Friday, October 14, 2016

What will technology do to globalization?

A big part of the political upheavals currently afflicting many nations in the First World, including the USA, is the impact of globalization, defined as "the process of international integration arising from the interchange of world views, products, ideas, and other aspects of culture".  Supporters claim that its benefits far outweigh its disadvantages.  For example, the Economist defends its economic benefits:

Export-led growth and foreign investment have dragged hundreds of millions out of poverty in China, and transformed economies from Ireland to South Korea.

Plainly, Western voters are not much comforted by this extraordinary transformation in the fortunes of emerging markets. But at home, too, the overall benefits of free trade are unarguable. Exporting firms are more productive and pay higher wages than those that serve only the domestic market. Half of America’s exports go to countries with which it has a free-trade deal, even though their economies account for less than a tenth of global GDP.

Protectionism, by contrast, hurts consumers and does little for workers. The worst-off benefit far more from trade than the rich. A study of 40 countries found that the richest consumers would lose 28% of their purchasing power if cross-border trade ended; but those in the bottom tenth would lose 63%. The annual cost to American consumers of switching to non-Chinese tyres after Barack Obama slapped on anti-dumping tariffs in 2009 was around $1.1 billion, according to the Peterson Institute for International Economics. That amounts to over $900,000 for each of the 1,200 jobs that were “saved”.

There's more at the link.

Unfortunately, those same benefits bring with them associated penalties, most particularly the loss of local jobs as production is 'outsourced' to countries with lower personnel costs such as wages, benefits and other overheads.  What's more, skilled workers from those countries can be employed at much lower costs in this country than local workers - hence the dramatic increase in the H-1B visa program, which benefits corporations (particularly those that 'game the system') but penalizes their US employees.

Many lower-skilled jobs are paid so poorly that US workers literally can't afford to take them;  welfare and other unemployment support programs pay them more than they could earn at those jobs.  (Whether such benefits should be so lavish is another question, of course.)  Instead, companies offering such employment (e.g. farms, food processors, construction companies, etc.) rely, explicitly or implicitly, on cheap foreign labor, sometimes legal, often illegal.  Most of the millions of illegal aliens currently in this country would not be here if they could not be sure of employment.  Thus, illegal immigration - a major social issue and cost to the taxpayer - is directly correlated with globalization from an economic perspective.

A backlash is brewing against globalization.  The recent Brexit vote in the UK is one aspect of this.  The Presidential campaigns of Bernie Sanders and Donald Trump in the USA were also related to it.  Many workers - or those whose jobs were eliminated through globalization - want to reverse its effects, so that they can get their jobs back and revert to their previous standard of living.  However, they're probably doomed to disappointment, because technology - which previously contributed to globalization - is beginning to work against it in entirely new ways.

A prime example of this is 3D printing.  Instead of a part being produced in a factory in the traditional way by taking a block of metal, or plastic, or whatever, and cutting away everything that doesn't belong in or on the finished product, a 3D printer builds up the part by depositing layer upon layer of additive material until it's built what's required.  The application of this technology is as broad as your imagination.  Here are 17 examples, some of which are pretty mind-boggling.

What a lot of people, both pro- and anti-globalization, have not yet grasped is that this technology has the potential to completely upend the current manufacturing cycle.  Raw materials are presently mined in one country, either refined there or shipped to another country to be refined, ordered by a factory, shipped there (perhaps in a third country), and used to manufacture a product.  The finished item is then shipped to customers (perhaps in multiple countries).  Workers are involved in every single step of that production cycle.

3D printing is already radically changing that cycle in certain specialized applications, and promises to do so in many more as the technology is perfected.  A few real-world examples:

There are many more possibilities.  Furthermore, 3D printing is only one aspect of this technological revolution.  If a designer can produce and digitize a design for a product, it can be downloaded to a 3D printer or robotic manufacturing facility anywhere in the world, and produced on demand.  It will no longer be necessary to produce it in a centralized factory, and then export the product to its markets.  This is likely to produce a massive escalation in digital piracy.  If a company produces a particularly desirable product, what's to stop someone buying a single example, laser-scanning it (and/or its component parts), digitizing the design, and producing a 3D printer template that will allow anyone to produce an exact copy, anywhere in the world?  The company may be able to sue a rival corporation or factory to prevent the mass production of such pirated copies, but how can it possibly stop thousands of people from making their own copies at home, simply by downloading the template?

What this means is that a very large number of the jobs associated with the historically typical production cycle are going to be automated out of existence.  Factories will still be the most economical way to mass-produce large quantities of items.  However, when individuals and families, or smaller companies, can produce what they need on their own premises, on demand, that's going to greatly reduce the need to order parts and products from elsewhere.

The technology is still in its infancy, but it's growing by leaps and bounds.  Who knows what impact it will have on globalization?  Not only will this affect production in other countries, but it'll also affect the need for immigrant labor, legal or illegal, in those countries and our own.  Furthermore, those arguing that globalization should be reversed in order to 'bring jobs home' have often failed to reckon with the fact that it may no longer be possible to 'bring them home', because they may have gone the way of buggy whip manufacturers in the age of the automobile.

That's something to keep in mind as we consider the current Presidential election campaign.  How many of the promises being made by any or all candidates have taken this into account?  And how many voters are aware of its implications?



Rob said...

When someone speaks of globalization & technology I cannot help thinking of the cell phone.
Three quarters of the people in the world have access to a cell phone. That' another game changer.

Cambias said...

Protectionism is another form of government control — if you protect an industry it becomes beholden to government to maintain that protection, and government can punish and reward companies by tweaking the protection rules. That inevitably leads to corruption, political favoritism, and throwing good money after bad. It also means that some citizens (the ones paying higher prices) are subsidizing others (the ones getting paychecks from the subsidized industry). That also promotes corruption, political favoritism, etc.

But of course there are some industries you don't want to lose. No nation wants to depend on foreign sources for defense; no nation wants too much of its food or energy to be imported, especially if the import channels are easy to block. So a certain amount of protectionism may be inevitable. But it should always be treated as a last resort.

JK Brown said...

On the other end, the feed stock, I found this guy's work a couple months ago. Now, the feed stock for that 3-D printer can be picked up from the garbage or off the side of the road

He prototyped the machines needed for a personal plastics recycling set up using readily available scrap and offers the plans free for download.

Jonathan H said...

Yes, millions of people have been brought out of poverty by globalization - but how many have been harmed by it? For example, numerous factory cities in China have massive air and water pollution; some estimates say 400 million Chinese don't have access to clean water. Corruption, always endemic in Africa and Asia, is growing even bigger with globalization and can led to accidents and deaths like the Chinese explosion this spring that was traced to improper storage of hazardous materials enabled by bribery, or the large factory collapse in Burma 2 years ago.
There needs to be a way to balance trade and growth both to avoid these problems and to avoid the ever increasing boom and bust cycles that used to be a Western phenomenon and which are now even worse in the developing world than the West. These cycles have the potential to destroy countries that are new to international trade and democracy; for example, the Hanjin bankruptcy and Samsung problems are shaking South Korea badly and will reverberate throughout the West as well - who knows where they will end up?

SiGraybeard said...

This is something I've been posting about for years; there's a New Industrial Revolution starting up, with not just 3D printing, but home CNC and the small ubiquitous computers like the Arduino or Raspberry Pi.

There are already many companies making a living producing personalized products for small markets. Maybe thousands a year instead of millions, with CNC Routers and small CNC machine tools. CNC knives are great example. Like it or not, conventional machining (subtractive manufacturing) has tons of advantages in the materials it can use over 3D printing (additive manufacturing). The first home class 3D printer that can print metals like the big boys can will be a global game changer.

At this point, trying to predict what will happen in 25 or 35 years would be like the guy who said the world market for computers was about four or five, or the guy who said nobody needed more than 640k of memory. The only thing that can be said with complete confidence is that it will be incredibly disruptive to the "world order".

Jeff Weimer said...

Jonathon H - Every time there is an "intervention" to "avoid" these boom and bust cycles it has only made thing worse. See the global economy since the 2008 crash.

And I wouldn't say "globalization" has brought people out of poverty, it's the expansion of capitalism, or better said - human nature (capitalism is an organic system of people dealing with other people). Globalization is merely an expansion of governments trying to regulate human nature in new areas and larger contexts.

David Lang said...

What you are missing about 3D printing vs conventional manufacturing is the difference in cost.

If you need a single part, especially if there are significant delivery costs/delays, then 3D printing can be a good choice.

But it's FAR cheaper to produce thousands of parts through more traditional manufacturing processes, this is very unlikely to change anytime soon.

3D printing is also slow, if you need enough things, it can be faster to order them (amazon next day delivery) than to print them yourself.

There's also the issue that 3D printing doesn't do mixed materials well, and printing in metal is still a very expensive thing to do. Printing custom plastic parts is easy, but you aren't going to print electronics.

That said, 3D printing is enabling some things to be produced that cannot be produced with methods. The fuel nozzles for the latest jet engines for example, or these nozzles

What is becoming far easier is customization of things where standard size components are hooked together with a small number of custom components.

The other thing that is getting much easier is creating the molds and parts to support traditional manufacturing techniques. You can machine a mold to use to in injection molding with a CNC mill, and then produce many identical parts far faster than you could do with 3D printing.

One thing is certain, technology is decoupling the various parts of the work. It's FAR easier for people to design things in one place, have a small shop prototype them, another small shop test them, etc than it ever has been in history. It doesn't matter much if the different parts of the job are in different buildings in the same city, different cities, or different countries.

David Lang said...


Globalization is not governments trying to expand their reach, it's companies and individuals trying to work around government and geographic restrictions

The H1B fiasco is not really globalization, it's working to do end runs around employment/immigration restrictions. It's also a bad example of real globalization.

Hiring people to do the work where it's cheaper helps the people being employed directly (and the population around them as well), and ti also will drive up wages in those areas as they become more productive. So far Industry has been reacting by moving to other areas that are still dirt poor, but eventually (on the order of decades) they will run out of areas to move to and the playing fields will level out to a large extent (regulation levels will still make a big difference)

shugyosha said...

"Makers, the New Industrial Revolution", C. Anderson ends up postulating something in between. Basically, that reducing wages can only lead you so far [*], and you have to account for design piracy, lack of security when operating overseas, latency, shipping costs... Between that and increased agility when making it nearer (northern Africa --EU-- or Mexico --US--) and the possibilities for better local distribution (small CNC, 3D printing...), he thinks that "made in China" will be reserved for very specific runs.

Take care. Ferran

[*] Can't recall the "real world" equivalent, but in computing it's Amdahl's Law.

Nate Winchester said...

As someone who's day job is working with REGULAR printers right now, it's going to be a few decades before I even begin to worry...

"We need this widget! Hurry!"
"Ok um... hang on, my computer doesn't see the printer."
"Turn it off and back on again."
"Done. It... it doesn't recognize the device."
"Did you install the drivers?"
"Of course I did! Let me run a check for updates."
"Google says a recent windows update broke the printer driver."
"ARGH. I'll roll back the computer update until the new driver is released."
*2 days later*
"Ok by using a DOS 3.1 emulator and this Lexmark retro driver we can simulate the printer just enough to get something printed."
"Finally! Sending the print command."
"It says there's a jam in the device."
"Dammit. I'm printing out a gun and shooting myself."
[Printing Device Not Found]

Duke Norfolk said...

Lost in this discussion, almost every time, is the effects of central banks and their inflationary monetary policy (and deficit spending by govts). If our currency hadn't been debased so relentlessly over the last century (and especially the last 45 years when Nixon closed the "gold window") we would have reaped the full benefits of the productivity boom of our economy and our standard of living would have risen greatly.

But instead the rapacious financial sector and the .01% globalist elite have skimmed off a great amount of those productivity gains and pocketed them, through the inflated stock market and other means. We need to stop this grand theft that is being perpetrated in plain sight. But almost nobody understands it or appreciates the damage they have done. And so they go on, laughing at us fools from within their gated estates.