In his new book, "The World is Flat", Thomas Friedman claims, "When the world is flat, you can innovate without having to emigrate". But, how did the world `become flat'? Friedman suggest the trigger events were the collapse of communism, the dot-com bubble resulting in overinvestment in fiber-optic telecommunications, and the subsequent out-sourcing of engineers enlisted to fix the perceived Y2K problem.
Those events created an environment where products, services, and labor are cheaper. However, the West is now losing its strong-hold on economic dominance. Depending on if viewed from the eyes of a consumer or a producer - that's either good or bad, or a combination of both.
What is more sobering is Friedman's elaboration on Bill Gates' statement, "When I compare our high schools to what I see when I'm traveling abroad, I am terrified for our work force of tomorrow. In math and science, our fourth graders are among the top students in the world. By eighth grade, they're in the middle of the pack. By 12th grade, U.S. students are scoring near the bottom of all industrialized nations.
. . . The percentage of a population with a college degree is important, but so are sheer numbers. In 2001, India graduated almost a million more students from college than the United States did. China graduates twice as many students with bachelor's degrees as the U.S., and they have six times as many graduates majoring in engineering. In the international competition to have the biggest and best supply of knowledge workers, America is falling behind."
Similarly, a while back CNN's Lou Dobbs' released a book skewering HP's Fiorina on Offshoring - Exporting America: Why Corporate Greed Is Shipping American Jobs Overseas.
His book continues a long-time theme of his CNN-TV show, that American workers are being sold out by greedy, shortsighted CEOs who are damaging America.
Dobbs says corporate eagerness to send jobs offshore is undermining the American middle class, costing Americans jobs, forcing Americans to work harder and longer for less pay, devastating some communities, and depriving governments at all levels of the tax revenue for upgrading public education and providing other essential goods and services.
"India can provide our software; China can provide our toys; Sri Lanka can make our clothes; Japan make our cars. But at some point we have to ask, what will we export? At what will Americans work? And for what kind of wages? No one I've asked in government, business or academia has been able to answer those questions," Dobbs writes.
Dobbs singles out Hewlett-Packard CEO Carly Fiorina, who said, "No American has a God-given right to a job."
Dobbs' reaction to that statement was the urge to tell Fiorina where she could go.
"That first reaction has held up as a lasting impression. As much as I hate what she said, I at least have to give Fiorina credit for straight talk. She didn't sugarcoat her sentiments for public consumption, because she didn't have to. Forty or 50 years ago, Fiorina's bald statement, and its clear implications, would have fueled a firestorm of labor protest and political controversy. Not now. Working men and women in this country aren't part of the political equation. Business and capital rule. It's that simple," Dobbs writes. Among the others spotlighted by Dobbs for outsourcing jobs to India, the Philippines, Romania, Ireland, Poland and other countries are IBM, SAS Institute, Intel, Microsoft, Perot Systems, Apple, Computer Associates, Dell, Hewlett-Packard, Oracle, and Sun Microsystems.
I wrote a version of the below August 2004 here but think it's woth restating:
Focusing on purely the economic balance of costs and returns misses a larger, more important piece to the puzzle: Innovation and the leadership required to foster new types of markets, technologies, and jobs. I am a deep believer of free trade. As a professional economist would no doubt state, it's important to understand the benefits we Americans receive through international trade that is based on each country's comparative advantage. That in of itself receives no argument from me.
However, it's also important to note that comparative advantage is not static for a fixed number of areas - it is a constantly changing variable that each country and its political and business leaders must think over the long term, formulating strategies that maintain, if not expand, the scope of things a nation is good or better at vis-a-vis other nations.
We were once leaders in the markets for cars, planes, and consumer microelectronics. Now, we are not (the Big 2 car makers are re-learning the harsh lessons again from the Japanese, as if the 1980s never happened). As a sampler, presently, we are leaders in entertainment, software and PCs, as well as big pharma (albeit in turn is distorting the cost structure of health care system for the worse). In this sample list, the Japanese and Chinese are encroaching entertainment (Japanese anime, Chinese movie imports, as American plots become rehashed and predictable, much like our music), Airbus is giving us a run for our money, while we maintain a lead in the software and PC space (with the ASEAN countries not far behind).
The root concern I have is while that is true, there is a decreasing fraction of our economy and its leadership that are innovating and executing in the long term, while our basic pillars (education, healthcare, and technology infrastructure) deteriorate, which we have and continue to take for granted, watching passively as they deteriorate buttressed by a variety of excuses: fear of big government, or assuming private industry can effectively provide such public goods for society's greater good.
Meanwhile, foreign govt's are incenting and working with their businesses and political bodies to grow and nurture new IP and markets, we stand aside and hope our Fortune 1000 executives lead the charge of cost cutting, repackaging existing goods and services, and driving growth through cost-cutting (vs. innovating). It's easy to blame executives alone. But let's not forget the Internet and how it affords a voice for all who choose to participate and political leverage to grass roots efforts, and how more of us are getting involved and more need to hop on board.
It's time to stop being passive citizens, take some individual responsibility, and start getting involved in a real conversation at the local, state, and federal level about what's going on all around and where Americans want to take this country, and stop being so PC to the point of essentially having no voice, not speaking out, and being numbed ultimately to economic defeat as we let our many (not all) short-sighted politicians and CxOs get away with degrading, myopic policies and business practices.