Gilbert Clee and the New World Enterprise

When it comes to the balance of industrial trade, many who support China's rapidly increasing share of the global manufacturing pie attempt to invalidate those of who do not by arguing that globalization is inevitable and that we should just 'get over it' and move on.

But, are those Middle Kingdom sycophants, bunting hangers and flag wavers really talking about globalization in it's pure sense? Maybe not.

In 1959, Gilbert Clee, of McKinsey & Company, described a 'new world enterprise' where corporations could procure raw materials from anywhere across the globe; manufacture it's products wherever labor was the cheapest and market it's products, without limitation, to any country on the globe. Clee treated labor and raw materials as commodities which could be competitively interchanged with any combination of countries in order to arrive at a profitable 'bottom line'.

In Clee's view, the corporation was elevated to super-political status and given the ability to step across the world with it's seven league boots any way it saw fit. This vision was only slightly better than pure colonialism where one country simply rode into another country taking whatever it needed and leaving whenever it was good and ready.

Todays' 'world enterprise' is much different than Clee's original hypothesis forewarned. When we talk of globalization we are actually describing 'multi-localization' where a corporation becomes an active partner in foreign enterprises in many countries rather than operating as a passive consumer of foreign commodities per Clee. Few nations today are willing to allow foreign companies a free reign within their borders. Those who have done so have, as of late, reversed their decisions via ugly street battles calling for the nationalization of foreign businesses.

Contemporary China serves as a good model of multi-localization. China contract manufactures products in factories jointly owned by Chinese and foreign interests. The products are designed by the foreign partner and marketed through sales channels managed by the foreign partner, as well.

In exchange for it's investment, the foreign partner's cost for it's product is far below that of a similar item produced domestically. In addition, the foreign partner is relieved of any responsibility for social, energy and environmental issues within the product cycle which, in the corporation's eyes, adds cost to a product but no value. You may be sensing an imbalance of social responsibility whilst reading this section.

If a modern day Connecticut toolmaker decides to design it's tool offerings domestically but produce those tools in China, then it is bypassing the very heart and power of it's company- it's manufacturing prowess.

The word 'industry', as used during the early part of the industrial revolution had more to do with personal diligence and a passionate drive to excel at a craft and less to do with sweat shops, draconian working conditions and child labor, all of which would come much later. The essence of the industrial revolution was the transition from craft and cottage work toward mechanized and standardized work.

In the early days of our country, farmers, shopkeepers and ship chandlers crowded alongside the forges of village smiths and into the cramped cottage workplaces of wood and metal craftsmen to ask for wares produced specific to their individual trade and purpose. As the country grew, these custom products were desired by a growing complement of users and it became necessary to expand the scope of industry into what we now know as manufacturing.

To meet the burgeoning demand, parallelism was introduced to the workplace and even more craftsmen needed to be trained in the trade. Those who would learn in earnest and be industrious in the shop or factory were rewarded with a skill worth a lifetime of gainful employment. A factory full of skilled tradesmen provided a hotbed and incubator for innovations to grow from ideas to fully tested and market ready products. In short, the skilled worker was the heartbeat of the organization and hardly a commodity to be 'traded' across the globe.

That Connecticut toolmaker we spoke of earlier can now stand on the dais at a hotel ballroom and report increasing corporate earnings to a roomful of shareholders, giddy from head spinning at all the newly found wealth in their possession. Of course, this newly found wealth was mostly created by replacing high cost, 'unproductive' labor in Connecticut with outsourced contract production units which have few days off and absolutely no legacy pension liabilities. I would be willing to bet that none of those overseas contract production unit members will be found sketching out ideas for improving the product he or she is making.

Gilbert Clee at once overestimated a nation's willingness to move to a purely borderless economy and underestimated an American worker's desire to be industrious in the historical sense of the word and for this I am thankful.

The Future of Computing: high energy costs and pollution problems

If you take a walk along the decks of the USS Eckert and Mauchly, you may notice water seeping up through the chinking of our giant ship of undelivered promises and general all around purposeless entertainment formerly known as the computer industry, at least in the pre-Web 2.0 days.

It is 6:38 AM: I am sipping coffee and offering up electronic dialogue from my perch high atop the clock tower at Rearden Industries here in Philadelphia. My text musings will engage not only my brain, but will also engage the hardware of my computer, monitor and Wi-Fi connection here, and will proceed to engage servers, gateways routers, firewalls, switches and any other technical paraphernalia imaginable downstream along the message routing pathway. Even being armed with knowledge of the full complexity of sending my message across the ether I perceive my message to consume very little energy and, therefore, my hands are clean in this whole environmental versus energy debate.

Were my words of critical importance to the well being of the world, I would find justification for all the wanton, rampant severing of hydrogen atoms from carbon atoms that I am bringing to bear but, I fear that my words probably fall into that wide category of the mostly forgettable in the larger scope of reality.

Our nation spends an incredible amount of it’s financial and energy resource capital on what can only be described as electronic distraction and personal entertainment. Cell phones, Blackberry devices, PDA’s, iPods, laptops, desktops- all contributing to an exponential increase in consumer demand for electricity over the past twenty-five years.

It would be interesting to compare the proportion of consumer spending for telephone/electronic entertainment/connectivity services to gross income for the years 1969 and 2007, I think that we would be stunned by the dollars spent on such transient, volatile pastimes.

In 1969, we were probably more concerned with paying our mortgages, buying hard goods of lasting value and saving money than we are today but, in 1969 we were more engaged with one another in a realistic fashion which seems to have been gone away over time. Although we enjoy a certain degree of independence from each other, we still find it difficult to sit in quiet idleness at airport concourses without searching for a wi-fi signal or a wall plug to recharge our laptop; we can stand but a quaint few moments in our cars before we scroll though our cell phone address book looking for someone, anyone, to call during our journey. We are so afraid to be alone with our thoughts.

The greatest minds of our common era were able to plumb the profundity of intellectual creativity without email, text messages, YouTube or a MySpace account and brought forth wonderful inventions- this computer included.

Is all of the connective ’soothing’ really worth the environmental price to be paid? I personally do not think so. I’ll just repair to the park with my Moleskine and draw carefully on the paper all of my thoughts. I just can’t survive happily in this Hand Staring Age of Distraction.

Alternative to 'Machine Dreams'

We were surfing the web in the break room here at Rearden Industries on our PCJr.and came across an interesting blog entitled 'Gardenworld;.

The author, Douglass Carmichael, made a wonderful statement which I hope we can have clarified in a future dialogue:

"...the need for an alternative to the machine dreams of the current mainstream hyper organization of everything. I call that alternative, quixotically, and realistically, Gardenworld: the vigorous use of tech, capital and the environment, but to design principles, not capital dominance. Think Olmsted, Bucky Fuller. Erich Fromm, and Erik Erikson’s Eight stages of the human life-cycle as a design template for society."

Let us then be up and doing.

Zero to 160 in Seconds

Yet another coal mining disaster in China.


Reuters

Nineteen coal miners are known dead in an apparent methane gas explosion in a Chinese coal mine. Reuters story here.

This begs the question: is this what happens when a country moves from a mostly agrarian and mildly industrial nation to a nation of leviathan manufacturing involvement in less than three decades?

Honestly. It took modern industrial countries almost two centuries to arrive at the levels of industrial throughput witnessed in contemporary China in a period of twenty five years. Remember the steepness of the technical learning curve we had to ascend? The social upheaval from the turmoil between workers and owners? And the monumental environmental dragons we only began to slay in the early nineteen seventies?

Economies of scale in mining rarely apply to the human worker as an increasing headcount increases the risk to all on an exponential basis. As U. S. coal production has increased, the number of miners required per ton mined has fallen dramatically. China and the U.S. have equivalent annual production tonnages yet American coal is produced with 80,000 miners versus China's 3,000,000. Yes, that's three million. Imagine that many poorly trained miners stumbling over one another underground. Losing a miner underground is not a problem under the Chinese conscription system: lose one, ten waiting. It's a miracle that tens of thousands of Chinese miners aren't killed each year.

China's insatiable need to manufacture for the world at all costs may be a unique twist on the Dutch Disease phenomenon and we may all experience some symptoms sooner rather than later.