22 August, 2005

The Dangers of Globalization

The Premise

The Diane Rehm Show hosted Barry Lynn today to discuss his book, End of the Line: The Rise and Coming Fall of the Global Corporation. Lynn was a globalization consultant for many business, and, over the years, came to believe that as our economy has become more global for the sake of efficiency (which all economists will agree is a benefit), this efficiency has come with increased risk. He gives examples such as computer manufacturers relying on chips from Taiwan, and we are thus importing their political instability in the form of component-reliance. Lynn's solution is to use the US Government to force diversification and backup, such as a law stating "no one foreign country can supply more than 25% of a given product."

My criticism

Such a law would probably have the intended benefit - political disturbances in Taiwan would have less of an effect on our economy because businesses would be forced to also use Brazil.

(Opponents who still accept that this is a problem would argue that the US Government should be giving tax credits to companies doing manufacturing and sourcing within our borders so as to decrease dependence on foreign goods and services overall. This has some merit, but strikes me as a little heavy-handed. It's basically substituting tax money for efficiency, which smacks of socialism. This doesn't work.)

I, however, like to think of Government as the solution only when we can't come up with a free-market solution. Therefore, I began to brainstorm some ideas that will help alleviate future problems due to dependence on unstable resources. (By the way, people who study computer science will be smacking their foreheds and saying, "duh," throughout this whole article, because we're constantly trying to limit dependence upon unstable resources.)

Some ideas

  1. A company that offers foreign-instability-insurance. If you've got a $10B business that relies on information stored in Bangalore, we'll give you money when Bangalore falls into the ocean or erupts into civil unrest . . . for a price. This has the benefit of being immediately profitable (we're not making payouts until something bad happens, and we're taking in premiums from the get-go), but the actuaries are going to complain a lot because they've never seen a problem like this.
  2. A company that offers goods/services backups. Creating domestic copies of Dell's offshore data is quite easy, but how do you create a backup chip manufacturing or chemical processing plant? A backup textile factory? Perhaps the company could have a branch that specializes in really fast construction and buy up land in cheap areas to be used at a moment's notice. Clearly location isn't important, since the plants are now 8000 miles away.
  3. (as a little bonus, Company #1 could offer discounts to businesses that employ the services of Company #2 - now we've got a risk-reducing empire on our hands!)
  4. A company that stops natural disasters. You'd just call them up and say, "hey, in case there's an earthquake about to hit India, I'd rather it didn't." Technical specs to be hashed out later.


Anonymous said...

You should really just write a book.

Anonymous said...

"hey, in case there's an earthquake about to hit India, I'd rather it didn't."

Political and economical strategery at its finest.