Flutterby™! : rethinking globalization 2007-04-19 16:32:19.514018+00

rethinking globalization

2007-04-19 16:32:19.514018+00 by Dan Lyke 1 comments

The Establishment Rethinks Globalization:

The Gomory-Baumol book describes this as "a divergence of interests" between multinational firms and their home country. "This overseas investment decision may then prove to be very good for that multinational firm," they write. "But there remains the question: Is the decision good for its own country?" In many cases, yes. If the firm is locating low-skilled industrial production in a very poor country, Americans get cheaper goods, trade expands for both sides and the result is "mutual gain." But the trading partners enter a "zone of conflict" if the poor nation develops greater capabilities and assumes the production of more advanced goods. Then, the authors explain, "the newly developing partner becomes harmful to the more industrialized country." The firm's self-interested success "can constitute an actual loss of national income for the company's home country."

This has been one of the things I've been saying about something as simple as treating IT as a commodity means that a company has given up on innovating (and out-innovating their competitors) in that front.

"The implication is this: If nothing changes in how globalization currently works, Americans will be increasingly exposed to downward pressure on incomes and living standards. "Yes," says Gomory. "There are many ways to look at it, all of which reach the same conclusion."

I've maintained all along that outsourcing intellectual capital (rather than building it at home) will spell the long-term destruction of the American middle-class, and eventually lead to a bi-modal distribution of wealth in the U.S., with all of the attendant social problems arising from that. We're seeing the beginnings of that now.