Chapter 4 The Interdependent Global Economy Introduction The Historic Atlantic Alliance The Pacific...
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Transcript of Chapter 4 The Interdependent Global Economy Introduction The Historic Atlantic Alliance The Pacific...
Chapter 4The Interdependent Global Economy
• Introduction
• The Historic Atlantic Alliance
• The Pacific Rim
• Core and Periphery Relations
• The Role of Multinational Corporations
• The Changing Geography of Global Finances
• Global Communications and World Cities
Gottman’s Quotation
“Modern cities are the pillar’s of the developing global system.It is a poetic illusion to assume that the world is shrinking because communication improves. In reality the world of each of us constantly expands because, as we carry on, we find it necessary to deal with more and more people, in more places,with a greater number and diversity of problems. This is sofor individuals and also for cities.”
• Could be seen as another expression of Vance’s mercantilist model, or of Alonso’s bell-shaped development model• Historical characterization of European colonial empires
to supply commodities needed in the industrial revolution
Evolution of Global Trade• The Historic Atlantic Alliance
- Domination of Atlantic trade in global trade• Post WW-II Pacific Rim Development
Japan, 4 Tigers (S. Korea, Hong Kong, Taiwan, Singapore), Indonesia, Malaysia,
China, Thailand (Table 4.2)• Figure 4.1 (U.S. Exports), Figure 4.2 (Japan
exports), the Changing Position of China• New big trends: Movement of Mexican
Maquiladora production to China; Outsourcing to India (English), Africa (French), E. Europe (German)
Core and Periphery Relations (again)with more of a geopolitical spin
• Wallerstein’s core-periphery hierarchy– Figure 4.3– World Cities as the set of core focal points– His 4 epochs: (a) transitional period 1450-1640
(b) colonial capitalism (1640-1815) (c) British hegemony (1815-1917) (d) U.S. hegemony (1917- present)
Marked by: U.S. Military superiority; socialist experiments, decolonialization of the periphery, rise of multinational corporations
Dependency Theory
• Core growth only possible by exploitation of the periphery
• High levels of competition in primary producers, w/labor willing to work for low wages, in industries with depressed product prices, and a lack of internal investment to develop other industry in the internal economy.
The Brain Drain
• International Perspective in the text– (Japan vs. China)– The dramatically altered landscape since 9/11
• Could make the same arguments internally in countries, like the U.S.
• Regional differences in education system capacity & consequences for income earning possibilities for residents.
Location Quotients: S&E Graduate Students
.66
Washington State Employers Import Educated Labor to a greater extent than expected due to the small local higher ed system
The Role of Multinational Corporations
• The rise of large corporations and increase in concentration of power
• Types of market organization
• Evolution of multi-establishment corporations
• The ICI example in the text
Alternative Models of Competition
One Buyer A Few Buyers Many BuyersOne Seller Monopsony MonopolyA Few Sellers Oligopsony OligopolyLimited Quantityof Sellers
MonopolisticCompetition
Many Sellers PerfectCompetition
Barriers to Entry - High
Barriers to Entry - Low
Attributes of Alternative Market Types
Perfect Competition Monopoly OligopolyHomogeneoous products Unique Product Similar ProductsEach producer makes asmall share of output
One producer makes all ofthe product
Several sellers divide themarket
No one seller influencesPrices
Prices set to maximizeprofit
Prices set through pricingstrategies
Entry to market is easy High Barriers to Entry High Barriers to EntryFlow of information isPerfect, eliminating excessprofit
Monopolist is able tocontrol the market
Oligopolists engage instrategic behavior—competitive or collusive
Markets are fluid Market is rigid Market may be unstable,competitive strategies tocreate stability: productdifferentiation,advertising, industryagreements
“Pure” Monopoly
Trends in Business Concentration
•“Concentration ratios” as indicators of market structure
•Rising concentration in manufacturing in U.S. and U.K. over time
•Similar trend in other sectors
•Most industries are not monopolies, or perfectly competitive. The tendency is towards oligopoly AND often are part of
multi-establishment firms, often conglomerates
Size Distribution of Business Enterprises, U.S., 1997
0.09% of the businesses in the U.S. account for60% of total receipts
0 5000 10000 15000 20000
Non-Farm Proprietorships
Partnerships
Corporations less than $1 million
Corporations $1 - $4.9 million
Corporations $5 - $9.9 million
Corporations $10-$49.9 million
Corporations Over $50 million
Net Income
Receipts
Number of Businesses
0.1% of Enterprises account for 61% of Receipts
Examples of Concentration Ratios
50 Largest 24%100 Largest 32%150 Largest 38%200 Largest 42%
Share in 1992 of Value Added accounted for by thelargest companies, United States.
Examples of Concentration Ratios
SIC # of Companies
Value of Shipments ($ millions) 4 8 20 50
2421 5302 21065 14 20 31 443334 30 5849 59 82 99+ 1003721 151 62938 79 93 99 99+2011 1296 6959 50 66 79 882013 1128 5478 25 33 46 622015 373 23845 34 45 66 852021 31 1034 49 78 98 1002022 418 18344 42 60 74 862023 153 7541 43 55 76 942024 411 5291 24 40 68 872026 525 21921 22 30 49 68
Share of value of shipments accounted for by the x-largest companies:
Evidence of Mergers and DivestituresUnited States 1985-1999
0
2000
4000
6000
8000
10000
1985
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
0
1000
2000
3000
4000
Number ofActions
Value ($Billions)
$#
Acquisitions and Divestitures, U.S., 1985-1999
0
1000
2000
3000
4000
5000
6000
7000
1985
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Acquisitions
Divestitures
#
Consequences of Mergers, Acquisitions & Corporate Expansion
• Most industries exhibit oligopolistic tendencies
• Leading corporations are multiestablishment
• Leading corporations are conglomerates
• Leading corporations are multinationals
• Truly global corporations now dominate international business: Table 4.4
“We live in a world of oligopolies, a world in which hundreds of thousands of small firms still exist but a relatively small number of large enterprises predominate.” P. 262, Lloyd & Dicken
The constant flux in global (and local) corporations
• Downsizing as a strategy
• Outsourcing
• “Re-engineering”
AND
• Simultaneously development of new businesses
• Development of new product lines in existing businesses
• Restructuring production locations
K2 shifts work, cuts half of staff on Vashon (Seattle Times 11/19)
“K2, a maker of skis and other sporting goods, said it will lay off half the workers at its Vashon Island plant as it moves half its ski and snowboard manufacturing to China and California and has suppliers make its bike products to cut costs.”
“The company expects the changes to save $4 million next year.”
“K2 makes skis, snowboards, inline skates and bikes under the K2 brand, as well as Olin skis and Shakespeare fishing tackle. It will move production to plants in Corona CA and China by year’s end.”
“K2 got the Corona plant as part of its recent acquisition of Preston-based snowboard-equipment maker Ride. It will house manufacturing of mid- to high-end snowboards. The rest of the company’s products will be made in China or outsourced.”
The Segmented Economy
• Dynamics in Firm Populations
• Averitt’s dual economy model
Center firms - large, dominant, complex in organization, powerful resources and influence
Peripheral firms - small, simple structures, weak resources, and little influence
David Birch’s Thundercloud
Birth Rates: ~ 10-12% of Existing PopulationDeath Rate: ~ 8-10% of Opening Stock of Businesses
Size
Big
SmallMost Firmsstay small forever
A few grow huge
Most fall backafter a short period
A small cohortbecome globalcorporations
Many voluntary startups andcessation's each year
A Model of the Segmented Economy by Taylor and Thrift
BUSINESSORGANIZATIONS
SmallerFirms
LargeFirms
Leaders
Intermediates
Laggards
Craftsman SatisfiedSatellites
Subcontractors Franchises
LoyalOpposition
Multidivisonal Global
Supports Laggards Intermediates Leaders
Lindahl & Beyers test in the producer services
Beyers & Lindahl Test of Segmented Industry In Producer Services
Leaders
Intermediates
Laggards
Declining Strugglers
High Fliers Still Growing, Exporters
Still Growing, Local
Right Industry
Satellites & Spin-Offs
Field Offices
Stabilizing
Craftsman Proprietor
Satisfied Small Business
Steady Cruisers