Over the coming decades, a labor shortage in China will force U.S. multinational businesses to remake their China operations or pack up and leave. This change will start the next chapter in the history of globalization, “where automation is king, nearness to markets is crucial and the lives of workers and consumers around the world are once again scrambled,” according to a front-page Wall Street Journal report titled: Demographic 2050 Destiny.
Demographic 2050 Destiny. www.wsj.com/2050
In the last chapter of globalization, U.S. manufacturers chased cheaper labor by relocating their factories and supply chains to China and other emerging economies. CEOs and their PR spin doctors then persuaded people those factories simply needed to be closer to the millions and billions of future customers entering the middle class in countries like China, India, Brazil and Mexico. Conspiracy theorists believed that the real motivation wasn’t cheap labor or a crucial nearness to markets, but a subversive strategy to unshackle their companies from the chains of U.S. organized labor and Union leaders.
That conspiracy theory seemed plausible after European automakers like BMW and Mercedes opened brand new factories in the U.S. Why? Because BMW and Mercedes manufacture their entire global production for several classes of cars here in America – and then cost-effectively ship them from our ports like Charleston and Mobile to more than 100 countries around the world. If “nearness to markets” isn’t crucial for European manufacturers who make cars in America and then ship them worldwide, why is it “crucial” for U.S. manufacturers?
Also, if some powerful marketing force of consumer magnetism did exist, why do an increasing number of nations feel the need to establish protectionist government policies that penalize companies who don’t make products in their countries? For example, why does Brazil fear that their hundreds of millions of new middle class consumers will prefer foreign-made goods? Perhaps it’s because they’ve seen American consumers voraciously consuming the contents of massive cargo ships stacked high with truck-size containers of Chinese products sold by the billions at WalMart and other retail stores.
Understanding the truths or facing the facts about the last chapter of globalization could be critical to what happens during the next chapter of Globalization. For example, if a manufacturer is in the planning stages to construct a brand new completely-automated, “lights-out” smart factory next year – and assumes that “nearness to markets” is NOT crucial – then what’s the best place on planet earth to locate it. Let’s make that question even more interesting… Make it a T-shirt factory. Yes. Clothing.
The garment industry was one of the first to chase cheap labor worldwide. And when people talk about a “Manufacturing Renaissance” in America — few if any people, politicians or pundits would even begin to pretend that this nation could ever cost-effectively mass produce our own clothing again. Yet, as the latest segment of the Wall Street Journal’s front page report describes today… Levi’s and the garment industry are rapidly becoming highly-automated with lasers cutting, robots sewing and other computer-driven machines making clothes.
As global garment factories become more highly-automated, could America competitively make clothing again? Well, we still produce about 18 percent of the world’s cotton. Up until a couple years ago, it was over 20 percent because the U.S. government spent several billion dollars a year to subsidize U.S. cotton growers. Recently, a world trade court ruled those subsidies were illegal and unfair. Our nation’s leaders said – “Oh well” and simply stopped them which is now quite quickly devastating our nation’s cotton industry.
If government leaders understood the last chapter as well as the next chapter of Globalization, they might have considered other options. Reinvest those billions from government subsidies into new policies and programs that would create a “U.S. Garment Manufacturing Renaissance.” Transform our high-priced cotton into globally competitive value-added manufactured goods like T-shirts and clothing. Create an X-Prize or a Manufacturing Innovation Institute to pioneer the most highly-automated or ideally a “lights out” T-shirt making factory.
The transition to the next chapter of Globalization where “Automation is King” is just beginning. Numerous questions will confront us in the decades ahead in what Andrew McAfee calls “The Second Machine Age.” Human emotions will naturally cheer for the underdog in the age-old Man versus Machine battles dating back to the Luddites and John Henry folk lore. Feel it for yourself as you — Watch a Samurai warrior compete with an industrial robot.