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Commentary: February 2005

Globalization: Embrace It or Fail
By Thomas A. MacNaughton
The October 2004 DE ironically contains “An American Tale” and John Maynard Keynes’ quote: “The difficulty lies, not in the new ideas, but in escaping the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.”

Keynes was a good economist. A rich economist, like Keynes, is worth listening to. Winners listen to winners. Losers listen to whiners. Karl Marx, a bad economist who died poor, saw a changing society and whined.

Globalization has been inevitable since the invention of the compass, and understood since the 1776 publication of Adam Smith’s The Wealth of Nations. In this book Adams examines most of the anti-globalization arguments that are still in use today and effectively demonstrates that globalization is ultimately a good thing for all societies. Adams also demonstrates that nations that fight against globalization the hardest are always those that suffer ill effects. Nations embracing globalization prosper.

The United States has always had an ambivalent attitude toward globalization. Starting in the 1600s people here built faster, more efficient merchant vessels, which, in turn, brought great wealth to even small towns here in my native state of Maine.

On the other hand, people such as Thomas Jefferson railed against globalization and preached self-sufficiency and protection. As president he crippled trade and bankrupted many, putting thousands of successful merchants, shipyard workers, sailors, shopkeepers, and others out of work. He even wrote a book urging rejection of Adam Smith and his laws of economics.

Thomas Jefferson died a revered founding father. Jefferson also died bankrupt, living on at Monticello only at the sufferance of his creditors. Let’s not emulate his economics.

Thomas A. MacNaughton, The MacNaughton Group

Henry David Thoreau also touched the fringes of this anti-globalization attitude. We could all gain from emulating Thoreau’s rejection of the relentless pursuit of material goods, and could be happier, and even richer, if we led simpler, more frugal lives

Yet despite Thoreau’s valuable insights, much of his questioning of the life he saw around him in a society beginning to go through the first stages of the Industrial Revolution was a direct argument against what he read in The Wealth of Nations about the division of labor and the involvement of too many people in one’s economic life.

Moving on to today’s concerns about globalization and outsourcing, please realize that globalization worries in the computer industry loom large for those involved in information technology, but not necessarily so large for others. Our influence on thinking in the U.S. is great because Internet linked computers increase globalization. Efficient global communication has accelerated globalization more than any other factor. In this sense if there is a problem, we cause it ourselves.

The problem is not differences in labor costs. People in other countries would subcontract work from me for less than one third of what I pay here. However, ease of training, personal contact, and language difficulties give those in the U.S. an edge. I have plenty of contact with people in our field in other countries because people come to us from the whole world for training in our type of design work. Many could work with us in one way or another. However, aside from some lemmings following trends off cliffs, most business people stick with local, more predictable, labor. So why is there a problem?

We were nostalgic for a brief time of computer operator shortages, before everyone began to be computer trained. In that time we got huge salaries because we could run Microsoft Office and actually could make CAD software work. Some of us could even handle networked computers.

Look, this stuff isn’t that hard. Our outfit trains CAD operators through distance learning. The cost to the student is around $1,000. Do you really think we’re ever again going to be able to ask for BMWs and other signing bonuses simply because we can draw stuff on screen, do a few renderings, and maybe do some finite element analyses?

It’s supply and demand, baby. Forget foreign workers. You don’t have to work for what they’d work for. Just realize you can no longer get paid out of proportion to the amount of training needed to create your replacement domestically now that the supply side is up. We pay three or four times what we could pay an Indian worker, but you cannot expect us to pay 10 times. Adapt.

In the 1900s the U.S. started losing textile mills and shoe factories. This labor-intensive, low-skill work was inevitably heading offshore, yet there are still people in these industries surprised that they are losing jobs. But it is important to understand that this is a very narrow view of what is happening. We complain we lose jobs to low labor cost countries and it is not “fair” and that we “cannot compete.” What we often do not hear is that they are complaining that they are losing jobs to the lower labor requirements of our automated production. The lesson here is that everyone worldwide needs to remain flexible and view change as an opportunity rather than a problem.

Globalization may mean we must re-create our businesses. Our markets once were local, or at best national, now they are worldwide. In my business I’d starve if I depended on my local market. We used to fight for a national market. Now we easily get a global market. We must accept change to take advantage of that.Globalization offers two choices, embrace it, or blame it for your failures. Personally, I’ll embrace it.

Thomas A. MacNaughton heads a major yacht and small commercial craft design firm in coastal Maine. Learn about the worldwide marketing of his team’s design work atwww.macnaughtongroup.com. Send you thoughts about this commentary via e-mail c/o de-editors@helmers.com.

About DE Guest

This article was contributed to Digital Engineering by a guest author.