Flat World: How Triad school kids are recruited into Thomas Friedman’s pro-globalization camp
As chairman of the Guilford County Commission, Bruce Davis found himself saddled with the responsibility of speaking alongside other local officials at the 2005 State of Our Community luncheon hosted by the Greensboro Chamber of Commerce at the Koury Convention Center.
It might have seemed quaint for a local elected official from North Carolina to quote from an African proverb on such an occasion, but Davis was tapping into a conversation already buzzing among elite business leaders.
“Every morning in Africa, a gazelle wakes up,” Davis quoted. “It knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death. It doesn’t matter whether you are a lion or a gazelle. When the sun comes up, you better start running.”
The story about the gazelle and the lion had appeared six months earlier in New York Times columnist Thomas Friedman’s popular treatise on globalization, The World Is Flat.
Friedman, an ardent free-trader, related how a Mandarin translation of the proverb had been posted by an American-trained manager of a Chinese fuel pump factory. The observation leads Friedman to express concern about the effect corporate globalization has had on the wages and benefits of US workers.
Typical of this weighty tome, which runs 635 pages long in its updated and expanded 2007 edition, Friedman expends several paragraphs discussing the ease in which jobs can be relocated, the increasing complexity of the global supply chain and the relative competitive advantages of the United States vis-Ã -vis China, before getting to the point about what it means for US workers.
“If Americans and Europeans want to benefit from the flattening of the world and the interconnecting of all the markets and knowledge centers, they will have to run at least as fast as the fastest lion,” he concludes. “And I suspect that lion will be China, and I suspect that will be pretty darn fast.”
Bruce Davis didn’t need to bother with a string of anecdotes to reveal the subtext of his proverb for his audience in Guilford County. All would have been familiar with at least the rough outlines of how competition had dealt a stunning blow to key industries in the county – how the once mighty Cone Mills and Burlington Industries had gone into bankruptcy and then, in 2004, had been snapped up by New York financier Wilbur Ross and reorganized as International Textile Group with plants across the Piedmont shuttered one by one as the corporation’s manufacturing capacity shifted to China and Central America. No one needed to be reminded that Las Vegas had steadily snatched away a progressively larger share of the High Point furniture market’s business.
The economic identities of Greensboro and High Point once rested on textiles and furniture. By 2005, the time was long past when the two communities could claim to lead the world in these industries. And no one would dispute the competitive challenge of China. But what lesson to take from the African proverb? Run faster? Panic? Motivate yourself by fear?
Since the publication of The World Is Flat and Friedman’s lecture at NC A&T University in April 2006, political elites in Greensboro and the state as a whole have increasingly embraced the columnist’s ideas. Erskine Bowles cited The World Is Flat in Greensboro before he was sworn in as president of the University of North Carolina. Bowles might have mentioned that his wife was the CEO of Springs Industries, a South Carolina housewares company that had combined the Brazilian textile company Coteminas only months earlier.
And Councilwoman Yvonne Johnson cited Friedman when she declared her candidacy for mayor of Greensboro in April.
So taken have local elites become with Friedman’s ideas that Greensboro was the site of the first summer camp organized around The World Is Flat. The weeklong Camp Flat World for 7th through 10th graders held at YMCA of Greensboro’s Camp Weaver in late August, was sponsored by the chamber of commerce and the city’s Parks and Recreation Department.
Standing outside the camp gymnasium, Jamie Cosson, the camp’s 36-year-old, Australian-born director outlined some recent developments he thought students should know about: local hospitals sending medical imaging scans to India for overnight processing; the global production of components for products like the iPhone, and advances in workflow software.
“The first workflow is the T-model Ford,” Cosson said. “Now, workflow is Wal-Mart software. If you pick up the second to last product off the shelf, it scans it and then places a new order. The software systems of Wal-Mart and its suppliers are all integrated, so they’re talking to each other.”
Economic insecurity motivates business leaders to educate youngsters on these changes.
“The Triad has been hit harder than many areas with globalization, particularly the moving of textiles and furniture overseas,” said Dennis Stearns, a local financier and YMCA board member who conceived of the idea of Camp Flat World. “Some of these kids may have had an uncle who was downsized or even a direct family member that was challenged due to a flattening world. The reality is that there are a number of opportunities that go along with the challenges, and these kids need to know about them before they get into college.
“They need to understand that certain careers will do better than others,” he continued. “We want these kids to understand that you’re either in the stands watching what happens or you’re on the field making it happen, and not standing on the sidelines saying, “What happened?’ after you get flattened.”
As campers filtered into a cavernous gymnasium, international staff members prepared to teach them a game called “The Beast” that, it was hoped, would impart on them the complexity of the global supply chain and show them the importance of communication and collaboration with other workers around the world.
With 30 campers, a mix of white and African-American with some subtle shades in between, circled around, counselor Keyu Kulla, a 23-year-old Estonian, instructed the youngsters to break up into four groups, each with an observer, a relayer, a buyer and handful of builders. The observers would be allowed to visually size up an item called “the beast” in what could be considered a kind of reverse engineering. The observer would describe the item to a relayer, who in turn would tell a buyer what kinds of parts to acquire at a camp “store.” The buyer would then deliver the parts to the builders, who would be expected to replicate an item they had never seen.
Counselor Heather Griffin safeguarded “the beast,” a human-like figure made from a stocking filled with sand with a foil hat and popsickle stick arms, in a small room in the gymnasium complex. Outside in the hallway chaos reigned as observers huddled with relayers, yelling out lists of materials.
“I’m going to tell you the nose and the mouth are not on sale,” she said. “You have to make them. You have to cut out the mouth. Tell them to trace it before they cut it out.”
The hallway, already enlivened with the energy of a busy stock-trading floor, exploded with shouting, and a stampede commenced.
Later that evening they heard a videotaped address from the author of The World Is Flat. Becky Scoggins, an account coordinator for Greensboro’s Amplify Communications, had traveled to suburban Maryland the previous week to interview the columnist in his home.
“The most important competition is going to be between you and your imagination,” Friedman told the campers via video. “Whatever you imagine – whether it’s a new song, a new platform or new software – you can do it.”
When asked how he felt about his book being the inspiration for summer camp for teenagers, the hale and mustachioed Friedman enthused, “That is so way cool. I’ll tell ya: I’ve had a lot of fun things happen to me around this book…. It has sort of entered the language, but nobody has built a camp around it, and I get such a kick out of that.”
The next day the students assembled at the camp’s nearby dining hall to hear presentations from various employers, educators and industry representatives, including the Piedmont Triad Partnership, an organization specializing in industrial recruitment, along with Forsyth Tech, Wake Forest University Baptist Medical Center, Amplify Communications and a Winston-Salem film animation company. The overwhelming volume of detail and the staggering complexity of the presentations would leave some campers clutching their heads and others yawning.
Kenneth Conley, who coordinates Forsyth Tech’s nanotechnology and physical sciences programs, was talking in a rapid-fire patter occasionally salted with street slang phrases like “you da man.” He tried to perk their interest.
“There’s so much going on right now that’s like science fiction,” he said. “Amazing things are going on right now.”
Nanotechnology, an area of science related to the control of molecular matter on the most minute level imaginable, which can be applied to everything from making stain-resistant clothing to reinforcing military hardware, would likely provide the innovative, high-compensation jobs of the future, Conley suggested. Nanotechnology is a top priority for the planned Gateway University Research Park, a joint-research project of A&T and UNCG that will feature campuses on East Lee Street and in the Reedy Fork area off of US Highway 29.
“About sixteen months ago we at Forsyth Tech were visited by the CEO of Hanesbrands,” Conley told the campers. “He was saying, “You build nanotech into the thread.’ Textiles are very important for the economy of North Carolina.”
Then David Hauser from the Piedmont Triad Partnership took a turn. Hauser, who started his career three decades ago loading trucks in a warehouse, directs the partnership’s logistics and distribution program. Logistics and distribution is considered a “targeted industry cluster” by Triad economic development planners.
Hauser showed the campers a video produced by General Electric. It featured an annual review meeting at a fictitious trucking company called KG Trucking in 2010 in which various department heads raved about the wonders of technological advances. There would be trackers to locate stolen trailers, the video suggested. And there would be trackers to help avoid fiascoes like the 2005 Hurricane Katrina response when truckloads of ice ended up far from the areas of need.
Asked later if the video might have glossed over the factor of human error, Hauser responded that transportation jobs are relatively insulated from the threat of outsourcing and automation for just that reason.
“That comes right back to why we need to educate people,” he said. “The big difference in the logistics industries… if I take the example of an iPod being manufactured in China and shipped to Wal-Mart in Greensboro, you cannot automate that because you’ve actually got to have someone drive the truck, load the freight; you need a dispatcher to call the trucker and say, “You need to re-route because there’s an accident up ahead.’ If the trucker sees the traffic breaking up, he can still go ahead. It’s still the driver’s call. Transportation is not something you can 100 percent automate.”
If they were paying attention, some of the campers likely gathered that certain aspects Keith Hobgood’s work in film animation will probably also remain resilient to the ever corrosive pressures of outsourcing and automation, notwithstanding the increased agility of the industry and the proliferation of collaborations across the globe.
Hobgood, illustration director for Out of Our Minds Animation Studios, showed the campers a trailer for The Magistical, a feature film being made by 29 people in Winston-Salem.
“In 2015, not only will you be able to do this yourself using software you downloaded off the internet, but you’ll be able to e-mail your [animation] sculpture to a company and they’ll print it out for you,” he said. He explained how Pixar software allows artists to give their characters virtual spines and manipulate their movements, eliminating the need to draw each frame. In the future, Hobgood predicted, amateurs would make their own animated films and e-mail them to independent festivals for judging.
Then he handed out new pencils bearing The Magistical logo.
“Personally, I’m not so much into the 3-D stuff,” Hobgood said. “I just like to draw. That’s why I like these pencils. These will never crash.”
Among the forces transforming Hobgood’s industry is something Friedman calls “the steroids,” or technology accelerators. Because of improvements in bandwidth and capacity and computer chip sophistication, Friedman writes, “year after year we have been able to digitize, shape, crunch and transmit more words, music, data and entertainment than before.”
As a result, menial functions can easily be outsourced to more low-cost labor areas, and talented knowledge workers and artists can collaborate with ease across the globe.
Technology accelerators are just one of 10 “flatteners” that Friedman argues have radically restructured the world. Others include the fall of the Berlin Wall in 1989, Netscape’s initial public offering in 1995, work-flow software, open-sourcing, out-sourcing, off-shoring, supply-chaining, in-sourcing – United Parcel Service being Exhibit 1 – and the informational decentralization made possible by Google and other search engines.
While the “flat world” has been embraced by local elites, for many Triad residents of ordinary means these concepts likely bring to mind a succession of trade deals that have put traditional manufacturing workers at an increasing disadvantage even as they’ve allowed companies like International Textile Group to take advantage of cheaper labor by shifting production to countries like China and Nicaragua.
That tension may have been on Scoggins’ mind when she asked Friedman for examples of communities similar to the Triad that have successfully responded to globalization?
The columnist reflected on his visit to A&T in 2006, and told her he considered the Triad to be a globalization success story.
“I was so impressed at the campus they’ve built, the way they’ve brought industry and education together,” he said. “I don’t think of the Triad as a place that doesn’t get it. To me, it’s an example of a place that hasn’t sat on its behind but has really taken the bull by the horns.”
The Triad’s corporate family would seem to exemplify both the innovative front-end of globalization and the reactive rear-guard.
The most ready example of a local corporation designed for the new economy would almost certainly be microchip maker RF Micro Devices. With 1,889 local employees, RF Micro is ranked by the Greensboro Economic Development Alliance as the city’s largest company with local corporate headquarters. With research and manufacturing facilities in both Greensboro and Beijing, RF Micro Devices straddles the global production divide.
According to its most recent annual report, 92.8 percent of RF Micro Devices’ sales are foreign while 13.1 percent of its assets are located abroad, with both sales and assets steadily shifting abroad over the past three years. 37 percent of the company’s revenue in fiscal year 2007 came from sales to customers in China, and the company recently expanded its internal assembly operation in Beijing.
In addition to offering bargain-priced labor, Chinese production also provides the advantage of reducing transportation costs.
“We expect to increase our reliance on our Beijing facility as well as our utilization of contract suppliers and partners in Asia in order to minimize the movement of inventory, which improves cycle time and results in lower levels of inventory,” the annual report states.
Even as the company shifts many of its operations to China, it has leveraged its crucial role in the Triad economy to extract incentives grants from local taxpayers. The Greensboro City Council approved a $1.2 million grant in late August, but the Guilford County Commission rejected a $1 million incentives proposal on Sept. 6. Since 1999, the county has approved $4.4 million in incentives to the company and paid out a total of $2.5 million. The county still has another payment to make from a 2003 incentives grant, and four more payments from a commitment made in 2004.
It would be difficult to find a major corporation in the Triad without employees performing virtually the same function in China or India. And it’s hardly the case that the sole consumers of these services are Americans. Virtually every corporation is staking its survival on its ability to make major inroads in the Chinese and Indian markets over the next several years.
Financial services giant American Express, the fifth largest non-government employer in Greensboro, operates a credit card services call center in the Gate City – one of eight around the world, alongside Gurgaon, India and Mexico City. Last year, American Express launched a partnership with two Chinese companies to market credit cards in that country.
Swedish transport giant Volvo Group’s 3-P unit – ranked as the 11th or 12th largest employer in Greensboro with 1,600 local workers – performs product planning, product development and purchasing for the corporation’s three truck divisions in Greensboro. It’s only one of eight offices scattered across the globe that carry out virtually identical tasks for their respective territories, with others located in Shanghai, China; Bangalore, India; Gothenburg, Sweden; Lyon, France; Curitiba, Brazil; Brisbane, Australia; and Allentown, Pa.
Almost half of Dell’s computer sales in fiscal year 2006 came from outside of the United States. While it recently brought its Winston-Salem assembly plant online to help supply the US market, it already operated plants in Penang, Malaysia, Xiamen, China and Limerick, Ireland, with Penang and Xiamen producing for the Asian market and Limerick turning out computers for Europe.
One of the most dynamic companies on the crest of the globalization wave is UPS. It is also the sixth largest employer in Greensboro, with 2,000 workers. The company has managed to thrive on globalization thanks to its mastery of what is known as “supply chain management.” Its competitive advantage grows from scrupulous attention to every part of a package’s journey from sender to receiver, along with a host of specialized services such as freight forwarding, customs brokerage, financial transactions and less-than-truckload delivery.
“We believe the future is bright for this industry [because] globalization of trade is a worldwide economic reality, which we believe will continue to expand as trade barriers are eliminated and large consumer markets,” the company’s most recent annual report states, “in particular China, India and Europe, experience economic expansion.”
UPS boasts that it was the first US airline to launch non-stop service between the United States and Guangzhou, China, “which lies strategically in one of China’s fastest growing manufacturing regions.” And last year, it added three daily flights from the United States to Shanghai with plans to develop a new air hub there.
And yet it would be false pride to paint UPS as an economic showpiece for Greensboro, because while UPS is important to Greensboro, Greensboro is not that important to UPS. UPS operates three sorting hubs, including its Worldport in Louisville, Ky. and facilities at Cologne/Bonn airport in Germany and Clark Air Force Base in the Philippines. It operates 13 regional air hubs in six different countries, including one in Columbia, SC that delivers to Greensboro.
In other words, the city is at the end of UPS’s global supply chain rather than at the heart of it. Greensboro’s UPS facility is a terminal where tractor-trailers dump packages to be sorted out for delivery routes across western North Carolina. But UPS employs sorters, automotive mechanics, long-bed truck drivers, salespersons and human relations specialists, and it’s the rare company with well over half its employees covered under collective bargaining agreements.
Greensboro-based VF Corp. – ranked as the city’s 16th largest employer – has also managed to thrive in the new economy by mastering the intricacies of the supply chain, but rather than engage the productive energies and talents of an expanded workforce, as UPS has done, VF has pared its workforce down to a skeletal minimum.
VF has been able to keep costs down by buying from a wide array of global suppliers, who compete against each other to provide the lowest-cost product. More than 1,500 independent contractors manufacture apparel products for VF and the company boasts, “No single supplier represents more than 4 percent of our total cost.”
Over the last several years, the company has shifted production from the United States to lower-cost locations, according to a recent annual report, with roughly a third of its clothing manufactured in its own facilities, mainly in Mexico and Central America, and two thirds by contractors, mainly in Asia. Similarly, production of blue jeans for the European market is being shifted from company-owned plants in Western Europe to contractors in the Middle East, Africa and Asia.
“To an increasing extent, we are using independent contractors who own the raw materials and ship only finished, ready-for-sale products for VF,” the report continues. “These contractors are engaged through VF sourcing hubs in Hong Kong and Miami. These hubs are responsible for product procurement, product quality assurance and supplier management and handling functions in the Eastern and Western hemispheres, respectively.”
In other words, sometimes the product goes from fabric to stitched blue jeans without VF ever handling it. And while Greensboro is home to not only corporate headquarters but also the VF Jeanswear division – whose handsome North Elm Street headquarters bears the bold legend of the company’s famous Wrangler brand – no blue jeans are made in Greensboro. Wranglers for the US market are produced in Mexico and Central America, just as factories in Poland, Turkey and Malta turn out jeans for the international market.
Over the years, VF has gone from producing tangible goods to lifestyle images, defining itself as “a worldwide leader in branded lifestyle apparel.” The company’s largest customer, Wal-Mart, accounts for 13.2 percent of VF’s revenue.
It owns two of the most classically recognized American jeanswear brands – not just Wrangler but also Lee. It owns the Vans line of “skateboarding-inspired footwear and apparel” – the sponsor and majority owner of the Vans Warped Tour, which brings punk bands to about 40 cities in North America every summer.
The North Face brand represents another lifestyle image in VF’s outdoor coalition. The marketing campaign behind North Face illuminates the company’s strategy of selling customers an idea along side a practical piece of clothing.
“The North Face products are designed for extreme applications, such as high altitude mountaineering and ice and rock climbing,” the annual report states, “although many consumers purchase those products because they represent a lifestyle to which they aspire.”
VF’s strategy of prioritizing image over tangible product has remunerated the top tier of its management nicely, with executive salaries in 2006 ranging from $412,000 to $700,000. VF’s executives have rewarded themselves lavishly compared to UPS, which generates more revenue, employs more workers and arguably creates more economic impact.
Total compensation in 2006 for VF CEO Mackey McDonald came to $12.4 million, compared to the $6.2 million earned by UPS CEO Mike Eskew. VF’s total revenue was $6.2 billion, compared to the $47.5 billion brought in by UPS. VF reports that only 300 of its 45,500 employees are covered by a collective bargaining agreement, while upwards of 248,800 UPS employees claim union membership.
With textiles considered a ghost industry by economic development planners in the Triad, the region has staked its future on companies that will leverage the presence of Piedmont Triad International airport to move components and finished goods quickly and efficiently in and out of the region.
Enter FedEx, which plans to open its Mid-Atlantic Hub in Greensboro in 2009, adding to existing regional hubs in Newark, NJ; Oakland, Calif.; and Fort Worth, Texas. In contrast to UPS, FedEx takes a decidedly lukewarm view of the prospects for its domestic package service.
“US domestic package volumes decreased during 2007 primarily due to the moderating growth of the US economy,” the company’s most recent annual report states, adding that it expects domestic package services to continue to slow in 2008 as a result of the softening US economy.
Like everyone else, FedEx is casting a longing gaze toward China.
“We are focused on further expanding our international presence, especially in key markets such as China and India,” the annual report reads. “China and India are the two fastest growing major economies in the world, consistently recording domestic growth rates of over 7 percent a year. China is already the third largest trading country in the world, behind the United States and Germany.”
FedEx has had a presence in China since 1984 and now employs 6,000 workers there. From December through March, the company spent $700 million buying out companies in the United Kingdom, India and China to expand its international presence. And in 2006, FedEx broke ground for its new Asia-Pacific hub in Guangzhou.
The other major corporation with a reputation as a globalization innovator that has shown favor to the Triad is Dell, the Texas computer maker, which opened an assembly plant in Winston-Salem in 2005. Friedman runs through three pages detailing the production journey of the Dell Inspiron 600m notebook he used to write his book, concluding: “This supply chain symphony – from my order over the phone to production to delivery to my house – is one of the wonders of the flat world.”
But the company that found itself at the center of a bruising economic incentives bidding war between Winston-Salem, Greensboro, High Point and the counties of Forsyth, Guilford and Davidson has weathered some troubling financial news of late.
Dell’s 2007 annual report has been delayed by an investigation of the company by its auditing committee and by the US Securities and Exchange Commission, not to mention the US Attorney for the southern district of New York.
“The audit committee’s investigation has identified a number of accounting errors, evidence of misconduct and deficiencies in the financial control environment,” a corporate report filed with the SEC states.
Friedman’s rhapsodic overview of globalization has drawn its share of critics, not only for the way his book glosses over the outlook for downsized US workers but for his failure to reckon with negative economic trends in some of the same developing countries blamed for taking US jobs.
Among them is Joseph Stiglitz, a Nobel Prize winner who has come to be considered a globalization defector since leaving his position as chief economist for the World Bank.
“Not only is the world not flat, but also there is growing inequality around the world, and there is a growing gap between the rich and the poor,” Stiglitz told an interviewer at US News & World Report last September. “The world is becoming less flat as that inequality grows. One way to think about globalization is simply the lowering of transport and communication costs. As we become more interdependent we need to solve together a whole host of problems. If the world is going to do it, we should do so in a way that reflects our fundamental values: democracy, fairness, respect for the individual, concern for the poor. Unfortunately, the way the United States has been exercising leadership in the area of globalization has not been consistent with those values.”
One of the final chapters of Friedman’s book, “The Unflat World,” acknowledges some of the downsides of globalization that are not captured in the author’s overarching thesis that globalization has leveled the playing field and created greater opportunities for all.
Even Microsoft Chairman Bill Gates cautions him that “there is a trap that these three billion [of the world’s poor] are caught in, and they may never get into the virtuous cycle of more education, more health, more capitalism, more rule of law, more wealth.”
Friedman acknowledges the persistence of global poverty, writing, “There are many, many others living outside this cycle. They live in villages and rural areas that only criminals would want to invest in, regions where violence, civil war and disease compete with one another to see which can ravage the civilian population the most.”
A proponent of alternative energy development, Friedman also concedes that accelerated global trade and expanded international consumer markets threaten to wear out the planet.
“The flattening of the world is making low-impact people into high-impact people faster, in greater numbers, and with greater impact than at any other time in the history of the world,” he writes.
Friedman also acknowledges that Islamic extremist attacks such as those that vividly captured the United State’s attention in 2001 run counter to the theme of increased openness and collaboration.
“Some cultures thrive on the sudden opportunities for collaboration that this global intimacy makes possible,” he writes. “Others are threatened, frustrated, and even humiliated by this close contact, which, among other things, makes it very easy for people to see where they stand in the world vis-Ã -vis everyone else.”
He might have added rising xenophobia in the United States and perpetual US wars abroad as forces that dampen global commerce and collaboration.
Almost all global corporations with a presence in the Triad list terrorism and war in their annual reports among risk factors that threaten continued profits. RF Micro Devices’ cautionary statement is remarkable only for its comparatively dystopian tone.
“If terrorist activity, armed conflict, civil or military unrest or political instability occur in the US or other locations,” it reads, “such events may disrupt manufacturing, assembly, logistics, securing and communications, and could also result in reduced demand for our products. Major health concerns could also adversely affect our business and our customer order patterns. We could also be affected if labor issues disrupt our transportation arrangements or those of our customers or suppliers.”
A harmonious future of global connectivity, collaboration and competition might also be threatened by persistent poverty in the developed world’s backyard – in cities like Greensboro where a hot and dry summer has provided an anxious backdrop for rising fears about African-American and Latino gang violence, where average wages have been found to lag in almost every industry, where earnings and income have deteriorated, and where prisons and jails expand to absorb idle and frustrated youth for whom the educational system provides few relevant lessons.
No one seems to have a plan for those cast aside by globalization.
“The theme of the future will be more and more jobless recoveries,” conceded Dennis Stearns, “and that theme will happen regardless of which political party takes the White House.
“Look at the six years since 9-11,” he continued. “9-11 was measured in a cost of multi-trillions of dollars. Many historians believe that this will be the greatest economic recovery from a negative economic event in history. It has been with the wind at our face of “the world is flattening.’ My expectation is that there will be more pressure on the people who get downsized or their job gets eliminated.”
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