Musing about the Future, Part II

Rising fuel prices are bringing some reversals to globalization trends, and bringing some traditional forms of manufacturing back to the United States.

I would like to say "I told you so," but apparently I didn't. After careful perusal of my archives it appears that many of the thoughts I've had about the future of energy and global markets never made it to the electronic page. So far, only my husband, and my colleagues on the Technology Committee have had to listen to those ideas, which were prompted last summer by reading Thomas Friedman's The World is Flat

Today, the New York Times has a piece "Shipping Costs Start to Crimp Globalization" which documents that changes I was predicting for the future have already begun. Globalization, the dispersion of economic activities across the world is driven by the search for cheaper and cheaper labor, and considerations of monetary exchange rates, tax policies, and environmental restrictions. Globalization has been made possible by cheap transportation and the global spread of instantaneous digital communications. Friedman and others have viewed the globalization process as moving in one direction only, to greater and greater integration of all localities into one world-wide economic web.

Thomas Friedman's description of what happened to the world up through 2006 is excellent. However, as I read The World is Flat last summer, it occurred to me that Friedman's predictions for the future did not take into consideration what would happen when the cost of fuel made transportation a more important cost than labor. That was in July 2007, when the cost of oil was approximately $70 a barrel. The cost of oil yesterday, August 1, 2008, was $125 a barrel an increase of seventy-nine percent - and this is nearly $10 less than the all time weekly high of $134 a barrel last month (July 2008).

Since cutting costs is the driving force behind globalization, it seemed to me logical and reasonable, that as the cost of moving goods across oceans become more expensive this would offset other costs (such as labor, taxes, and environmental controls) and make production of goods closer to end consumers more appealing. Moreover, a rise in transportation costs seems inevitable given the finite nature of the primary transportation fuel - petroleum.

As much as oil prices have risen (and with expanding economies in Asia to blunt any declines in consumption from the U.S. and other advanced industrialized countries) traditional economic theory would predict rises in world oil production. Albeit that many oil producing nations (especially within OPEC) are not market economies, even state owned industries are not completely immune to the pull higher prices can have on production levels. However, the Energy Information Agency of the U.S. Department of Energy gives oil production figures that show only small increases in world production in recent years, and even small declines in early 2008.


Oil production from Saudi Arabia where oil is state owned rose from August 2007 to January 2008, and then declined slightly in the first quarter of 2008. In Russia, where major efforts have been made to privatize and modernize oil production, saw small but steady production declines from August 2007 through April 2008. The overall pattern of world oil production in this time of rising prices suggests that oil is becoming more difficult and more expensive to find and produce. The easing of oil prices (and the price of gasoline at the pump) in the last three weeks, does not signal a long term return to cheap fuel, but a short term adjustment to the downturn in demand in the U.S. The long term outlook is for fuel prices to continue to rise.

The NYTimes article provides some specific examples of industries that have already bucked to the globalization trend due to increased costs. One of particular interest to people in central Appalachia were I'm located is a return of furniture manufacturing to the region.

Until recently, standard practice in the furniture industry was to ship American timber from ports like Norfolk, Baltimore and Charleston to China, where oak and cherry would be milled into sofas, beds, tables, cabinets and chairs, which were then shipped back to the United States.
But with transport costs rising, more wood is now going to traditional domestic furniture-making centers in North Carolina and Virginia, where the industry had all but been wiped out. While the opening of the American Ikea plant, in Danville, Va., a traditional furniture-producing center hit hard by the outsourcing of production to Asia, is perhaps most emblematic of such changes, other manufacturers are also shifting some production back to the United States.
Among them is Craftmaster Furniture, a company founded in North Carolina but now Chinese-owned. And at an industry fair in April, La-Z-Boy announced a new line that will begin production in North Carolina this month.

The U.S. steel industry is another that has seen resurgence due to rising transportation costs, while steel imports from China have been steadily declining in recent years.

The assumption by Friedman (and others) that all industries would eventually move into "just-in --time" supply lines that span the globe, is likely to run afoul of rising transportation costs and greater uncertainty of fuel supplies. The NYTimes article gives a few specific examples of industries opting for local suppliers for components in their products, which hints at a future in which more localized neighborhood based integration of groups of producers and suppliers may reappear in the American landscape.

This does not mean that there will ever be a complete retreat from global trade. As Brian Fagan discusses in The Great Warming even during the unpredictable precipitation in the Sahara Desert during the "medieval warm period" camel caravans carrying a variety of goods continued to be regular feature of northern Africa's economy. However, it does mean that the future global economic landscape may not be as "flat" as it is today.

The real education for a "flat world"

I submitted this to the Lexington Herald-Leader as an Op-Ed piece, but the events of the last 8 days pre-empted its printing. So rather than let it go to waste, I'm going to post it here. Particularly since I have a lot more to say on the subject of education and the future. So here it is:

The young people of Kentucky face an uncertain future. No one really knows what the jobs of the future will be, or what types of knowledge will be required to do those jobs. To be workers in the twenty-first century Kentucky youth require and deserve an extraordinary education. They deserve the kind of education I was privileged to receive. They must receive an education that goes beyond training in technical skills. We have to teach them how to think for themselves. This kind of education takes time, it takes talented, knowledgeable teachers who love their work and are well rewarded for it.

Since I began working, in 1967 at age 16, I have held nine full-time jobs and more than a dozen part-time jobs. I have been a babysitter, waitress, library assistant, a field hand, secretary, office manager, bookkeeper, and library circulation manager; in the academic world I have held five different research assistant positions, been a teaching assistant, and a college teacher at a total of four quite different institutions. During my 28 years as a teacher, I have prepared and taught twenty-six different courses in sociology, anthropology, education and statistics. During my academic career, I have also been paid for writing newspaper columns, research and consulting for community groups, writing book chapters, reviewing, and writing poetry.

During the forty years of my working career, I have seen office work go from manual to electric typewriters, to correcting electronic typewriters, to computers, to a host of digital devices. The first time I ran a computer program I handed a pile of punch cards to an operator in a huge room filled with a single computer, then waited an hour to receive my printout. Now I do far more complex analyses in minutes on my notebook computer while sitting on my front porch.

The first work telephone I answered had a dial, one line and no “hold.” Now the computerized VoIP phone on my office desk is capable of hundreds of functions. As a teacher I have gone from cranking out mimeograph and ditto handouts, to photocopies, to pin-dot printers, to full color desk jet printers that also scan and fax documents. In the classroom I’ve gone from 16 mm movies with projectors to video cassette recorders to DVD players. I’ve gone from film strips to overhead projectors, to PowerPoint, to Smart Boards. After decades of teaching in classrooms with chalkboards, I have adjusted to teaching students simultaneously at multiple sites through interactive television, to telecouses and Internet courses.

The changes I have experience in the work world are typical for many workers of my generation, but they pale in comparison to the changes that young people starting in the work place today will face.

Like most workers many of my job changes over the years were not voluntary. Businesses went bankrupt, research projects ended or lost their funding, tenure and promotion was denied, and it was necessary to find a new job. Yet in forty years, the total amount of time that I have been without any employment is three weeks, and the longest single period of unemployment I ever had was five days during the recession year of 1973. Some of it has been luck and some sheer perseverance, but primarily I ascribe my ability to adapt, change and adjust successfully to the changing work world to a superior education.

The education I received in high school, but most especially in college, did one thing extraordinarily well – it taught me how to think and how to learn – about anything. Sure, I remember some of the content of the courses I took: the novels of D.H. Lawrence; the revolutionary designs of Frank Lloyd; the beauty of the poetry of the Bhagavad-Gita; the problems of urban renewal in the 1960’s; the problems of the Greeks in the Peloponnesian wars; the differences between the programs of Trotsky and Stalin. But content wasn’t really the point of my education. The point was developing the skill of reading and comprehending extremely complex information, and learning how to summarize it, analyze it, synthesize it and use it in new ways. I learned how to take any subject and learn what needed to be learned, then to apply that knowledge to new and unique situations.

This is the kind of education that we must invest in for the next generations of Kentuckians. This is a price we must pay to ensure all our futures.

What kind of American workers does business really want?

I happened across a news story today: https://news.bbc.co.uk/2/hi/technology/6224183.stm
Article entitled $100 laptop project launches 2007. In this article, Negroponte, the leader of this project, had the following to say about schools in AFRICA (not the U.S.):

"In fact, one of the saddest but most common conditions in elementary school computer labs (when they exist in the developing world), is the children are being trained to use Word, Excel and PowerPoint," Mr Negroponte said.
"I consider that criminal, because children should be making things, communicating, exploring, sharing, not running office automation tools."

If "running office automation tools" is inappropriate learning for elementary school children in developing nations in Africa, should it not be inappropriate for college students in American community and technical colleges -- if what we really want to do is prepare our students to compete in a "flat world"?

I teach (sociology and statistics) for Southeast Kentucky Community and Technical College, part of the statewide Kentucky Community and Technical Colleges System (KCTCS). At Southeast, and I suspect at all the KCTCS schools, only a very tiny number of students who take programming courses learn the kinds of skills Negroponte is talking about. Those who learn to use the computer at all learn to use Microsoft Office.

[Since I teach in a severely economically depressed area, the students don't come into college with much more than the ability to use a browser and instant messaging. What they primarily seem to use the browser for is shopping. They also are quite adept at using Google to hunt up websites to plagiarize in place of doing their own rudimentary thinking about reading assignments. I ask students to read a short essay or article, then to summarize its main points and reflect upon them in relationship to some of the sociological terminology they are supposedly learning. Not an especially demanding intellectual exercise. But many of them immediately rush to Google, and turn in mindlessly cut and pasted papers. ]

No one has ever seriously contemplated the idea that the majority of students that pass through our doors should be computer competent enough to be Linux users and able to do some programming of their own. Yet this is exactly what is needed if our students are to have any chance at competing for jobs in Friedman's "flat world."

By the way, I quite agree that the world is getting flatter, but, I highly skeptical of the degree to which that is empowering individuals as Friedman so optimistically claims. I strongly suspect that what the "flat world" has done has made is easier for larger multinational corporations to run-rough shod over more people faster at less cost!

Given the insistent focus that our community colleges have on students learning to use the latest Microsoft product, it makes me wonder whether the business community (and hence the community colleges which bow down to the business community) really wants the kind of creative, innovative, self-directed, wired worker that all the flat world rhetoric extols.