Friday, December 23, 2005

HOW FLAT IS THE WORLD?

WARNING, THIS IS NOT A FUNNY ENTRY. IN FACT, IT IS DANGEROUSLY CLOSE TO BEING ABOUT WORK, ALTHOUGH IT IS REALLY WHAT BUDDY F DOES, NOT WHAT I DO.

Thomas Friedman wrote a book this year called The World is Flat. He argues in the book, among other things, that globalization is being driven by individuals making decisions rather than big companies or international organizations. He also says that the United States does not understand the process well and is in danger of falling behind in this process. One of his recommendations is producing more engineers to compete with India and China. It is an article of faith that they are producing more engineers than the United States is.

This week the Christian Science Monitor ran three articles that go straight to the heart of Friedman's analysis. First, on Tuesday the Monitor published an article about the supposed engineer gap. A Duke University study has looked into this assertion and concluded that the gap may not exist at all. Apparently the Chinese will call many more graduates "engineers" than the United States will. These include car mechanics and others. Similarly, the United States graduates, in absolute terms, more four-year graduate engineers than India. India graduates more people from three-year programs that the U.S. would not count as engineers. This is not to say that engineers are not important to our collective future, but it is not clear that China and India, each with populations roughly four times the United States', are yet challenging the American dominance in engineering work.

Also on Tuesday, the Monitor ran a commentary by a woman in Baton Rouge, Louisiana whose family decided to buy nothing from China. She sells the issue as sort of a pro-worker, avoidance of consumerism. It seems to me that there is an undercurrent of racism too, but the article was interesting nonetheless. The family had difficulty purchasing gym shoes, toys, mouse traps, and cheap flip-flops. They either used old products, paid more for Italian and other non-American goods, and otherwise climbed well on to their high horses. It turns out that cheap, crappy stuff comes from China and it is hard to buy cheap crappy stuff that is not Chinese. I do not believe that the morally superior position is for all Americans, including the poorest, to pay more for Italian gym shoes than for Chinese gym shoes. And yet, that was the net result of the family's little experiment.

On Thursday, the Monitor ran an article about the Canton trade fair, where many, many Chinese goods are sold. I can only imagine the shudder running through Baton Rouge at the idea of the Canton trade fair. The trade fair is a clearing house for the crap that nobody wants (bamboo animals with light bulbs inside) and for stealing ideas. It also fails to capture the reality that Wal-Mart alone imported $18 BILLION from China last year. That is roughly 10% of the value of consumer imports from China to the United States. Many other U.S. companies have substantial manufacturing in China.

This last point is nicely made in this Business Week article about "The China Price." The idea is that the price at which a good can be procured in China is the price at which all United States manufacturers will be required to operate, or they will go out of business. This misunderstands the process at work. Some people in the U.S. have to worry about the China price. However, a number of factors, including national security regulations, the ability to produce complex items efficiently, and the fact that they are closer to their customers helps some U.S. manufacturers compete. However, ALL workers in countries like Thailand, Vietnam, Taiwan, and similarly situated countries MUST be terrified by the China Price. These countries do not have any of the advantages of the United States, and so must compete on price with China. If any Americans ever want to sell anything to Southeast Asia, South Asia, or similar areas, it is necessary to address their ability to compete with China.

2 Comments:

Anonymous Pat said...

You can call that post "work", but that was one of the most interesting things I've read all month.

The engineering analysis particularly struck me. I've also taken it on faith that America isn't producing enough math and science graduates, yet this made me rethink that completely. However, I do feel that the U.S. government is not doing nearly as much as China or India to promote scientific research for the sake of research, or even for national security. Most of the scientific advances that are now corporate moneymakers came through government-sponsored scientific innovation: vacuum tubes, GPS, advanced plastics, etc. Scientific research in the U.S. has become the province of corporate R&D, whereas China and India are far more willing to use the government for scientific funding (though China is another animal, what with the government-planned economy).

8:00 PM  
Blogger David said...

Interesting point about the scientific research. I would just note that corporate R&D has arguably allowed the U.S. to leverage the cost of research more effectively than a government-run and researched projects. Whereas the U.S. has created everything from GPS to Teflon, our last rivals in this field, the Soviets, did not produce anything of this magnitude or usefulness. It may be that the U.S. model remains the best suited to get the most useful research for the dollar.

12:40 PM  

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