The Truth about Job-Taking Machines, Globalization, and Mexican Trade | Robert Kaplan | Big Think

The Truth about Job-Taking Machines, Globalization, and Mexican Trade

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The US economy has spawned a vicious cycle that few people are talking about, but it's one that affects us all. You, right now, are likely caught in that ugly loop. In fact, it's what may one day send you packing from your job. It's called technology-enabled disruption. And the worst part? (There's a worse part!?) You contributed to it in a big way, explains Robert S. Kaplan. Advancements in retail technology gave consumers the power to shop smarter and put pricing pressure on manufacturers. That pressure is "rippling back, through impacts on workers and their wages, and maybe encouraging businesses to increasingly replace workers with technology," says Kaplan. In a nutshell: every time a consumer finds a bargain, a robot gets a job.

But tech-enabled disruption isn't prominently on the public agenda. Currently a multitude of loud voices are blaming globalization for America's waning job market but, as Kaplan explains, it seems to be a case of misdiagnosis. It is crucial to identify the correct cause of the coming job market crash because if the problem is globalization, policy makers will take one set of actions (like withdrawing from trade deals). However, if it's technology-enabled disruption, that calls for an entirely different set of actions. The danger of this is most easily understood through US-Mexico trade, which Kaplan argues does not milk jobs from the US, but rather creates jobs, keeps US businesses competitive, and actually grows US GDP. It's time to re-think America's plan of action, and hopefully get the solution right the first time around. You can read Robert S. Kaplan's latest essay at the Federal Reserve Bank of Dallas.

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ROBERT STEVEN KAPLAN:

Robert S. Kaplan is president and chief executive of the Federal Reserve Bank of Dallas. Previously, he was the Senior Associate Dean for External Relations and Martin Marshall Professor of Management Practice in Business Administration at Harvard Business School. He is also co-chairman of Draper Richards Kaplan Foundation, a global venture philanthropy firm, as well as chairman and a founding partner of Indaba Capital Management. Before joining Harvard in 2005, Kaplan was vice chairman of the Goldman Sachs Group with responsibilities for Global Investment Banking and Investment Management.

He has written several books on leadership and goal development, including 'What You're Really Meant To Do: A Road Map For Reaching Your Unique Potential' published by Harvard Business Review Press. You can read his most recent essay here.

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TRANSCRIPT:

Robert S. Kaplan: So listen, during almost my entire lifetime globalization has been a key element of our economy. It started decades ago as many industries wound up—manufacturing in particular—off-shoring jobs to take advantage of lower labor rates in other countries. And so we lost manufacturing jobs in this country due to globalization. But the other part of globalization is increasingly the S&P 500, the 500 largest companies domiciled in the United States, are increasingly finding a larger share of their revenues and profits are coming from outside the United States.

And the other part is our trade relationships, the nature of them, are changing due to globalization. I’ll take Mexico as an example. Right now, of the imports to the U.S. from Mexico, 40 percent of those imports is U.S. content. So what is that about? It means these are not just trade relationships. These are integrated supply chains and logistics that, in our judgment at the Dallas Fed, are making the U.S. more competitive, likely actually adding jobs in the United States and keeping those jobs from going elsewhere, most likely to Asia.

The last part of globalization that we have to—a couple of more parts I’ll talk about is China is much bigger today than it was 10 years ago and 20 years ago, and I mean much bigger as a percentage of global GDP. China has been growing at much higher rates consistently than almost any other country in the world except for maybe India. It means they are a larger percentage of global GDP and they’re a much larger percentage of global GDP growth. Okay, what’s the impact of that?

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