by David Mullings
Thomas Friedman’s famous book “The World Is Flat: A Brief History of the Twenty-First Century” was released on April 5, 2005, 20 years ago this month. In it, the author looked at the forces of globalization and technological advancements as well as their effect on the global economy.
He admitted he was a bit early. The world wasn’t completely flat yet. However, the Internet was speeding up this flattening. This meant that anyone in any country could soon earn money from anywhere. They could easily sell to another person.
Those of us who were 18 and over during the Dot Com Bubble remember the rise of ecommerce very well. eBay, Amazon and more were growing. We are buying items from all over the world and it was easier to book plane tickets on travel websites. Who needed a travel agent anymore?
This “Creative Destruction” as Joseph Schumpeter, the economist I learnt about in my various economics classes at the University of Miami, called it. He argued that a fundamental feature of Capitalism was that innovation destroyed old jobs and ways of doing things while freeing up resources to be deployed elsewhere.
In 1924, approximately 10.5 million Americans were employed in Agriculture, approximately 25% of the U.S. labor force at the time. In 2024, that number was down to about 2.6 million and accounted for just 1.2% of the U.S. labor force. In that same period, the value of agricultural produce has grown from about US$12.1 billion to over US$500 billion. Accounting for inflation, that US$12.1 billion would be about US$220 billion.
Productivity Growth
Double the production and one fourth the workforce. This is called Productivity Growth and it comes with innovation. Time stops for no one and innovation is inevitable. Those who choose to focus on rewinding time to what they believe were better days are doomed to fail and repeat the same mistakes of history. Blanket tariffs simply increase the costs of goods and services to customers. Targeted Tariffs to protect specific industries and jobs only work if they are actually targeted and the industry is globally competitive from a cost standpoint.
The most important idea I learned in my economics classes was “Comparative Advantage.” This concept helped me see that countries should make what they do best. They can sell these goods to other countries. Then, they can use the money to buy things they need or want. These are items they cannot produce at a lower cost or better quality.
Caribbean countries have mostly fixated on Tourism even though they have no real Comparative advantage: Sun, Sea and Sand are in many other countries. Substitute Goods are plentiful and so potential customers can go elsewhere easily with very little switching costs.
The new global economy is different. We are in unknown territory. Countries need to focus on their real strengths. They should also find new strengths through innovation. The world is now flat, and competition is global.
David P.A. Mullings is the Chairman and CEO of Blue Mahoe Holdings, Inc., a private company focused on giving retail investors access to investments across the Caribbean region and served as the first Future Leaders Representative for the USA on the Jamaica Diaspora Advisory Board.
