Globalization of Industry and Implications for the Future

SIMON RAMO

THE KEY PROBLEMS OF SOCIETY TODAY are rarely categorized by governments as problems of science and technology. They are assumed to be social-economic-political problems, such as avoiding war, building the economy, curbing terrorism, fighting poverty and disease, or preserving a healthful environment. We can predict, however, that it will become clear that all social-economic-political issues intersect and that issues of technological advance are right in the middle of every intersection, sometimes causing the problems, more often offering possibilities for their solutions, and frequently providing opportunities for the world society to rise to new, higher levels of productivity, satisfaction, and happiness.

Of course, trying to predict the future with perfection is not defensible. But if we are active in some field, we are bound to be aware of important trends in it, and we should take our anticipations of significant future events seriously. We should force ourselves to list potential developments regularly, estimating for each the probability of its occurrence and the importance of the event should it occur. Then, for those happenings we consider both highly probable and significant, we should ask ourselves what we can do early to enhance the positive and suppress the negative consequences.

At present we see that the impact of advancing technology on the social-economic-political framework of the entire globe is growing rapidly, yet its implications are far from being adequately explored. Moreover, the effects of technological change are underestimated as short-range; crisis-dominated problems monopolize the attention of most of the world’s leaders. A severe mismatch is developing between accelerating technological advance and lagging social progress.

Thus, advances in information technology provide computer systems that



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Globalization of Technology: International Perspectives Globalization of Industry and Implications for the Future SIMON RAMO THE KEY PROBLEMS OF SOCIETY TODAY are rarely categorized by governments as problems of science and technology. They are assumed to be social-economic-political problems, such as avoiding war, building the economy, curbing terrorism, fighting poverty and disease, or preserving a healthful environment. We can predict, however, that it will become clear that all social-economic-political issues intersect and that issues of technological advance are right in the middle of every intersection, sometimes causing the problems, more often offering possibilities for their solutions, and frequently providing opportunities for the world society to rise to new, higher levels of productivity, satisfaction, and happiness. Of course, trying to predict the future with perfection is not defensible. But if we are active in some field, we are bound to be aware of important trends in it, and we should take our anticipations of significant future events seriously. We should force ourselves to list potential developments regularly, estimating for each the probability of its occurrence and the importance of the event should it occur. Then, for those happenings we consider both highly probable and significant, we should ask ourselves what we can do early to enhance the positive and suppress the negative consequences. At present we see that the impact of advancing technology on the social-economic-political framework of the entire globe is growing rapidly, yet its implications are far from being adequately explored. Moreover, the effects of technological change are underestimated as short-range; crisis-dominated problems monopolize the attention of most of the world’s leaders. A severe mismatch is developing between accelerating technological advance and lagging social progress. Thus, advances in information technology provide computer systems that

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Globalization of Technology: International Perspectives can alter productivity and employment patterns to a much greater degree than the passing of new minimum wage laws can. Broadened global communications and transportation, resulting from technological breakthroughs, can speed up and link the world’s operations far more than trade pacts can. Not only has nuclear weapons technology radically altered the dangers of war, but it dominates negotiations intended to prevent war between the superpowers, and the very awesomeness inherent in the technology has averted such a war, despite the noticeable and continual shortcomings of the political leadership involved. Technological advance is becoming globally pervasive, and this leads us to another prediction. It is that the totality of advances produced by the international fraternity of nations henceforth will greatly transcend the new technologies generated by any one nation. To be sure, an individual engineer, scientist, corporation, or country may happen upon a great discovery or invention or may successfully focus resources for progress and attain leadership in one area. That entity might then possess an initial superiority—on that one item—exceeding the expertise or output of all the rest of the world put together. But if it is an important advance, then pockets of similar or greater concentration will pop up in many other places around the world almost immediately, and the total will soon dwarf the continued contributions by the source of the breakthrough. The rapidly growing disparity between the total output of technology from all nations and the contribution of any single nation means that no one country in the future will be strong enough in new science and technology to depend solely on its own intellectual and physical resources to fight the competitive world battle. The prediction, more specifically, is that the effort to achieve technological advances will become so widespread, and engineers and resources to back them up so widely available in the world, that what happens technologically on the outside will become too important for any country to ignore, and a failure on its part to acquire and use external advances will be too penalizing to be tolerated. Owing to the clear economic potential of technological developments, should we predict that national governments will universally reach agreements in the future for all technological advances to be made available freely to all nations, all peoples, all private entities throughout the world, no matter where the advances originate? Will all new technology be owned by no one exclusively and hence equally by everyone? Will inventions, information, and ideas be breathed in by every group, shared like the atmosphere that surrounds us all? Not quite. There is the certainty of entirely opposite government action, deliberate steps taken to impede the flow of technological advances, policies set up to seek a perceived national advantage. There is also the certainty that private entities in the non-Communist world will continue to have an interest in receiving quid pro quos for accesses to their technologies.

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Globalization of Technology: International Perspectives To probe for sensible predictions here, let us note some aspects of world trade policies. They will provide useful analogies. Every nation has social and economic problems and a citizenry that looks to its national government to solve them. The movement of assets across borders is bound to affect conditions within each nation. Therefore, it is impossible for governments to keep their hands off this flow as they seek to give their domestic industry competitive advantages, to protect jobs for their nationals, or to exact revenues in return for privileges to export products into that nation or, in some nations, as the politicians try to curry favor with their constituencies. Accordingly, we can predict that the protectionist-nationalist approach to international trade will remain strong forever. We should not predict a world totally in the grip of protectionism-nationalism, however, because the very different free trade alternative offers such powerful economic benefits. In this one-world approach, raw materials, manufactured products, services, money, management know-how, and even labor cross borders without constraint. Each nation offers what it has or can most sensibly produce to others at competitive free market prices. It acquires from other nations in turn what they can best present to the unfettered world marketplace. When each entity concentrates on what it is most suited to supply, those fortunate in their possession of natural resources, skills, and developed infrastructures admittedly enjoy advantages. But if the output of any country, richly endowed or not, is available to others in unrestricted return for whatever they can most readily contribute, then all tend to be significantly better off economically. Because of this, it is difficult to push free trade mechanisms aside entirely. Without doubt, that approach is also here to stay. The international trade of the world, it can be expected, will exist as a hybrid of both protectionism-nationalism and free trade. Such a hybrid pattern, we can predict, will apply also to the flow of technology. Wherever it might first occur, every technological advance will tend to move to all those nations and private entities that want it, organize to obtain it, and are willing and able to pay or trade for it. Despite the permanent, simultaneous presence of forces working to restrict the flow, technological advance will come to be seen as predominantly a global, not local, phenomenon of generation, dissemination, and use. All nations, it can be predicted, will adjust their policies and operations to accord with this concept. Of course, the recipient groups will all have to be technologically advanced enough to be able to assess, select, and use effectively the world’s generated advanced technology. In time, we can expect such competence to become universal. A powerful influence militating today toward a higher rate of technology flow about the world is that of the private sector, the private corporations, the organizations whose objective is to achieve a satisfactory return on the risk investments they make to spur technological advance and exploit it. How

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Globalization of Technology: International Perspectives will the strategies of such companies affect the global impact of technological advance in the future? We can predict that the private corporate world will become an ever-stronger force for dissemination of advanced technology, causing dissemination to be faster, more complete, and ubiquitous. The full use in the world market of every major advance a company develops will be regarded as mandatory for two reasons: (1) the return on investment can be greatly magnified by wide geographical dispersion of efforts to exploit the technology, and (2) failure to take a product worldwide increases the danger of losing out to competitors that do operate everywhere. Both factors will grow as the globe becomes an array of centers of technological strength, each center a candidate for creating, buying, leasing, sharing, and using advances in technology. With the rapid advance of technology becoming a worldwide phenomenon, no one company, not even the largest, can hope to originate more than a small fraction of the evolving technology that will be key to preserving its position. Every company will recognize the growing danger that a novel product invention or manufacturing process, a newly developed material critical to performance or fabrication, or a creative application of recent science may make its technology obsolete and drastically change the economics underlying its endeavors. This will cause a great rise in efforts to buy and trade advances in technology. As a result, we can predict that we shall see the creation of a major new kind of technological industry. A new class of multinational companies will take root and grow quickly—but not to make and sell a device or system. Instead, their product offerings will be technology itself, but not technology they originate. They will gather advanced technologies from sources all over the world and offer them to the technological industry everywhere. As agents of transfer they will be paid well for their services because of the values of the trades both to the originators and to the appliers of the advances. It may become rare in the future for a typical company to contemplate keeping its technological advances long for its exclusive use. That company will expect that an avalanche of alternative developments will soon build enormous competition. At the same time, given a proper market system for technology trading, the more and sooner its novel developments are applied globally by everyone, the greater may be the returns to the developer. On the other side, a single company may find it costly to search the earth to locate the technology it should endeavor to secure and use, and then arrange to acquire access to it. The new technology-trading companies will help by setting up a fast and cost-effective technology exchange market. In the future, when analysts study a corporation, trying to measure its present condition and future potential, we can predict they will add one important new item for study to their conventional examination of balance sheets, profit and loss statements, market growth rates for the products, and

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Globalization of Technology: International Perspectives strength against competition. They will check also on whether that company is obtaining the technological advances of others economically and quickly and is employing them effectively. We must now turn to a powerful influence that will restrict rather than enhance world technology flow—namely, national security or military technology. Unfortunately, we have to include among our predictions that the future, like the past, will not be characterized by universal, permanent peace. Technological advance will continue to be a key factor in military strength. Moreover, a sizeable fraction of the technological resources of the world will be committed to the development of weapons systems. Finally, advances in military technology will continue to produce peacetime spinoffs that will continue to affect the total world rate of generation of commercially useful new technology. All in all, global technological advances and their dissemination and use will continue to be affected greatly by technology’s relationship to national security. What can we predict about that relationship in the future? Consider first the most dangerous of military technology—strategic nuclear weaponry. Here we shall present an optimistic prediction. The involved nations of the world have together spent trillions of today’s dollars—from the first atomic bomb research to the creation and maintenance of manned bombers, intercontinental ballistic missiles, and submarine-launched missiles. Such a massive commitment of technological resources has profoundly affected the global economy. If nothing changes, another trillion dollars will be expended during the rest of the century to ensure continued mutual deterrence. But we can predict that so enormous a future investment in further expansion of offensive nuclear weapons will not take place, because the weapons will be seen as not useful except to deter others from using theirs and, being useless, not affordable at such high economic costs. Neither the United States nor the Soviet Union, we can predict, will launch a nuclear strike against the other, because the leadership in each nation will know that it would fail. To be successful, the first striker’s blow would have to leave the stricken nation with no significant capability to retaliate, and the aggressor would have to be assured that it would not suffer serious injury from unavoidable nuclear after effects. Neither result is possible. Even with a 99 percent score against the other nation’s retaliatory force, the remaining 1 percent (hundreds of nuclear bombs) would make the potential consequence unacceptable to the striker, because today’s weapons can be so destructive and the present inventories are so large. But no competent weapons engineer would expect anywhere near perfection from so complex an operation, one not completely rehearsable even once. Think of the timing problem. Considering that to launch one craft at a scheduled moment is a challenge, imagine coordinating thousands of launchings from thousands of square miles of land and sea so that all offensive warheads will arrive simultaneously. If the first-

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Globalization of Technology: International Perspectives strike nuclear weapons were to reach their targets over a spread of, say, 30 minutes, the other side might release their unhit retaliatory missiles immediately after the first weapon has detonated. Most of the offensive bombs then would land on empty silos, the retaliatory missiles having been sent off to blast the first striker. The United States has an alarming budget deficit ($200 billion in 1987), and the USSR has a critical need to find investment funds to attain economic growth. The United States is struggling to maintain its standard of living, the Soviet Union to get its raised. The powerful resulting economic pressures combined with the perceived uselessness and dangers of nuclear offensive weapons systems will drive the superpowers to agree to large-scale reductions, both becoming confident that they can fear, scare, distrust, and deter each other at a much lower level of expenditure. This leads to the prediction of a stable future pattern for nuclear weaponry, one that will last for years, deter nuclear war, and be tolerable in cost. The reduction of offensive nuclear weapons down to, say, 10 percent of present forces is reasonable to anticipate. Verification systems can and will be worked out to ensure that such agreed-to levels of reductions take place and are maintained. Defense systems, practical against a ten-to-one reduced offense, then will be put in place by both sides at reasonable cost, with the capability of shooting down 90 percent of incoming missiles. The number of damaging bombs from a first strike surviving to arrive on target, then, would be a tenth of a tenth, or a hundredth, of the present forces. Launching an attack would become preposterous. The installed defense systems, moreover, would provide insurance against an accidental launch, cheating on arms reduction agreements, or a deliberate attack by a terrorist nation. Even for European theater military forces, favorable predictions deserve to be taken seriously. Moreover, there are additional aspects to consider here, different from the strategic nuclear weapons situation, that will influence most particularly the way advancing technology will affect the nature and vigor of the global economy. To see why, we start by predicting that the European military strategies of both the East and the West will soon come to be based on nonnuclear military force structures. One consequence will be that European theater military strength will cease to be rated mainly by firepower, numbers of soldiers, and numbers of tanks, airplanes, and other equipment. The true strength of the forces in the future will be increasingly manifested by sophisticated technology for command, communications, intelligence, and reconnaissance and for the launching and guidance of robotic air, ground, and sea weapons in a broad variety of forms. Proper application of advanced electronics and robotics can make a defense force greatly more capable than a larger offensive army less well equipped with such technology. The basic technologies involved here happen to be very close to those that

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Globalization of Technology: International Perspectives are needed for increasing productivity in the peacetime operations of the world. Technologies developed for the military, such as advanced computers, fast and powerful semiconductor chips, and versatile electromechanical devices for automatic control, will be close cousins to technologies useful for improving manufacturing of commercial products and for employing information for superior management of nonmilitary industry, transportation systems, and governmental and professional services. These associated nonmilitary developments will come to be seen as extremely important economically, will be sought avidly by all nations, and will become increasingly popular in world trade. We can predict, then, that nations on both sides of disagreements and distrusts will tend to move toward negotiating reductions of offensive forces in the European theater. The greater the negotiated military reductions, the less the governments will feel required to interfere with the international flow of advanced technology and the more the nations of both the East and West will be able to invest in commercial application of the basic technologies and realize the economic rewards of the resulting trade. Trading of technological products will become freer between the North Atlantic Treaty Organization (NATO) and Warsaw Pact nations, even as they continue to regard each other as potential enemies. Technological advances stem in part from scientific discoveries. Let us now shift the focus of our prediction to basic scientific research, where the objective is to push back the frontiers in understanding the laws of the physical universe. What changes do we see in the future patterns of scientific efforts? How might these changes affect, in turn, the way technological advances will affect the global economy? We can see what is likely to happen by looking at two areas of scientific research. One is the building and application of colossal accelerators of the tiny particles that are the constituents of matter. The other is the exploration of outer space. Both are characterized by requirements for massive expenditures. The high costs have already encouraged some international cooperation. We can predict that greater cooperation will occur in the future because the expense of designing, building, and maintaining the needed equipment and facilities is becoming too high for any one nation. The particle accelerators offer the promise of giant steps in understanding the makeup of matter, the relationship of matter to energy, the formation of the universe, and the forces that control the dynamics of all physical phenomena. In outer space, manned exploration of Mars exemplifies the challenge as well as the enormous costs and complexities that will drive us toward international cooperation. Scientists worldwide agree not only on the importance of research but also on the idea that it is mandatory for the acquired data to be made available to all scientists in all countries. This view is held by scientists universally

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Globalization of Technology: International Perspectives not only because of a high sense of social responsibility but also for the practical reason that participation by all the world’s scientific brainpower is required for maximum progress. Eventually the necessary international approach to organization and sponsorship of large-scale frontier scientific research will act as a strong catalyst to the formation of friendly teams among nations in commercial technology. In both national security matters and pure research into the laws of nature, the impacts of scientific discoveries and technological advances on the global economy and society tend to be dominated by decisions made by governments. To be sure, national academies, universities, private corporations, and occasionally even individuals of exceptional public visibility and stature help shape the decisions. But because governments provide the funds for huge research projects and weapons systems, in the end, the governments are the bosses. In civilian commercial technology in a democracy, government is not in control but is indirectly forceful in the setting of priorities and pace. Government influence is comparable with the combined influence of free market forces and private decision makers, even though the latter determine the allocation of their privately held funds. When we probe the future effects of technological advance on the world’s economy, what should we predict about the relationships between government and the private sector? We are way behind in studying this role-setting issue and we are not likely to catch up. Confusion is likely to reign in the future, greatly impairing attempts to use advancing technology fully for the benefit of society. For example, consider information technology in the United States. Information is essential to human activities, and advancing technology is revolutionizing the way we acquire, store, process, ponder, transmit, and employ information, enabling us to perform these operations a thousand—sometimes a million—times more rapidly, cheaply, accurately, and effectively. If today’s information technology were put to work fully in the United States wherever a substantial economic benefit would result, the cost of the installations would exceed a trillion dollars. An investment of that size and the resulting financial returns, even when spread over several years, obviously will exert a powerful effect on the economy. The social impact will be even greater, because virtually all tasks will be accomplished more efficiently and many jobs will be eliminated even as new ones are created. The greater the potential economic gain, the greater the pressure for speedy implementation. The quicker the changeovers, however, the rougher will be the societal dislocations and the more certain it will be that the government will be expected to manage the social alterations. Consider one manifestation of new technology-society interactions resulting from advances in information technology. In the future, two-way national networks in the United States will come into being, connecting

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Globalization of Technology: International Perspectives hundreds of millions of computer and communications terminals in offices, factories, homes, schools, hospitals, airlines, and almost everywhere else. The information flow and processing in the network will vastly exceed those of the present telephone, radio broadcast, cable TV, and computer networks. All sorts of information will move all about the nation and will be integral to the nation’s functions. Thousands of private firms will be involved in producing the equipment, maintaining the networks, furnishing the information, and designing and setting up interconnections between the networks and the users. Hundreds of millions of hardware boxes will be used. Free enterprise activity will burgeon, but government involvement will be inevitable and essential. Who but the government could create and regulate the necessary standards for the electronic expression of information throughout the networks and for the hardware and software to keep the whole national complex from developing into a chaos of digital data? Who else could protect privacy yet guarantee free access to the networks that will enter virtually all homes and workplaces? Who else could prevent monopolies of information supply, transmission systems, and equipment manufacture? Who but the government could police to prevent malicious input of misinformation or tinkering with data, or fight fraud and set rules as money is shifted electronically and as distinct private activities are linked to attain efficiency in production and distribution? Government action is critical in all these functions, but the U.S. government is not now organized for it. Arranging for the government’s proper role will not be easy. If the government performs well the tasks it alone must handle, then the private sector will do a superior job of introducing new technology. Investors will see a rational, stable environment for long-range development if information technology and the free market will work to encourage investments. If the government defaults, it will be the limiting factor in the use of new information technology. Applying information technology fully will create new policy problems not only domestically but also internationally. Just as each nation will have to regulate electronic information flow within its borders, it will also feel compelled to control the flow across those borders. Although in some ways information is like a product in international trade, in other ways the transit of information between nations exceeds in importance the movement of goods. For instance, the advent of electronic money (fund transfers and commitments made virtually instantaneously by electrical signals) will force every nation intent on administering its money supply and its banking operations to monitor the transmission of financial data. Or consider that at some future time, when much of production and distribution will be computer automated, the flow in information networks within a nation will constitute the very heart blood of its economic life. Governments hence will want to protect that flow. But manufacturing in one country typically will depend

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Globalization of Technology: International Perspectives increasingly on the timely delivery of material and components ordered from another. Yet, to interfere with information flow tying production operations together internationally will harm economic efficiency. Will governments allow free border crossing of goods whose shipments are automatically scheduled by interconnected information networks? How will they set international rules to control the interconnections and the shipments? The information network is but an example of how the full employment of new technologies will require the defining of new roles for governments domestically and new challenges for international agreements. This is a terribly complicated process because governments are bureaucratic and politically controlled. In general, only a crisis receives the direct attention of leadership, whereas systems and long-range problems that involve integration of many factors and require new patterns of organization are very difficult for governments to handle. We can predict that whether the advanced technology be in the field of information, energy, environment, transportation, genetic engineering, oceanography, weather control, or whatever else, governmental response will lag behind the technological advance. Governmental planning, evolution, and implementation of policy always may be so late, we must assume, that government effort will be concentrated entirely on the disbenefits surfacing from technological advance, and only when those disbenefits are perceived as causing a serious political problem. We can predict that government will be the bottleneck in determining the extent to which the benefits of advanced technology are realized by the world society. Recall that we engaged in this exercise in prediction with the idea of noting potential developments and then asking what we might do ahead of time to accentuate the positives and eliminate the negatives. The engineers of the world are the experts on the nature of developing technology and its costs, but not on its societal impacts. They are best able to estimate the speed of development and how speed and quality of achievement will relate to the allocation of resources. If the future will be characterized by the increasing impact of technological advance on the global economy, then the world’s engineering leadership needs to be more interested in this impact in the future than it was in the past. Engineering leadership should be consulted more and contribute more to policy formation. When we say engineering leadership we are describing the world’s academies of engineering. What should the academies be doing in sensible anticipation of problems, dilemmas, and opportunities for the world ahead? What can the academies do to ensure the maximum contributions from the world fraternity of engineers? For one thing, the academies should help everyone to understand what engineering is really supposed to be. Probably all the dictionaries in all the languages of the world use the same short definition: Engineering is the application of science and technology to provide benefits for the society. In

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Globalization of Technology: International Perspectives citing this definition we are not advocating that every engineer should be an expert in science and technology and also be a sociologist, economist, and political scientist, although it would probably be advantageous if there were more such hybrids. It is rather that the engineering profession and the general public should have the image of the profession contained in the definition. Even if an individual engineer is best employed in designing a microsemiconductor chip, an automobile, an airplane, or a petrochemical plant, that engineer should think of his or her profession as being broader than his or her duties. Not only the academies but virtually all other professional engineering societies, as well as the engineering departments of our universities, have tended in the past to be preoccupied with the science and technology basic to the engineering profession. The academies should encourage universities to introduce students—not just engineering students but all of them—to the idea that engineering not only encompasses the science and technology basic to engineering accomplishments but also links technology to its societal applications. If the image of engineering is properly broadened, disseminated, and accepted, then the leadership of the engineering profession surely will come to play a much larger part in the society’s decision making as it arranges the way technological advances will alter the global economy and civilization in general. Much more often than they do today, engineering leaders will find themselves interested in adding the political dimension to their careers, and more will become leaders in government. We should not realistically expect engineers to compete numerically with lawyers as members of the legislative bodies of the world. The medical profession probably furnishes a better example. Its leadership expects to be involved and listened to seriously when the government sets rules and regulations pertaining to the allocation of resources to protect the public’s health and to advance the field of medicine. Engineering leadership exerts much less influence in matching technology to societal needs. Engineers do mainly the technical work called for by the policy and priority decision-making process. The future must be different, and we can predict that it will be.