The world is flat: Or so goes the argument by Thomas Friedman in his 2005 book of the same title. Twelve years later, however, Friedman’s argument takes on additional meaning as geopolitical unrest sets the stage for a new global reality.
It’s widely recognized globalization and technology are leveling economies onto the same playing field. Still, economists have mixed views of whether globalization is good or bad for the United States economy. Arguably, through open borders, free trade, free flow of corporate profits and operations and overwhelming public and corporate desire for 401k and stock performance, the U.S. has allowed its collective wealth and competitive advantage to flow to economies elsewhere. This concept isn’t groundbreaking. But if you consider the notion the U.S. middle class, fueled by technology, helped build a middle class in Asia and in effect hollowed out the U.S. middle class through loss of lower- to mid-skilled jobs, you’ll understand the full effect of globalization.
The story of globalization is one of tremendous irony. If the U.S. middle class knew the end result of low-cost products made in Asia would ultimately cost future generations the very prosperity that underpins the American dream, would we have made different policy choices toward trade and globalization? It’s true low-cost products have allowed Americans to buy more and enjoy better lifestyles for nearly 30 years. Advancements in automation have allowed tremendous gains in worker productivity and buyer convenience. However, such changes such as automated teller machines, self-checkout kiosks and smartphone applications have cost thousands of jobs — all in exchange for convenience, lower labor costs and increased corporate profits.
At this point you’re probably thinking, “This guy is arguing for protectionism.” No, I’m simply pointing out that our national wealth isn’t static. Rather, it’s subject to flow.
For as long as the world has been urbanized, wealth has been geolocated. This began prior to the city states of Athens and Rome and continues today. However, rapidly changing Asian economies and advancing technologies are altering world wealth distributions. The trade of goods will always have a geolocation component. But tangible goods only represent a portion of economic activity. Virtual goods and services are gaining market value and wealth creation.
Americans need to recognize the realities of globalization and technology and the risks these forces pose to the U.S. economy. Remember: 401k performance will never offset the loss of our middle class.
Now more than ever, shopping local, buying American and supporting regional economies constitute critical stories to tell. It is also important to understand we can’t enjoy the benefits of low-cost goods while simultaneously maintaining a diverse and healthy middle class.
As economist Erik Brynjolfsson, author of “Race Against The Machine,” said in a 2013 TED talk: “We need to race with the machine.” Meaning: We must transform our society into one which coexists with the rapid advancement of technology. If we fail to adapt both in our educational systems and government policies we put our future prosperity at risk, making the world truly economically flat.
A former engineer and production and operations executive, Eric Goertz works as an adjunct instructor at Colorado Mesa University in Grand Junction while completing his master’s of business administration degree.