Issue link: https://www.e-digitaleditions.com/i/86587
Editor's Letter Competition Compensation Quick, what do these four things have in common: cameras, motorcars, fax machines, and factory workers? The answer is that, within the past decade or so, they've all been digitised. The difference between the first three and the last is that the former are still considered current. The image of a grimy labourer hammering rivets seems almost quaint. But just as snapshots are now ported on memory chips, just as dashboards now give real-time data about auto performance, and just as the pixel is displacing the practice of sending ink by telephone, so is the factory worker morphing into something new. And that's evolution. Which is not the same as extinction. We are entering what The Economist has dubbed "the third industrial revolution." The first stage—recall your grade school lessons about replacing draft animals with machinery—entailed the rise of the factory. Fast forward a century to the assembly line and the advent of mass production: That was stage two. Now comes the age of industrial digitisation. With that comes, in some ways, the opposite of mass production: mass customisation. Or, for those pitching software-as-a-service, mass configuration. This is a world in which carbon fibre offers significantly higher strength-to-weight ratios than traditional aircraft materials, potentially yielding huge fuel savings. It is a world in which nanotechnology makes for vastly easier cookware cleaning. It is a world in which 3D printing might well mean that "made in your basement" becomes as common as "made in China." In other words, it is a world changing out of all recognition—a world of profound disruption. And it is destroying certain jobs. Some car manufacturers now produce twice as many vehicles per employee as they did just 10 years ago. That said, factory workers are not obsolete. They are just fewer in number—and more likely to be sitting in front of a computer screen than standing on an assembly line. They also increasingly might be found sitting in shops that are based in Europe or the States. The geography of both supply chain and production are realigning. As labour costs decline as a percentage of production, wage arbitrage loses some appeal. Locales with a developed rule of law, a highly educated workforce, and modern transport systems will see new opportunities. That does not mean the end of globalisation. Anything but. Still, manufacturing has already begun repatriating to rich counties, and the trend is likely to continue. Globalisation and digitisation are net goods. But the net has holes. Multinationals arbitraging the labour pools of India and China have inevitably put some in the West out of work—statistically, those without college degrees most. Yes, globalisation has generally reduced prices. But it has also cut jobs, in ways that seem pretty much irreversible. Responding to dislocation with protectionism—erecting barriers to imports and imposing penalties on outsourcing—would cut off too many noses to spite too many faces. Digging a moat in hopes of preventing multinationals from leaving the castle simply won't do. What's more, it would be particularly injurious to emerging economies (which, by the way, offer new customers, not just new labour threats). The problem requires a smarter, sustainable, nuanced response. Global taxation treaties might be negotiated some day. But that day seems pretty far off. Ditto global labour and environmental standards, or the knitting together of any meaningful international safety net. Somehow, we need to reallocate outsourcing cost savings to a kitty for retaining the displaced. Retraining for what would differ from sector to sector, but the impulse would not be charitable. It would be an investment. Thinkers, let's get to work. Dirk Olin, Editor-in-Chief [6] HRO TODAY GLOBAL | SUMMER 2012