Globalization unquestionably rearranges the business and social landscape on most places on Earth. This is particularly acute and painful in one side of the labor market. The process can be visualized in two stages:
Stage 1. Labor reallocation. Jobs displacement to cheaper labor force countries – outsourcing.
○ The developed country needs higher skilled workers and offers higher paid jobs. A retraining of the displaced labor force is imperative.
Stage 2. New work found. The previously displaced and effectively retrained workers find new and higher paid jobs.
○ Generating more income, which also increases their investing and spending capabilities.
○ Which, in turn generates more jobs. A full virtuous circle in motion.
This rearranging process simultaneously creates both opportunities and threats, depending upon the particular circumstances of the person, organization or country under the spotlight. That in turn generates anxiety and a general feeling of uneasiness, unless you happen to be in the winning side of the process.
The losing side of the process just mentioned, only applies to the first stage, where, in most cases there is a winner for every loser. Fortunately, if enough flexibility and learning attitude exists, there are always ways to benefit from globalization.
“Once you embrace unpleasant news, not as a negative but as evidence of a need of change, you aren’t defeated by it. You’re learning from it.” –Bill Gates
The major foundation of the fear and anxiety that globalization provokes is the result of a lack of a proper understanding regarding what globalization is really about. In its wider perspective, globalization means sharing markets and opportunities across the globe. However, when there is not a sufficiently strong desire to learn, to adapt and thrive, globalization becomes a nightmare –a big monster that has to be exterminated.
Most of the time, the perspective under which globalization is viewed is not holistic enough. What about the global consumers? How in the world can we –global consumers– aspire to better products and services at better prices by hampering the globalization process?
The present worldwide economic stagnation –if not outright recession, like in many European countries– with the resulting dire status in the jobs market and its painful effect in income, is essentially the result of the lack of flexibility from most societies in the globe that naively aspire to protect their –declining– status, without appropriately adapting to the changing, new circumstances; like a surfer opposing the waves, instead of riding them.
It is crucial to understand that, in essence, no matter what we do or fail to do, the globalization process is unstoppable. At most, it can be delayed and hampered, at a great cost to the transgressor of the 5 basic laws and principles behind globalization: Comparative advantage, Free markets (learning to compete in a fair game), Creative destruction, The price of mechanism, and the double entry truism (cause and effect).
Globalization is unstoppable because it is deeply rooted in a very sound basis: the search for better living standards for as many people as possible.
The comparative advantage principle states that every person, organization or nation should concentrate on doing what they’re best suited for. Naturally, that can only flourish within the context of a reasonably free market.
Unfortunately, but quite understandably, in the process of thriving and appropriately adapting to the new, ever-changing circumstances –in an evolutionary, essentially orderly way, for the experienced observer– the collapse of some of the old ways of doing things is inevitable. This phenomena has been aptly described in sociology and in economics as creative destruction. It is one of the typical manners of evolutionary change in free market societies. Granted, it is very painful for the displaced workers. All efforts must be made towards effective and quick retraining. Here is where the win/win situation materializes. If retraining has been performed correctly, the new jobs will be better ones, in every aspect, higher on the skills scale.
The price mechanism, as ancient as it is, does not seem to be properly understood by a significant portion of the global society. Cost considerations are paramount in any business endeavor. An entrepreneur, and/or any corporate officer is not to be blamed by constantly striving to remain cost competitive, even if it implies transferring tasks —along with jobs– abroad. Likewise, from the consumers standpoint, it makes all the sense in the world to aspire to excellent products and services at affordable prices. This is the double-entry truism.
In the final analysis, globalization is a profoundly human and social phenomena. But in order to make the best of it, it is essential that we understand it. Avoiding the hard issues has never been a valid, lasting solution to anything worthwhile.