Problems With Tom Friedman's Love Affair With Globalization

This article is Tom Friedman's latest op-ed on the theme that he developed in The Earth Is Flat. He spices it up with the introduction of a couple of new technologies, to show that he is hip, and he reaches the same conclusion that he did in The Earth is Flat. New technologies and globalization are reducing the need for unskilled workers in developed countries. His solution to this problem is that everyone needs to be better educated to compete in the global economy. He provides data which shows that the unemployment rate in the US falls as the education level rises. The implication is that the US labor force will require higher education in order to compete with the rest of the world. Access to higher education, which is restricted by the growing cost and declining public funding, should be made more available.

I support Friedman's suggestion that higher education is a public good and that access should not be dependent upon the good fortune of being born into a family that can provide the nurturance and financial support that are required for access to higher education. A simple thought experiment will show that this will not solve the unemployment problem. Lets suppose that the US finds a way to enable everyone to obtain a college degree. That would only affect the unemployment rate in the US if jobs that are being lost to higher productivity and globalization would be filled by a work force that has achieved Friedman's criterion of being "better than average". Productivity has reduced the number of manufacturing jobs that are required to satisfy the demand for manufactured products in the US. What new jobs will be created to provide employment for the surplus workers? We could ask the same question about all jobs that are reduced by advances in productivity. Replacement jobs will only be available if increased demand for other products or services is generated. Most of the new jobs being created are in low paying service jobs that do not require a college education.

Globalization presents a different problem. The industrialized economies of the "old world" provided a high standard of living because they were very productive. They had a better educated workforce which was made more productive by the use of capital equipment. That enabled them to export products to the less developed countries. That advantage is disappearing today. Developing countries have made progress in educating their workforces, and capital has been made available to them. Much of the capital has been provided by multinational corporations that are able to get similar productivity at lower cost. The workers in developing countries accept lower wages than workers in developed countries because the wages improve their standard of living. Over time their wages will approach those in developed countries, but today corporations can purchase productive labor at much lower cost in developing countries. They also get better access to rapidly growing markets in developing countries as they develop a middle class that can afford their products. IBM does not employ thousands of information technology workers in India because they cannot be found in the US. They are able to get the same work done at lower cost. This make it possible for IBM and Accenture to sell information services to their customers at a lower cost than if their customers hired similar workers in the US to do the same work. The Internet makes it possible to perform these services anywhere in the world. It would only make sense to educate more Americans in information technology if the same work could not be performed elsewhere in the world at lower cost. This will be the case for a number of high skill jobs that can be performed elsewhere at lower cost by taking advantage of the Internet.

The world is indeed flatter today than it was in the past. The problems that this poses from developed countries cannot be solved by winning an education race with the rest of the world. China produces more college graduates than the US today, and it will produce even more college graduates in the future as its economy grows. India produces more highly educated information technology workers than the US today and this advantage will grow as the demand for these workers in India leads to an increase in programs to provide the training. The problem for the US and other developed countries is not an education problem. It is a problem of how to deal with globalization. The encouragement of globalization that is directed by the policies of multinational corporations is an unsolved problem for the nation states. It won't be solved by winning an education race with the developing countries.