Globalization’s Down Side

The National Intelligence Council (NIC), a high-level think-tank within the CIA, released a report today that predicts the state of the world in 2020. And if you work in the United States technology field — probably 99 percent of you —the results ain’t pretty. (You can read the report yourself, but be aware that it is 120 or so pages long and the file is pretty big.)

At its heart the report challenges the prevailing wisdom that globalization is good for everyone, particularly us, and predicts that China and India will emerge as the big winners. Other countries, including the United States, will lose share to the new powers,

“[b]arring an abrupt reversal of the process of globalization or any major upheavals in these countries.” The report concludes that the United States will still be the largest player in 15 years, but that its leadership role will be diminished and perhaps critically wounded.

Technology innovation is the big factor here, and for my money the most important part of the report is the following:

As nations like China and India surge forward in funding critical science and engineering education, research and other infrastructure investments, they will make considerable strides in manufacturing and marketing a full range of technology applications—from software and pharmaceuticals to wireless sensors and smart-materials products.

Rapid technological advances outside the United States could enable other countries to set the rules for design, standards and implementation, and for molding privacy, information security and intellectual property rights.

I think that this is what the U.S. technology sector is most afraid of. No one thinks that we are going to become some innovation backwater—our place among the world’s technology leaders is basically institutionalized. (Nonetheless, don’t miss CIO’s story, Innovation Ships Out, due online on Jan. 15.) We do, however, have to recognize that there is a good chance that we will have to play by someone else’s rules the same way we make others play by our rules now.

(See my colleague Art Jahnke’s column from last spring asking, “Should U.S. Companies Build to China’s Tech Standards?” Along with some opinionated reader feedback.)

The report limits its historical perspective to the recent trend to offshore, but I think it is instructive (especially for a technology policy blog such as this) to take a broader view. Both China and India have highly detailed (albeit very different) technology policies that they have developed over the last couple of decades. One common element is to promote foreign investment as a spur to domestic innovation. The NIC’s conclusion seems to be that this approach is working. The big question is still out there though. Whose economy benefits the most when a researcher in China who works for an American company achieves some sort of innovation?