Transforming Banks for a Digital Future: The Winners, The Losers, and the Strategies to Beat the Odds
So what does worry you?
I want to come now to a stark scenario, which I think is a different way of looking at globalization. I don't think that as China and India develop we have anything to worry about, just for the reasons I mentioned. But what I think we do need to worry about is simply the nature of global competition today, and it's not focused just on India and China.
Today there are so many countries in play all over the world. Multinationals can do good in many countries, and they absorb technology wherever they can get it. They'll go to your country rather than mine if they see some advantage in being there.
People are reading very similar books and have very similar know-how. Interest rates and capital markets are much more integrated than ever before. So a lot of cost elements have been leveled out, and in that sense you can actually begin to think in terms of operating in world markets, because the other guy doesn't have all that much of an advantage over you. The fact that you have cheaper labor is not particularly relevant. In fact, all the econometric studies show that labor cost is the least important thing when it comes to locating businesses.
Because of all this leveling down of interest rates, and because multinationals can locate anywhere, competition is fierce today. Talk to CEOs and executive directors, and I doubt you'll find anybody who's comfortable about the fact that the world is moving very fast. Maybe somebody's going to take your job, which is why there are protectionists.
Everybody fears that somebody might overtake them. Back in 1991, when I was at my daughter's music camp, I met a Silicon Valley father, and he said he was having big problemsinternational competition from the Koreans and the Far East. So I turned to the next parent and asked him what he did. He said, "I grow mushrooms." I said, "You really must be leading a quiet life." He said, "No, Taiwan is killing me." So everybody has somebody killing them. You look over your shoulder, and somebody's stealing your party.
I call it the Age of Flux. I call it "kaleidoscopic comparative advantage." It's not that comparative advantage has disappeared and that everything now goes to India and China, or to another country. It's that it has become so volatile. Given that volatility, everybody is now on edge.
So what can be done about this volatility?
Now if that is the situation, then, of course, workers are going to be on edge, too. Therefore, you have to rethink the whole question of how to cope with living in a globalized world. It's much more complicated than just saying we're going to prevent India and China from exporting to us or taking our jobs.
If it was just that, we could say, "Go to hell. We don't really need you. We can manage by ourselves." But today, if you're in the international economy, if you want to lead a happy life, you have to be continuously coping with globalization and flux.
This is really where I think we've got to rethink the kind of social-support systems we have for people. Suppose Boeing starts going downhill. Right now it's doing well again, but it could be that Airbus steals some margin from it. Then you are going to have people who lose their jobs at Boeing. But they could get jobs at Nissan or Toyota, because those companies are expanding. You could have aeronautical engineers doing auto engineering.
We have other jobs coming up, like in medicine. Aging, for example, is creating a problem, but at the same time it offers possibilities. Take the fact that almost 15 percent of our income is now being spent on healthcare of one kind or another. If you want to think of specific specializations, there are lots of age-related ailments that are going to come up. I'm 72 and I'm beginning to get them now myselfarthritis, rheumatism.
The real problem is this churning, and the fact that we're an aging society. If I lose my job as a professor of economics when I'm 45, and then you come and tell me there are jobs available for professors of physics, I'd say, "Get lost, you're really increasing my anguish by telling me that."
We don't have to worry about new skilled jobs. Skilled jobs are going to keep coming up, and technological change is also continuously creating jobs. Skilled people have nothing to worry about. What we do need in an aging society is for everybody to get together, particularly professional societies, and really work out optimal trajectories of transitions.
If a radiologist is going to lose out and there are going to be jobs for plastic surgeons, how do we minimize the cost of retooling? If the American Medical Association cannot figure out how you make transitions from declining occupations to expanding ones, then some smart guys will probably work it out.
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