Sunday, December 11, 2005

Globalization Road Kill

Are you an owner-innovator or a servant? Better choose now because that's the future of the American economy.

The American dream of the 20th century was built on American manufacturing and industrial dominance. The great American middle class enjoyed lifelong career with a great US company like General Motors, US Steel, or perhaps IBM. Growth, stability, solid benefits, and a nice retirement nest egg was assured as a result of America's industrial dominance.

Fast forward to the 21st century and these great American companies are becoming globalization road kill, choking or defaulting on worker entitlements, struggling to innovate, and shedding workers 10,000 at a time. Emerging markets are capturing competitive advantages in manufacturing (China) and services (India), bleeding America's industrial economy to a slow but near-certain death.

Does that also spell doom for American economic power? Not necessarily. America remains dominant in finance and innovation, the two most powerful drivers of wealth creation. So the best and brightest Americans will increasingly create, finance and own new high-growth ventures even if the manufacturing or service of those ventures is sourced and marketed globally. More and more of this elite group will have incomes at country club levels, even as middle class industrial jobs dissipate. The inevitable (if overstated) destination is an American economy that produces virtually nothing, partially services itself, yet creates and owns much of the world.

So what does that mean for the large portion of the middle class that don't figure out how to be owner-innovators? It means they are selling the X-Boxes, staffing the golf courses, and, yes, flipping burgers in service of America's endless consumerism. Some of these jobs will be well paying. Some not. Most will not be unionized or have the security or retirement benefits of the industrial economy. Just in time for Social Security to go belly up.

Globalization's ability to create wealth -- and disparity -- in emerging markets may be extending to America as well. Can the great American Middle Class survive?