Caterpillar workers at the company's recently expanded plant in East Peoria.
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RULE NO. 4
Closer Is Faster, And Faster Is Good
One of the most amazing things about globalization is that for all the press it gets, it's not nearly as broad-based as you would think. European business-school professor Pankaj Ghemawat's recent book World 3.0 lays out in detail how the world was never really all that flat to begin with. His numbers, which tweak some official tallies to account for what he believes are various errors in calculation, are compelling: by his estimates, exports account for only about 20% of the world economy, cross-border foreign direct investment is only 9% of all investment, only 15% of venture-capital money is deployed outside home borders, less than 2% of all phone calls are international, less than a quarter of Internet traffic is routed across a national border and about 90% of the world's people will never leave the country in which they were born. "The challenge isn't too much globalization," says Ghemawat. "It's too little."
But that's a hard sell politically at a time when the dark side of globalization--namely, growing inequality within nations--has resulted in a strong sense that an elite group of people and companies are flying safely above all the troubles in the global economy while the majority of those on the ground suffer. This was brought front and center earlier this year when an Apple executive being interviewed by the New York Times about why the iPhone is mostly made outside the U.S. was quoted as saying, "We [Apple] don't have an obligation to solve America's problems."
The statement implied that not only should Apple put jobs wherever it was cheapest to do so globally (which is still mainly in Asia) but that this was a relatively seamless process. But the company's recent labor problems with its supplier Foxconn in China prove that doing business globally is hardly simple. And companies with complex global supply chains have not only labor issues to contend with but also natural disasters (remember how last year's tsunami and earthquakes in Japan disrupted auto-supply chains and sank industry growth for several quarters), high energy costs that make shipping more expensive and risks of corruption (as in the case of Walmart's scandal in Mexico). The laissez-faire attitude toward globalization that prevailed during the Great Moderation seems decidedly naive today. "For much of the last 15 years, it seemed like the attitude was that anytime you could find a lower cost anywhere in the global supply chain, you did it, with no thought of the difficulties or risks that things could go wrong," says Gene Sperling, head of the National Economic Council. "More U.S. companies are rethinking that calculation, and that holds open the promise of more location and insourcing here."