though better than in all other economically-advanced countries). More rapid improvement was constrained by lack of government investment providing free higher and vocational education, training, and retraining support.

For the U.S., globalism has produced enormous advantages. The key driver depressing wages and eliminating jobs in the industrialized world is technology, not globalization. For example, between 1990 and 2014, U.S. automotive production increased by 19 percent but with 240,000 fewer workers. With 5 percent of the world’s population, it dominates the global economy in technology, education, finance, and clean energy. One in five U.S. jobs is a result of trade and that percentage is rapidly growing. The U.S. maintains the world’s primary reserve currency giving it substantial economic advantage.

The benefits of growth and globalization have admittedly not been shared equally and the pace of change has caused anxiety everywhere but these are the very reasons to invest in people, upgrade their skills, and better integrate communities. It is not a reason to destroy the most peaceful and productive international system ever devised in human history.

After 1945, after the Great Depression and two world wars, western nations established an international system characterized by rules that honored national sovereignty, allowed for the flourishing of global commerce, and encouraged respect for human rights and liberties. This order resulted in the longest period of peace among the world’s major powers, marked by broad-based economic growth that created large middle classes in the West, the revival of Europe, growth in poor countries that lifted hundreds of millions of people out of poverty, and the spread of freedom across the globe.

Globalization is generally considered only in relationship to trade in goods, services, or financial transactions but actually is much more comprehensive enabling communications and interaction between individuals exchanging information, ideas, and innovative concepts. Mobile technologies have transformed the way we live, work, learn, travel, shop, and stay connected. Individuals or corporations are able to compete, connect, exchange, or collaborate globally without limitations of location, distance, or time.

At a time when trade growth in goods and services is slowing, the global flow of digital information including e-commerce, videos, intra-company communications, and searches has enjoyed exponential increases. Small businesses, which create the majority of new jobs, are therefore able to engage in global trade more easily than previously possible (86 percent of tech-based startups engage in cross-border activity). From a worker’s perspective, education rather than trade barriers, currency, and tariffs is key to compensating for job off-shoring.

The changes and trends associated with globalization have been a net gain for most Americans though a vocal minority have been negatively affected. Globalization is not the same as outsourcing and while businesses sought to exploit less expensive labor markets in the past, digitization and advanced manufacturing technologies have now resulted in increased productivity.

The days when manufacturing went looking for cheap labor are almost over. There is increased scope for the next evolution in manufacturing which relies on high quality infrastructure, the right kind of talent in the workforce, and a good business environment. As transportation costs have become a greater percentage of product costs, manufacturing has relocated closer to markets.

Globalization created huge opportunities for growth, many of which were taken by U.S. companies[2]. The global economy is still dominated by large American firms; 134 of Fortune’s Global 500 are American. In cutting-edge industries, the vast majority are also American. These companies have benefited enormously by having global supply chains that can source goods and services around the world, either to lower labor costs or to be close to the markets in which they sell.

Globalization generates opportunities, innovation, and wealth for nations they can then use to address associated problems through good national strategies. The solutions are easy to state in theory: education, skills-based training and retraining, infrastructure…. But they are extremely expensive and hard to execute well.

Criticism of globalization is unfair as it has always provided a financial net benefit for the U.S. Though very little in life comes without cost, off-shoring has somewhat become the scapegoat for lower and middle-class demoralization. This criticism ignores the more relevant question of whether the supposed self-esteem provided by obsolescent manufacturing jobs is actually factual. Marketing efficiency has negatively impacted social cohesion in some regions but this has resulted primarily from advances in automation and computerization, not the more easily politically-motivated denunciation of off-shoring.

Global markets and emerging economies are growing much more rapidly than those in developed countries, in many instances at double the rate of the U.S., with corresponding greater demand. Many U.S. companies’ exports exceed domestic sales. Many of the nations in which these companies are located require investment in local presence and operations in exchange for market access.

Incomes have stagnated or declined since the 2008 recession with the lower-middle class being among the most impacted widening economic inequality. The top priority should not be protecting existing jobs or attempting to force corporations to manufacture in the U.S., it should be on training/retraining for new employment opportunities as the U.S. transitions to a post-industrial society.

The manufacturing leader of yesteryear, the U.S., is experiencing a relative decline in global influence and will almost certainly never return to its former glory as a manufacturing powerhouse but there are still areas in which it can distinguish itself — such as a supplier of extremely high-end, high-margin goods. But … while beneficial, we do not need it.

Prospects for the U.S. and the global economy are good but the tide of populist and protectionist pressures threaten to damage growth and hurt the very same people they claim to protect and must be controlled. Technology and globalization have been the primary drivers of prosperity and will remain so. The transitions must be better controlled by helping and protecting those who are negatively affected by the disruptions that these forces inevitably bring.  It will be necessary to leverage the potential of innovation and globalization to keep living standards rising around the globe.

Globalization is not a zero-sum game. The U.S. cannot quantitatively ease its way to sustainable growth. It has to invest in infrastructure and education, create a strong business environment, and innovate.

Let China and other southeastern Asian countries rule commodities: there are unlimited opportunities for U.S. companies[3] willing to innovate. The problem is not just an issue of manufacturing less expensive products with low-priced labor – it’s linked to a scarcity of skilled labor and actual innovation in this country – something that needs to be addressed in our educational system. It is time to move on to tomorrow’s economy.

That’s what I think, what about you?

[1] Jean-François Lyotard was a French philosopher, sociologist, and literary theorist.

[2] Zakaria, Fareed. Everyone Seems To Agree Globalization Is A Sin. They’re Wrong, The Washington Post, https://www.washingtonpost.com/opinions/everyone-seems-to-agree-globalization-is-a-sin-theyre-wrong/2017/01/19/49bded68-de8b-11e6-918c-99ede3c8cafa_story.html?utm_term=.e5aabb0c1b1d, 19 January 2017.

[3] Perlow, Jason. Let China Rule Commodities: Nanolumens’ Lesson For US Companies, ZDNet, http://www.zdnet.com/article/let-china-rule-commodities-nanolumens-lesson-for-us-companies/?tag=nl.e539&s_cid=e539&ttag=e539&ftag=TRE17cfd61, 7 March 2016.

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About lewbornmann

Lewis J. Bornmann has his doctorate in Computer Science. He became a volunteer for the American Red Cross following his retirement from teaching Computer Science, Mathematics, and Information Systems, at Mesa State College in Grand Junction, CO. He previously was on the staff at the University of Wisconsin-Madison campus, Stanford University, and several other universities. Dr. Bornmann has provided emergency assistance in areas devastated by hurricanes, floods, and wildfires. He has responded to emergencies on local Disaster Action Teams (DAT), assisted with Services to Armed Forces (SAF), and taught Disaster Services classes and Health & Safety classes. He and his wife, Barb, are certified operators of the American Red Cross Emergency Communications Response Vehicle (ECRV), a self-contained unit capable of providing satellite-based communications and technology-related assistance at disaster sites. He served on the governing board of a large international professional organization (ACM), was chair of a committee overseeing several hundred worldwide volunteer chapters, helped organize large international conferences, served on numerous technical committees, and presented technical papers at numerous symposiums and conferences. He has numerous Who’s Who citations for his technical and professional contributions and many years of management experience with major corporations including General Electric, Boeing, and as an independent contractor. He was a principal contributor on numerous large technology-related development projects, including having written the Systems Concepts for NASA’s largest supercomputing system at the Ames Research Center in Silicon Valley. With over 40 years of experience in scientific and commercial computer systems management and development, he worked on a wide variety of computer-related systems from small single embedded microprocessor based applications to some of the largest distributed heterogeneous supercomputing systems ever planned.
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