Friday, September 9, 2016

Brexit is just the Beginning

Now that the reality of Brexit has settled in many people are probably wondering what to expect next.  The key to understanding what comes next can be found in the reasons that made Brexit possible in the first place.  To me, the core of the issue revolves around globalization and income inequality.

Armed with the latest technology corporations are able to globalize their businesses faster than ever which means taking advantage of lower cost operations anywhere in the world.  Most people are not ready to keep up with the ever increasing pace of global focus shifts.  Most of us go to school to learn one particular skill and are not able to shift our skills rapidly in mid career at the turn of a dime.  This however, is what the modern corporation expects from us...constant evolution.  This is also what workers across the world are just now beginning to lash back against with a new anti-globalist movement that made Brexit possible.

When looking only at the shallow surface of globalization there are obvious benefits.  Lower costs of operations for corporations means lower priced goods to buy which should theoretically balance out any losses in incomes.  Driving those lower costs into higher rates of production creates more equity or wealth which normally would be a great benefit.  One of the deeper issues with this ideal is that workers don't typically own or seek to own a significant portion of equity in business and thus do not benefit from the increases in wealth that globalization provides.  They do suffer however when corporations abruptly cast them aside for a cheaper way of doing business.  This is what I believe is at the root of the growing income inequality epidemic.  Workers are not owners of globalization and thus are becoming rapidly less equal in terms of wealth as globalization accelerates.

In a sense, it is the fault of both sides.  Workers should seek to own more equity in business by investing more of their monthly payment into a low cost index fund of large multinational corporations such as $SPY or $EFA.  On the other side businesses should be sensitive to the long term ramifications of getting too comfortable with throwing workers away.  In the long run globalization is inevitable as losing economies will always seek to emulate winning economies and will always be ready and willing to provide their lower costs of labor to the globalist initiative.

I once went to a leadership seminar where we played a game that taught us about long term versus short term decision making.  We were broken into groups and given certain cards.  The rules were set up in such a way that if every group played one type of card every group would get a small amount of money.  If however, one group played a different card it would get all of the money while the other groups would sustain losses.  I watched this game played many times and there was always one group that would take advantage to the bewilderment of the other groups.  The point of this exercise was to show that short term business decisions focused only on profits come at the expense of long term business relationships.  This is exactly where we are at this moment in time.  Corporations need to understand that the short term profits that come from globalist type strategies come at the expense of the long term relationship they have with workers.

I wouldn't contend that corporations should avoid globalization altogether as this may result in unnecessary bankruptcies but rather keep in mind the long term and give your workers a fair shot in benefiting from globalization as well.  This fair shot could take the form of retraining programs, education about how to invest or restructuring compensation to include larger portions of equity based payment.  It is clear to me that in this upcoming election Trump represents the anti-globalist movement while Clinton represents the status quo and continuation of globalist ideals.  If corporations would like to continue with their globalist strategies I would seriously contemplate how an unlikely candidate such as Trump has come to power and the extreme environment that has led to this November showdown.