I was trying to decide if I should start with the potential positives, or address the pretty hefty fears of globalization. I think the subject of this post makes it clear which one I decided to start with.
I've done a short little search online, trying to track down a reference that is unfortunately lost. It was to the National Screw Thread Commission. A commission created in the United States to help standardize screws. The reference I recall mentioned it as one of the most successful commissions in our history. It seems a little silly, to talk about the importance of a standardizing a screw. Yet all it takes is a few moments of thought to realize just how critical it could be. How much do we take for granted, that if we lose a screw - or ruin one by stripping it - that you can just go to a hardware store and find one that's the right size? That the threading is the same, and will do exactly what you need?
Something similar happened with train tracks. Imagine what a disruptive mess it would be if every train track was a different width. Each train would have to figure out which tracks could support it's design, or you would have to create a one-size-fits-most design that could adjust to the different sized tracks. Aren't we all better off by having a standardized system for building train tracks?
This does come at a loss, of course. Nobody could build a monopoly by insisting on their own unique system (the way cell phone companies create phones with their own unique chargers). There is less room for individuality, less of a chance to distinguish yourself with a unique screw design.
This is the strength and weakness of centralization, standardization, control. In some situations (like screws and train track widths) it's fairly obvious which one has been better. In others? Not so much.
So to get back to globalization - right now each nation has their own way of doing things. Almost as though they all have a unique train track width, and multi-national companies have to adjust their trains to each different system. How much do we waste on this? I see this where I work. Somewhat. Now that I'm at our returns center, I occasionally deal with returns from India and China...and sometimes find myself wishing I had a Chinese or Indian customs expert on speed dial. And labels! How do we put labels on our parts in all the local languages? Covering the legal requirements of every nation? We could wind up with labels larger than the parts themselves!
In addition to consistency, there's an opportunity to simplify, simplify, simplify. I again did a quick search on a vague reference, and didn't quite find what I was looking for. I remember hearing about the Code of Hammurabi, which apparently helped consolidate and simplify the laws of that region. So much of our current system has grown haphazardly, over time, as the world has continued to change. Sometimes the thought of cleaning it all up, codifying it, and simplifying it appeals. (Almost too much...I try to remember the downsides, try to appreciate the little quirks, foibles and complexities that have developed over time.)
There are also some opportunities that have more to do with what I've been calling the endstate of globalization. While going over this in my head, I realized that most of the perceived downsides have more to do with the start/stop process of globalization, than any real problem with the end result. Fears of job loss, for instance...are more because of the tremendous imbalance in cost of living, currency, etc. between one region and another. As I started to say in my response, once we're fully globalized a company is about as likely to move their business from the US to Vietnam as they would to move their headquarters from New York to North Judson, Indiana. Not saying it couldn't be done, but it would depend on the market, the business, property taxes, etc. The lower cost of living just isn't enough to justify moving when it takes you away from a key location.
Plus, a globalized endstate has the potential to determine what a truly appropriate cost of labor would be. In a way, the disparities between industrialized world and developing world are suppressing wages in the industrialized one. Hard to unionize when the company decides to close your factory and move to Mexico, hard to argue for a pay raise when workers in another country could live comfortably off a third of your income.
This isn't meant as a 'rah, rah international labor movement'. I believe the current situation skews what a rational business analysis of wages would be. The companies that want to pay their workers more have to compete with companies that may not care, which means there's pressure on all of them to do more, cheaper. Just to stay in business. If the world economy were more balanced, that pressure would be gone and you could see the companies that invest in their people performing better.
Right now, we see a haphazard and inconsistent movement towards evening out the standard of living. A company moves part of their business to China, for example. Labor starts off cheap, but then costs go up. The business then has to decide whether they're going to keep the investment of resources in China, or look to move to Vietnam. (Or some other country. Countries are interchangable here, I'm not trying to pick on any particular ones.) If you do that often enough, businesses on their own will even things out. But not in any well thought out, planned process. And it would all be affected by current events, political leadership, etc.
Some of that, btw, is not necessarily about cheaper labor. I think most businesses want to get their toe in the door of the Chinese market. In a fully globalized world, they probably would want some of their business over there. Just as Toyota has factories over here in the US. But those decisions have more to do with where your market is, etc.
I've done a short little search online, trying to track down a reference that is unfortunately lost. It was to the National Screw Thread Commission. A commission created in the United States to help standardize screws. The reference I recall mentioned it as one of the most successful commissions in our history. It seems a little silly, to talk about the importance of a standardizing a screw. Yet all it takes is a few moments of thought to realize just how critical it could be. How much do we take for granted, that if we lose a screw - or ruin one by stripping it - that you can just go to a hardware store and find one that's the right size? That the threading is the same, and will do exactly what you need?
Something similar happened with train tracks. Imagine what a disruptive mess it would be if every train track was a different width. Each train would have to figure out which tracks could support it's design, or you would have to create a one-size-fits-most design that could adjust to the different sized tracks. Aren't we all better off by having a standardized system for building train tracks?
This does come at a loss, of course. Nobody could build a monopoly by insisting on their own unique system (the way cell phone companies create phones with their own unique chargers). There is less room for individuality, less of a chance to distinguish yourself with a unique screw design.
This is the strength and weakness of centralization, standardization, control. In some situations (like screws and train track widths) it's fairly obvious which one has been better. In others? Not so much.
So to get back to globalization - right now each nation has their own way of doing things. Almost as though they all have a unique train track width, and multi-national companies have to adjust their trains to each different system. How much do we waste on this? I see this where I work. Somewhat. Now that I'm at our returns center, I occasionally deal with returns from India and China...and sometimes find myself wishing I had a Chinese or Indian customs expert on speed dial. And labels! How do we put labels on our parts in all the local languages? Covering the legal requirements of every nation? We could wind up with labels larger than the parts themselves!
In addition to consistency, there's an opportunity to simplify, simplify, simplify. I again did a quick search on a vague reference, and didn't quite find what I was looking for. I remember hearing about the Code of Hammurabi, which apparently helped consolidate and simplify the laws of that region. So much of our current system has grown haphazardly, over time, as the world has continued to change. Sometimes the thought of cleaning it all up, codifying it, and simplifying it appeals. (Almost too much...I try to remember the downsides, try to appreciate the little quirks, foibles and complexities that have developed over time.)
There are also some opportunities that have more to do with what I've been calling the endstate of globalization. While going over this in my head, I realized that most of the perceived downsides have more to do with the start/stop process of globalization, than any real problem with the end result. Fears of job loss, for instance...are more because of the tremendous imbalance in cost of living, currency, etc. between one region and another. As I started to say in my response, once we're fully globalized a company is about as likely to move their business from the US to Vietnam as they would to move their headquarters from New York to North Judson, Indiana. Not saying it couldn't be done, but it would depend on the market, the business, property taxes, etc. The lower cost of living just isn't enough to justify moving when it takes you away from a key location.
Plus, a globalized endstate has the potential to determine what a truly appropriate cost of labor would be. In a way, the disparities between industrialized world and developing world are suppressing wages in the industrialized one. Hard to unionize when the company decides to close your factory and move to Mexico, hard to argue for a pay raise when workers in another country could live comfortably off a third of your income.
This isn't meant as a 'rah, rah international labor movement'. I believe the current situation skews what a rational business analysis of wages would be. The companies that want to pay their workers more have to compete with companies that may not care, which means there's pressure on all of them to do more, cheaper. Just to stay in business. If the world economy were more balanced, that pressure would be gone and you could see the companies that invest in their people performing better.
Right now, we see a haphazard and inconsistent movement towards evening out the standard of living. A company moves part of their business to China, for example. Labor starts off cheap, but then costs go up. The business then has to decide whether they're going to keep the investment of resources in China, or look to move to Vietnam. (Or some other country. Countries are interchangable here, I'm not trying to pick on any particular ones.) If you do that often enough, businesses on their own will even things out. But not in any well thought out, planned process. And it would all be affected by current events, political leadership, etc.
Some of that, btw, is not necessarily about cheaper labor. I think most businesses want to get their toe in the door of the Chinese market. In a fully globalized world, they probably would want some of their business over there. Just as Toyota has factories over here in the US. But those decisions have more to do with where your market is, etc.
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