Book Review

Robots as the Great Equalizers

FILE PHOTO –  A humanoid robot works side by side with employees in the assembly line at a factory of Glory Ltd., a manufacturer of automatic change dispensers, in Kazo, north of Tokyo
Robots could actually help redistribute wealth from rich to poor countries by enabling remote control of factories in emerging markets. Source: Reuters / Issei Kato

When one talks about globalization these days, it is usually to discuss the populist uprising against free trade and open borders, and usually from the side of the critics.

But not in this book from Richard Baldwin, however.

The economics professor, who teaches at the University of Geneva, doesn’t simply deliver an excellent summary of the history globalization with “The Great Convergence.” He also describes how it has changed over the last century, and how thanks to the digital revolution we stand on the threshold of a new age in the evolution of the global economy.

“This book aims to change how we think about globalization,” Mr. Baldwin writes at outset of his work.

This feat is only achieved through the author’s stringent approach to the task.

Branko Milonević, an income inequality expert at the City University of New York, said: “Baldwin doesn’t describe the structure of globalization, but rather its inner logic.”

Picking up Mr. Baldwin’s book is like stepping into an economic time machine.

How did the west become the dominant economic center of the world in just two centuries, generating 70 percent of global economic output? Why did this trend start to change around 1990? And why are supply chains, not national borders, the deciding factors for globalization today?

Only after these questions are answered can Donald Trump’s protectionist counterrevolution be unmasked as the illusion it is. Mr. Baldwin delivers these answers, and argues them convincingly.

Former U.S. President Bill Clinton once described globalization as “the economic equivalent of a force of nature – like wind or water.” Many agree, and, feeling helpless against the “forceful” economic tide, hurriedly fortress themselves behind opposition and protest.

Mr. Baldwin shows, however, that globalization is dependent on the cost of transporting goods, ideas and people from once place to another. With the industrial revolution at the turn of the century, and its new modes of transport such as railroads, steam boats and motor vehicles, mountains of goods could suddenly be launched from coast to coast in no time, for a reasonable price.

“British people could eat corn bread from America and sweetened tea from China with sugar from Jamaica, all served on a tablecloth made from Indian cotton,” described Mr. Baldwin.

“Baldwin doesn’t describe the structure of globalization, but rather its inner logic.”

Branko Milonević, Income inequality expert at City University of New York

The author speaks of the “great divergence,” the drift between the rich countries of the northern hemisphere and the poorer countries in the south. Although the transport of goods may have been cheaper in the south, the transport of ideas, know-how and people wasn’t, and therefore industry and wealth were concentrated in the north.

“The great divergence” resulted in lower trade costs, but higher “communications costs,” Mr. Baldwin wrote.

The change began with the widespread introduction of the internet at the beginning of the 90s.

It was suddenly possible to relocate factories to low-wage countries and, thanks to modern communications technology, integrate them seamlessly into the supply chain of multinationals.

Mr. Baldwin gives the vivid example of Canadian aircraft maker Bombardier, which outsourced much of its production to Mexico, and with the help of pictures and diagrams produced entire rear wings in the low-wage country. General Electric also opened a futuristic factory in Chakan, India in 2015, where 3D-printers produce fuel nozzles for aircraft engines.

Now, instead of having to send the 20-odd individual pieces to India to be assembled by hand, the plan for the finished product is sent digitally, and the rest is down to the 3D printer.

Through new technology such as this, emerging countries such as China and India are inching closer to the rich North. The author calls this the “great convergence,” the new face of globalization. Globalization used to work like the exchange of players between football teams, with both teams benefitting. Now it is as if the manager of a top team has started training a plucky underdog.

But managers of international companies are not concerned with nations, and there are those, in America for instance, who are putting up defenses. Those like Mr. Trump, who seek to hinder the march of a globalization with trade barriers, in effect erecting walls in the middle of factory floors. The anti-globalization effort is likely to intensify if – as Mr. Baldwin predicts – the third barrier, the transport of workers between North and South, is broken by advances in robotics.

Such a progression could lead to “virtual immigration,” by which Mr. Baldwin anticipates the remote control of machines, robots and production processes worldwide. In this world, physical presence can be exported to another workplace. He calls it “the third major untangling.’’

Japanese engineers could repair factory machines in South Africa by remotely controlling robots from Tokyo. A hotel room in Oslo could be cleaned by automatons controlled from Manila. This technology coupled with 3D-printing could dramatically change globalization.

“21st century globalization will increase with new possibilities for data and information sharing,” according to a study by McKinsey Global Institute. Where once shipping containers were hauled, now terabytes of data are sent back and forth around the world.

Mr. Baldwin’s main weakness is that he comes to the same conclusion about globalization as Bill Clinton did: It’s an unstoppable, untamable force.

It may be true that new technology won’t disappear, but globalization cannot be stopped by politics alone. The protectionism that came from two world wars showed how destructive hitting the panic button can be. The onus is on us to set the pace, so that as few as possible are left behind.

 

Torsten Riecke is Handelsblatt’s international correspondent based in Berlin. To reach him: riecke@handelsblatt.com

 

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