Contributed Column

The Changing Marketplace

by Frank Cioffi, president, GBIC

While we were sleeping, a giant awakened

A giant has awakened while we in the world’s most economically advanced countries were sleeping. Like many regions across America, over the last eight months, northwestern Vermont has lost more than 1,000 of its highest-paying jobs. We have seen companies like Belden Wire, York Capacitor and Bombardier Capital decide to leave our state for other, more competitive economic environments. As we analyze the reasons why companies choose to stay here or leave Vermont, we need to understand what is happening globally and then learn to provide a climate necessary to attract high-value-added, sustainable economic opportunities for ourselves and future generations of Vermonters.

Over the last five years, the only constant in the global marketplace has been change. Now and moving forward, the pace of that change appears to be doubling every quarter.

If you want to learn more about the dynamic changes happening in the global marketplace then I suggest you read Tom Friedman’s latest book, The World Is Flat. Friedman presents interesting real-life stories and keen insight into changes that are taking place and affecting every economy in every state and nation in the world.

The book should be a wake-up call for Americans and all people living in more economically advanced countries to seek innovation and education in order to remain economically competitive in the future. After reading the book and watching the changes in our economy, I can’t stress enough the imperative for Vermont policymakers and legislators to take action to better position Vermonters and our state.

What flattened the global economic marketplace? Friedman tells us that technology and technological infrastructure has flattened out the playing field of economic competition. Friedman’s metaphor of a flat world basically lays out the next phase of globalization. During the dot-com economic bubble, telecommunication companies invested hundreds of millions of dollars laying fiber-optic infrastructure across the oceans connecting India and China to the more advanced industrial countries. This created an excess supply of technological connectivity leading to dramatically low-cost Internet connections, data transmission and telecommunications, and wired the world so the cost to connect to Bangalore was nearly the same as connecting to California.

India moved quickly to invest in education and infrastructure to support technology and information-based enterprises. China moved almost regimentally to create and develop infrastructure, sites, facilities and labor to accommodate the manufacturing and industrial enterprise sectors. Once the world became wired, corporations realized they could hire three engineers in India for the same cost as one in the United States. In China, finished products could be made less expensively than design costs here.

To remain viable and globally competitive, companies needed to implement new ways of sourcing goods, products and services. These strategies started with low-priced goods and graduated to more value-added goods and then into more advanced service sector industries. Ask yourself how many times you have had a problem working with a software program or other technological device of a U.S.-based product only to call the help line and discover that the person guiding you out of your predicament was located in India.

The changes in global manufacturing alone have saved American consumers over $600 billion and saved American companies even more since our marketplace has had Chinese-sourced goods. China’s economy is not all about cheap labor. During the last seven years, Chinese productivity has increased at 17 percent annually.

These emerging economic powers also have another critical force stirring inertia from within, and that is a passionate aspiration of the governments and the people to succeed and advance economically. Countries like India learned the skills needed by workers to accommodate the most value-added industries and then created educational curricula, provided more support for institutions of higher education, and developed critical training programs for their citizens.

All of these events should send a chill through the spine of every American, but shouldn't be discouraged. China and India represent not just threats to all of us in the more advanced world, but also great opportunities. These economic changes have the net effect of adding hundreds of millions of people and consumers to the world economy, creating an unparalleled opportunity for every business and individual on the planet. These economic changes cannot be stopped.

The reality for the United States and other developed countries is that trying to contain and/or turn off these economic forces can only happen at great cost to their own economic well-being. History has shown that those countries that tried to preserve their economic systems, jobs and cultures by keeping the rest of the world out became stagnant. Those countries that opened themselves up to the world and innovated have prospered.

Today the clarion call to nations, states and people in advanced countries is to find ways to advance their own value chains and develop special skills that lead to the creation of superior products that will produce greater demand and yield higher value for all. The ultimate challenge for the United States and all Americans is whether we are prepared to do the things necessary to be competitive in this new flattened world. Opportunity awaits if we make the right investments in education and other things that are necessary to attract and retain the highest-value-added enterprises that create the highest-wage jobs.

There is a window of opportunity to make the improvements necessary to create meaningful and sustainable economic opportunities for Vermonters. Vermont is a small state, and being small we can move faster once we choose a direction. We must pick that direction and move quickly. Otherwise, we risk being a home and playground to the wealthy, where Vermonters merely work in the most basic of service sector jobs.

Vermont is a beautiful place to live, work and play. Vermont is a special place that has always encouraged innovation, and Vermonters have always engendered a strong work ethic and placed high value in protecting our natural environment.

Now more than ever we need to retain our strongest values, protect our treasured resources, make investments in education and maintain a business climate that allows Vermonters to compete globally. We can and will succeed economically if we share this aspiration with passion and a sense of urgency. •

Frank Cioffi is president of GBIC. GBIC is the nonprofit economic development corporation serving the municipalities and people of Chittenden County since 1954.

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