Globalization game

In the past two centuries, there was a shift of “wealth” from eastern countries to western countries. It happened when dominant western countries invaded and exploited weaker eastern countries, it was called “Colonization”. Now there is another shift of “wealth”, but on the opposite direction, from western countries to eastern countries. It happens when western countries are shifting manufactures, businesses, works, jobs to Asian countries, it is called “Outsourcing”. Low costs labor workers have encouraged the shifting of manufacturing works from western countries to China. High skilled IT workers have encouraged the shifting of information technology works from western countries to India.

Some economists call this shift “The Globalization Game” and it has one rule: “Create more profits by develop products, in the largest amount but at the lowest price, in the fast changing and highly competitive market, by applying technology knowledge and human capital”. This rule has forced every industries to change the ways they operate to maximize their profits in this global economy. Few years ago, many people doubted this rule, as they did not believe globalization could ever happen. Today, many can see the validation of this rule when they look at the performance of these global companies. In past few years, their profits have risen from hundred million to several billion dollars. These companies have grown to unprecedented size and no longer “national companies” but become “Transnational” companies. The list of multi-billionaires in the world has changed from fifty in the year 2000 to several hundred in 2010.

“The Globalization game” has also changed the economic equation of some countries. In less than twenty years, both China and India are being restored to the positions that they held two centuries ago. For the first time since the 18th century, they both become the largest contributors to worldwide economic growth. Many people believe that the economic growth of the BRIC group (Brazil, Russia, India, and China) will soon bypass the economic power of the G-7 group (France, Germany, Italy, Japan, UK, US and Canada).

As their economic powers grow, new companies emerge and strengthen their positions in the global market. Few years ago nobody know their names but today, they are giants in the industry. For example Brazil has the largest agriculture company in the world and second in offshore energy exploration; Russia has more energy companies and largest mining company; India has many large IT, pharmaceuticals, and auto parts companies; and China has more companies in heavy industry such as steel, appliances, machinery, and telecommunications equipments than any countries. Of the top 100 largest companies in the world, 84 were in Brazil, Russia, China and India.

The “Globalization game” also created winners and losers. Winners were some Asian countries and losers were many countries in South America (except Brazil) and most countries in Africa as they did not receive anything in this transfer of wealth nor any investments from developed countries. In other word, they were not invited to participate in the “Game”. The shifting of wealth also impact the lives of so many people. Never before in history so many lives have been changed so dramatically by something not wars or famine.

According to a World Bank report, in less than twenty years, over 135 million people escaped poverty and moved to the “Middle class” when their incomes drastically increased. In the next 10 years, the number could grow to 440 million, with most from China and India. However, this change also created another extremes. As the movement of poor people to the middle class, there were another movement of poor people to “extremely poor”. They were people who came from countries that “did not and could not” participate in the “Globalization game”. Many were left behind and basically abandoned by the world. These countries are becoming most vulnerable to economic disaster, political instability, with more incurable diseases and not achieve anything from globalization. The report found extremely poverty in Africa, South America, and few countries in South Asia and the situation is getting worst each day.

What make some countries do well and prosper when others do worst and sink to the point of no hope of recovery? If low costs is the factor then Africa or South America should be able to play because they have labor workers who would work for much less then China or India. The World Bank report conclusion can be described in two words: “Education and Leadership” as it makes the major difference between “Participatory players” and “Not invited”.

As global business grows increasingly all over the world, education has become a key determinant of countries' economic performance and potential. Adequate college education is essential but the quality of college education will be important to determine whether countries successfully develop skilled workers that meet global industry's needs. Today as the world is changing from manufacturing phase to knowledge phase, many countries in Africa and S. America are still living in the agriculture phase. Their thinking and mindsets have not change, their education systems have not change, and their societies have not change. According to a report from the United Nation, most funding aids to Africa have been used to buy arms in their civil wars. Economic supports to South America countries have been funneled to pockets of corrupted officials. Without adequate education and without hope for the future, many African people turn into rebels fighting in their civil wars. Many S. America people turn into illegal traders of narcotic drugs.

The report concluded that it is education or the lack of it can be an explanation of why many countries failed in the global economy. It went further by showing that the form of education that rooted in the 19th or the colonial time (In Africa and S. America) often generated knowledge suitable for the agriculture society where daily lives is focusing on food production and consumption. Their education is focusing on “bureaucracy works” to develop “clerical workers” as the majority of jobs available are with the governments. That type of education is not sufficient for an industrial society where certain vocational skills are needed for workers in the manufacturing. The education must also change to focus on conformant, standardization, and social management skills to effectively support an industrial society. However, with the “Globalization game”, these skills suitable for industrial society are becoming obsolete. It must move into the next phase where continuous learning, fast production, heavy consumption, based on the creation and use of technical knowledge. In this new global economy, the relationship between government, education and the industry is a “symbiosis relationship” where each depends on the others, where both individuals and societies gain benefits from their investments in education.

Currently, the US and some European countries have the best education systems. China is beginning to move up rapidly due to their recent significant investments in education. India is facing a bigger challenge because of their large number of poor and uneducated people, victims of the traditional caste system. Most Indian's top schools are cater strictly to a relatively privileged few. Over half of Indian's population only have the most basic education. It remains to be seen how Indian government will solve this problem. The current question is what about other countries? The countries that have not transitioned successful into the industrial age, at least not yet. Could they survive the next decade of globalization? What will happen to them?

Basically, there are two choices: They could gradually move into the industrial phase by continue to improve their education system. If successful, they could take over some manufacturing works left from countries that have transitioned into the knowledge phase. They will have to live with the consequences of industrial wastes, pollutions, diseases, and labor unrests. They will always follow others in the background and never achieved the respected status. Or they could make the tough choice of rapidly acquire the best education possible. Of course, they will have to invest a lot in education, training professors, acquiring technologies, mobilize their young people so they can “skip” the industrial phase and jump into the knowledge phase. It is difficult, it is bold and brave as it requires vision and leadership. It is possible as India already did twenty years ago. In that case, they will gain respect, a lot of respect as they become an equal partner to play the “Globalization game”. As the World Bank report concluded in two word “Education and Leadership” and it makes a big difference.

Sources

  • Blogs of Prof. John Vu, Carnegie Mellon University

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