Globalization, Unemployment & the Cloud

Michael Spence, Nobel Laureate, Professor and Dean Emeritus at Stanford Business School, has just published an excellent article on the “Downside of Integrating Markets” in Foreign Affairs with the title “Globalization and Unemployment“.

Prof. Spence differentiates between MNCs in the tradeable sector that operate and continously optimize global value chains; the kind of companies that boosted GDP growth at rate of 4x since 1990 compared to the nontradeable sector (services and some goods that are consumed locally only). Jobs growth in the US since 1990 however, came almost purely from nontradeable industries of which almost half is directly government or somewhat indirectly (i.e. healthcare), hence a very unreliable source of future jobs growth.

Spence highlights that until about 2000, effects of globalization on wealth as well as jobs distribution were largely benign BUT as developing countries climbed up the value chain and got richer this is changing irreversibly. Aside from the economic, social and educational progress in such developing nations mainly in Asia, I would argue that the emerging Cloud offerings are a strong accelerator and multiplier of this trend.

Having access to virtually unlimited (cloud) compute power, storage capacity and communications channels through connected (mobile) devices that are affordable to citizens with an average income in such developing nations is enormously powerful. It allows them to compete more effectively in what they do today (for a living) but enables them to satisfy their hunger for more income, independence and education. To them, the cloud is a symbol for all sorts of personal and national upside potentials.

In the Western hemisphere and namely the US, establishing the primacy of education gets harder, not just because of government budget shortage but because a promise of rewarding employment for all income levels is out of sight today. Could the cloud become an accelerator for further jobless (GDP) growth in the West ?

Filed under: Cloud Computing, Macroeconomics