Broadband Backlash?

We are in the midst of a new era in international commerce.

Trade in services — such as finance, advertising, medical care, customer service and software development — once was virtually impossible because of the time and money needed to ship information back and forth.

But with technological progress, such trade has rapidly become almost costless.

White-collar, skilled workers in the 21st century are feeling the competitive pressure that put so many of their blue-collar brethren out of work in the 20th century.

And, ironically, it is the thousands of miles of fiber optic cable — laid in the frenzy of the dotcom boom of the 1990s — that may become the rope to hang the same technical wizards who once felt the world was theirs.

It remains to be seen how well the skilled, educated part of the workforce in the industrialized world does as it struggles to adjust to economic pressures that less-educated workers have been feeling for decades.

Throughout most of the past 10,000 years, households in every part of the world produced almost everything they consumed themselves.

They were peasants, growing their own food, building their houses and making most of their own apparel.

Such self-reliance is not as romantic as it sounds.

Even today, economic self-sufficiency is coupled with poverty and often with extreme vulnerability to weather.

Even on a country-wide basis it can be disastrous to shut out the outside world, as evidenced by North Korea.

The alternative to self-sufficiency — specialization and exchange — is so attractive that, when offered a chance to join, only a tiny minority opts out of the exchange economy.

Workers choose to specialize even though integration into the larger economy introduces new vulnerability.

Instead of being tossed about by the storms of nature, workers in the modern economy face storms of man.

Political storms may disrupt commerce. But even when the political sea is calm, the storms of changing technology and new competition threaten.

The spread of trade and specialization has been given a tremendous push in the last 200 years by rapid declines in the cost of shipping and communication.

From the repeal of the British Corn Laws in 1846 — and notwithstanding massive efforts to protect farmers in rich countries — those farmers have felt the effects of changing technology and competition.

Today, fewer than 5% of households in rich countries are engaged in agriculture.

Manufacturing, too, has provided employment for a declining share of the workforce, as technology and competition have taken their toll.

The spread of trade has been one of the forces that destabilized the lives of workers.

Even within large countries, falling transportation costs have wiped out industries in whole regions.

New England agriculture — once the livelihood of most Americans — was dealt a fatal blow when canals and railroads made it possible to deliver cereals from the newly settled mid-western states.

Today, long stone walls deep in the woods of Massachusetts and Connecticut bear silent witness to the defeat of farmers.

Once painstakingly cleared from fields, the rocks remain neatly piled although the fields have long since been abandoned.

Decaying shells of steel plants and textile mills similarly bear witness to how international trade, together with changing technologies, have laid low formerly mighty local industries — casting their workers adrift.

A specter of similar proportion now haunts the West — but this time it is the service industries, not agriculture and manufacturing that face restructuring.

Finance, advertising, and computer software development in industrialized countries will shed many jobs — and gain others — as the international division of labor enlarges its beachhead in the services.

Indeed, almost every activity that depends on skillful manipulation of idea and symbols is likely to face restructuring within the global economy.

Broadband communication, document scanning technologies and global access to intellectual and cultural assets have made it possible to produce services anywhere.

Like all modern change, this is coming faster than any change before it.

It took the United States nearly a century to end grain farming in New England — and four decades to “outsource” half of automobile production to Europe and Asia.

But it may take no more than a decade or two to shift overseas half of the tradable services American workers have produced, to India, Hungary or the Philippines.

For those whose jobs are threatened, this development looks like a tsunami that will leave nothing but devastation. But not all the news is bad.

First, a number of low-income countries are booming as a result of these new opportunities. As a poor country becomes richer, it buys more and more of what everyone else is selling — stimulating export industries all over the world.

We can be sure that some of these exports from rich countries will be from the high end of the very service activities that now feel the threat of competition.

Apart from goods with very limited supply — most notably petroleum — the increase in demand from developing countries benefits its trading partners.

In the rich countries, too — even as the entrepreneurs who arrogantly thought they could lasso the world with fiber optic cable find themselves suddenly trying to escape a broadband noose — the displaced workers will be absorbed elsewhere in the economy.

In the 20th century when jobs in agriculture and then industry declined, the proportion of the population in formal employment did not fall — it rose.

In the 21st century — as jobs disappear in accounting and computer programming — we have no reason to doubt the emergence of new jobs somewhere else in the economy.

The big difference between the prospects of the developing countries — where “old” jobs are moving — and the rich countries — where “new” jobs are emerging — is that we know what Indians and Chinese will be doing in 20 years.

We've been there, done that.

But what will workers in the United States, France and Singapore be doing in 2020? Unfortunately, we lack that sort of vision.

Using history as a guide, we can be confident that not only men, but more and more women will be employed — doing specialized jobs we cannot even imagine today.

As the advanced economies of the world try to escape the backlash of fiber optic cable, one certainly can sympathize with the workers who are being displaced by new trade in services.

The challenge to rich countries is to help those workers adjust to forced changes.

But no one can stop the inevitable transformation of the world economy.

Indeed, no one should try to do so — even if today it is our educated peers who are threatened.