Globalization, Technology, and the MBE


The relentless attack technology has on inefficiency, the quest for profitability, and economic relevance will determine the winners and losers in business in the near future.- Dr. Fred McKinney, Tuck MBE Programs

Economic theory, based on the 19th century concept of comparative advantage, as distinct from absolute advantage and other variations of mercantilism, suggests that consumers in all countries will be better off if goods and services cross borders without the political intervention of states. Across the globe, countries and trading blocks are coming under increasing fire from workers and nationalists who dispute the unequivocal superiority of comparative advantage as the basis of national trade policy.

In this country, President Trump was quick to pull out of the Trans Pacific Partnership, has threatened to pull out of the North American Free Trade Agreement (NAFTA), and on his recent trip to Europe ignorantly accused Germany of unfair trade practices in the globally competitive automobile industry. (German auto manufactures BMW, Mercedes Benz and Volkswagen were net exporters from the United States.) The political smoke generated by the topic of international trade often hides the facts and the understanding of economic reality.

There is no dispute that the percentage of American workers in manufacturing has declined between 1980 and today. According to the Federal Reserve Bank of St Louis, U.S. manufacturing employment reached a peak of 19,500,000 in July 1979. Today there are 12,400,000 workers in manufacturing. The question is how much of this decline in U.S. manufacturing employment is due to global competition, and how much is due to other things, like technological change and innovation. And perhaps more importantly, is it realistic that the United States will return to its glory as the manufacturer for the world?

At the same time that manufacturing employment has declined, total exports of manufactured goods has increased dramatically. Between 1983 and 2005, manufacturing exports increased by 407 percent while manufacturing employment declined over that same time frame from 17.5 million workers to 14.3 million workers. The explanation for the loss of manufacturing jobs while manufacturing output and exports are increasing is more a story of technological change, perhaps as the result of international competition. But, primarily, technology and innovation are the reasons for the decline in manufacturing jobs, not trade.

This does not mean that countries unfairly break international trading rules and laws. They do, and when they do the U.S. and the international trading organizations have mechanisms to address these violations. But for leaders like the United States and the United Kingdom to attempt to turn back the clock not only flies in the face of the facts, it has no chance of achieving their rhetorical and nostalgic goals.

And it is not just manufacturing jobs that are feeling the effect of technological change. The toll booths and the toll booth employees are no longer on roads across America. They have been replaced by technology. Parking meter collectors in cities are being replaced by parking meter technology that only accepts electronic payments. Cash registers in retail establishments across the country are increasingly automated and only have a need for employee intervention when something goes wrong, like you wanted kale and got spinach. Any trip to an airport today is likely to involve a kiosk and not an attendant. Technology is a pervasive reality that is bringing the consumer closer to the seller. This directedness is eliminating middle layers and the people in those spaces. The question of the latter half of this century will not be what will people do at work; it will be what will we do with increasing amounts of leisure. Increasing leisure time is also a business opportunity!

This brings me to a question in this debate that is largely been unaddressed: What will happen to minority businesses as a result of this political attempt to pull back from globalization? The relentless attack technology has on inefficiency, the quest for profitability, and economic relevance will determine the winners and losers in business in the near future. MBEs must do two things today – not tomorrow because tomorrow might be too late. First, MBEs must learn the cutting edge technologies that are impacting every level of their existing value chain. This is both a defensive and offensive strategy. Technological change has no friends. The company that supplies you today or the companies that you sell to today could be implementing technologies that make you superfluous; just like toll collectors. Offensively, learning today’s best technologies will open your eyes to new opportunities. Pitney Bowes was primarily known as a mail meter manufacturer. Today PB thinks of itself as a global mapping technology company.

The second thing MBEs must do is aggressively make changes in their technologies. Technology is just a word. A horse and buggy is a technology. It just happens to be not as efficient as a Tesla. Your technology is not horse and buggy, but it needs to be improved – constantly. This is not one of those tasks that once you are done you are done. Technology is changing every day, and every day you must try to be aware of the changes your consumers, your suppliers, and your competitor are considering and implementing.

The benefit of this effort to stay technologically current is that not only will you survive, you put yourself in a position to be the leader in your industry: not the minority leader – the leader. The fight against globalization is real, but it is not the problem which you need to focus your attention. In a few short years, this anti-globalization movement will, like a virus, run its course with or without your active support or opposition. We have never really had free trade, but we will have managed trade, buttressed by global agreements. You need to spend your precious few seconds revolutionizing your business. It can be done. You can do it.