An excerpt from my book “The Third Wave“, published at the end of 2012.
The terms globalism and globalisation were coined in the 1930s and have been in common use for well over half a century. In general, globalism refers to the emergence of an international network of social and economic systems supported by the understanding that information, people and goods should be able to cross international borders freely. In our context, globalisation could be called “macro-globalism” since it describes trends and interactions on a large scale, typically involving the interactions of countries and entire industries or sectors.
Until recently, the commercial world has viewed the globalism concept more in terms of products than people. Globalism in a manufacturing sense was perhaps most solidly established in the Western world by the Japanese in the 80s and 90s. Their meticulous attention to quality, extreme work ethic, and leverage with technology eventually produced electronics and vehicles which at a certain price point were in many ways superior to the standards coming out of the United States and Europe at the time.
Today there is a growing recognition that China is now the manufacturing powerhouse of our age, with an extraordinary ability to duplicate intellectual property and deliver it at a very low cost. It is predominantly the labour cost efficiency of Asian manufacturing countries which results in the shelves of Australian stores being full of low cost products and our homes with cheap and high quality consumer goods.
For example, we have come to accept that the “normal” price for a typical flat-screen TV is between $500 and $1000. But had this same product been produced in Australia, it would likely cost between $3000 and $5,000, and very few middle and low income Australians would be able to afford even one.
micro – “small scale”
global – “world economy”
ism – “a philosophy or system”
There are several reasons for the higher cost of production in Australia. As we indicated earlier, wages are the major factor, although legislated health and safety requirements, together with other compliance costs, also contribute to the non-competitive nature of Australian-produced goods.
Whilst legislation targeted towards both employee safety and corporate compliance has a highly positive impact upon worker injuries and employer financial integrity, it also dramatically increases the cost of production. Add to this the fact that unskilled and semi-skilled labour in Australia often costs ten to twenty times more than similar skills in other countries and you begin to see why Australian employers in almost all fields of industry find it impossible to compete on a cost basis against developing countries.
Labour costs have also decimated many repair-related industries in this country, with the result that most cheap consumer goods end up in land-fill when a minor repair might have given the products a new lease of life.
We have been comfortable with this cost difference to now, and indeed celebrated it as a defining part of our industrial relations and humanitarian success.
To traverse from savage penal colony clashing with ancient indigenous culture, to one of the highest overall living standards in the world, in around 200 years is truly remarkable . (Though let us not forget that many indigenous Australians have a very different and justified view of that “progress”).
While it is clear that goods produced by cheap foreign labour have infiltrated almost every home in Australia, the impact of that cheap labour has not yet made its presence felt in the wider Australian employment scene. Yet its not a large conceptual step to go from cheap manufacturing labour to cheap technical labour, and cheap office administration labour, and cheap professional services labour, and cheap sales support labour.
What we are now witnessing is large scale “macro” globalism transforming into its next inevitable stage; micro-globalism. Micro globalism is the expansion of global influences to all aspects of product and services delivery.
In the new world of business micro-globalism, the decision about where a business task will be done, is not based upon the location of the client, the location of the management, or the location of the contract. The geographical location of each task, has become purely a function of where it can be done to an acceptable quality at the lowest price.
The roles and tasks that will move to lower cost countries first are those which are “geographically impartial”. That is, work that can be done outside Australia without a difference in quality because the location of the worker is irrelevant if they have the right skills.
Technology is core to both geographic impartiality and micro-globalism. Much of the work that can be now done in another country is because of technology systems that make this possible, convenient, and low cost.
The rise of Cloud Computing has further increased the tasks that can be done from any location. Cloud Computing describes the centralisation of business IT systems for reliable access from anywhere in the world.
For organisations which are sensitive to the physical storage location of data, technologies like Private Cloud allow them to have a high degree of control over the security of their information. It also allows them to have flexibility over which applications and information can be accessed by which staff, and where in the world. Importantly, Private Cloud is now affordable to every business in Australia, and costs represent only a small fraction of the savings with cheaper labour.
Technology marches inevitably forward, and we can expect that further evolutions will enable even more roles and tasks to become geographically impartial, and global communication systems to become consistently stronger and more flexible.
The traditional concept of globalisation refers more to the physical creation and global distribution of tangible goods. It began with the refining of international trade standards, the standardisation of shipping systems, and the establishment of global manufacturing hubs. Micro-globalism, on the other hand, has more advanced technology at its core and may be thought of in relation to the electronic movement and manipulation of information and intellectual property. Technology has now enabled the global distribution of “white-collar” processes, making a wide range of business functions geographically impartial.
Over the coming years, even the small details of our daily lives will become heavily influenced by people from all over the world. Services that we expect are purely local, will all end up having a foreign component to them.
For example, you may call a local glazier to get a broken window replaced. During that interaction, the following scenario is highly likely.
– The website or directory you used to find the glazier was built in Sri Lanka, and is physically hosted in the United States.
– The helpful person who answers the phone and does your quote lives in the Philippines, though they seem to have a detailed understanding of the suburbs in your area, travel times, and kinds of glass in houses like yours.
– The software being used to record and execute your glass job and to manage glass inventory was created in Ireland, and is hosted in Europe and mirrored in several different countries for high availability.
– The processing of the invoice, the emailing of that invoice to you, will all be done from outside Australia.
In fact the only part of the work that is purely local is the trade-person that arrived onsite (in the imported utility) to fit the (imported) glass.
Micro-globalism is an immutable law of the today’s business environment. Micro-globalism occurs where disparity in national labour costs are empowered by the effects of technology, communication, and education, to shift the geography of work performed.