Can Innovation Save Us? Part Deux

In my first blog on capital-I “Innovation,” I noted that Apple employs some 40,000 workers but that it was not easy to determine how many were actually American workers employed here in the U.S.A..  On Sunday January 22, 2012, the New York Times published an article that provides better and more up to date figures:  Apple currently employs 43,000 people in the United States and 20,000 abroad, for a total of 63,000 direct jobs.  However, like many companies, Apple does not itself manufacture every component and part of its products; most of that process is contracted out to other companies, mostly located in a variety of Asian countries (the glass covers of the iPhones, interestingly, are made by Corning, but for the most part in factories it has located overseas, primarily to save shipping costs).  The end product is assembled in modern Chinese factories (not owned by Apple) by approximately 200,000 workers.  These workers, the article notes, work 12 hour days 6 days a week and earn per day about what unskilled workers in the U.S. make per hour.[1]  Try to compete against that, regardless of how innovative you are.

Tellingly, the article pointed out a point similar to one I made in my earlier post, that “ ‘If you scale up from selling one million phones to 30 million phones, you don’t really need more programmers.’ ”  Thus it would appear that computer programming careers will never be sufficient to soak up the unemployed and the new-to-work graduates here in America, despite the optimistic rhetoric to the contrary.

The New York Times’ article’s excellent and clear description of globalization focuses on digital products, particularly smart phones (using the iPhone as the primary example) but the description fits most products and commodities today.  Clothing, furniture, automobiles, wines and spirits, processed and specialty foods, are examples of finished products that circulate globally and which more often than not consist of materials and parts made in multiple locations and countries.  On its website, General Motors brags that it sells over 7.5 million vehicles in over 120 countries, much of that product in China.  It also manufactures in many countries—meaning that most of those cars being sold in China are not being shipped from the United States (though some of their parts are).  General Motors is an American company in one sense but an international one in another.  Ford and Chrysler are also now international as much as domestic companies; so are Toyota, Honda, BMW, and Mercedes, which manufacture in the United States and in other “foreign” countries.

Basic commodities and raw materials are also internationalized. Oil and gas, lumber and metals, agricultural commodities, minerals and rare earths come from everywhere and are shipped everywhere.  Alaska ships oil to Japan while Saudi Arabia ships oil to the continental United States.  Given all the shipping back and forth of commodities, it seems particularly out of date and even futile to hope that any country can be truly energy (or any other commodity) independent.  To revert to genuine energy or economic independence would probably set all economies back to the middle ages.  Modern life would be impossible in a world of truly self-sufficient nations.

Will education and training save us?  Will graduating more engineers keep us on top?  Population says probably not.  It is difficult to pin down accurate, comparable figures, so consider these hypotheticals (based on the best 2008 data I could locate):  China appears to be graduating, or close to graduating, only enough engineers to equal .01724% of its population, while the United States is graduating enough engineers to equal .045% of its population.  By percentage of population we look pretty good.  But then note that .045% of the U.S. population is roughly 140,000, whereas .01724% of the Chinese population is 520,000!  Some sources suggest that in 2011, China may have graduated as many as 1 million engineers; if true, that is still a smaller percentage of the total population of China than the U.S. produces, but nonetheless a distinct advantage to China in sheer numbers.  No wonder the New York Times article explained that Apple manufactures abroad in part because “The company’s analysts had forecast it would take as long as nine months to find [the needed number of] qualified engineers in the United States” but that “In China, it took 15 days.”  Our population disadvantage vis-a-vis much of the rest of world will increase as other more populous countries continue to develop.  Perhaps, then, we should start looking to other relatively small developed countries for insights into how to prosper among the whales.

All this to point out that we are moving to a time when to talk of the or an American economy will no longer be meaningful, at least not in the way we have thought of it in the past; we will be talking of a world economy as if it were our economy, because that is what it will be and is already becoming.  Consequently, we will have to shed our old ways of thinking about ourselves and the rest of the world and re-imagine who we are and what role we can play in a world that will continue, despite our right-wingers’ protests, to integrate and other countries to develop.  Individual Americans are going to have to rethink education and career and lifestyle choices and determine what is truly worthwhile and what they really want and how to achieve that in this new global terrain.  Politicians will have to be more truly knowledgeable and genuinely pragmatic and future rather than past oriented (as opposed to ideological and dogmatic).  And because the putatively American corporations and CEO’s are now truly global rather than local or national in their vision (“ ‘We don’t have an obligation to solve America’s problems.  Our only obligation is to make the best product possible.’ ”), the federal government is going to have to learn how to manage and coordinate the economy on behalf of American citizens, who after all do not, individually or collectively on their own, have the power to balance the weight of the global corporations, based here or not.  For the federal (as well as state) government to do that requires that the American citizen also must be a whole lot smarter, more astute, and more global than he or she currently is.

Will that happen?  Not if the Chinese continue building universities and colleges faster than we have been building stadiums and prisons.

[1] “How U.S. Lost Out on iPhone Work,” New York Times, Sunday January 22, 2012, p.1 ff.

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