The Localization of American Commerce under the Globalization of Capitalism

I’ve always been a believer that if you’re going to write a blog, than at least keep up with it.  Admittedly, this cardinal rule has been broken (I have not written in weeks).  Rather than putting out sound bites to the marketplace (and world) at large, our time has been spent working on modeling and technology development surrounding the future of BusinessCard2, so I hope you’ll accept my humble apology for the infrequency of posts.

This Monday I attended a small forum called “Innovation: Drivers and Impediments” held at the University of Minnesota.  The event was moderated by U.S Secretary of Commerce Carlos M. Gutierrez and professor Rajesh K. Chandy, who also serves on the Dept. of Commerce Measuring Innovation in the 21st Centry Economy Advisory Committee.  The panelists included the CEO of 3M George Buckley, the CEO of Medtronic William Hawkins, and board director of Carlson Companies Marilyn Carlson Nelson.

During this forum on Innovation there was much talk about the U.S. value proposition to the world.  The consensus was that we are a country of innovators.  The panel dissected the unique nature of the American people and how we strive to find solutions to problems.  The majority of questions addressed by the commerce leaders came from the small audience, including yours truly.  What I took away from the event was that for the U.S. to stay strong in the “international business war” we need to maintain our fundamental competitive differentiators — leading the world in innovation — by supporting invention and focusing on the impact innovation has on the economy.

In an article coming out in the September 2008 issue of Minnesota Business, I have gone out on a limb by stating that I do not espouse to Tom Friedman’s theory “The World is Flat.”  Although Friedman has strong ties to Minnesota, he might as well be from another planet.  Although his analysis of globalization has proved accurate for those seeking to remain competitive in the global market, it is my personal and professional believe that the world is proximate and this is a big opportunity which I would love for him the write on.

During my studies at the SJMC at the University of Minnesota back in the late 1990’s, I put forth a theory loosely based on Einstein’s Theory of Relativity that I called the Theory of Geographic Relativity. In my theory I postulate (axiom) our lives, both personally and commercially, are always first defined by the geographic distance from an object of prioritized need.  That is to say that although a bottle of water might only cost a nickle in Beijing, you’re still going to buy it for a dollar from your local convenience store, especially if you can’t afford to die from thirst.  [Keep reading, I’m going to make a point here.]

Even though China is becoming a viable economic competitor to the U.S., if we are reliant on our energy in the form of gasoline from Saudi Arabia and Russia, because we don’t have supply to meet demand here, and the cost of bringing the products we prioritize on ships burning fuel back here to save costs, we’ve just undermined economic value.  In math, it looks like this…

Toothbrush made in the U.S. = $1.05
Toothbrush made in the U.S. w/distribution cost to U.S. = $0.22
Toothbrush made in China = $0.31
Toothbrush made in China w/distribution cost to U.S. = $0.96
TOTAL COST FOR TOOTHBRUSH MADE AND SOLD IN U.S. VS. TOOTHBRUSH MADE IN CHINA AND SOLD IN THE U.S. = $1.27 vs. $1.27

This is of course a hypothetical cost scenario, but it is one that shows the former cost advantages can now be viewed as a deterrent with increasing energy costs impacting transportation of goods and services.

On the Discovery Channel I’ve enjoyed watching The People’s Republic of Capitalism, hosted by Ted Koppel.  This has provided me some insight on the cultural differences of the Chinese, as well as their growing economy.  However, I have seen nor heard anything that makes me fear China.  Let me explain why…

Maslow, for the most part, was correct with his Hierarchy of Needs. No where on this list of needs is a single item that can’t be procured locally from any city in the U.S.  Therefore, all items outside are not needs, but rather wants.  So, in essence China has successfully exploited its cheap labor force and established an economy based on foreign “wants”. America has an uncanny ability to meet “needs” in proximity.  The economic downturn has shown that the first thing people cut are the “wants”.  Our net gasoline consumption in the U.S., for example, is a “want” that decreased by 11 billion gallons in the last year.  In fact, we are staying home more often and traveling less.  My local gas price has fallen from $4.04 a month ago to $3.44 this morning and I’m betting this is going to continue.  This is not a direct result of supply and demand or commodity future’s speculators, this is a result of “need” vs. “want” prioritization.

Now, as China and India boom, the real question is how do we balance the playing field in terms of global trade?  Well, the first thing on both of these countries “want” list is going to be improving infrastructure (something coincidentally we’re dealing with again here in the U.S.*).  Next, their growing middle and upper classes will move from basic needs, to wants.  American innovation, quality and progress are the envy of the world.  In Koppel’s program, he showed a slightly upper middle class family that “WANTED” to buy U.S. made Ethan Allen furniture because of its “unparalleled quality”.  By the year 2012 the middle class of India will be larger than the entire population of the U.S.  That is a huge growth in want consumers.

I would argue that a properly trained and well-equipped manufacturing company in India or China can produce quality for it’s own consumers.  I don’t think this is the boon for the U.S. that will kickstart our global trade, save a minority of quality manufacturers in the U.S. that have a strong brand.  I also argue that because of the same energy costs making internationally sourced consumer products more expensive, it is fruitless to dream of a future where the U.S. becomes a low-cost manufacturer to the rest of the world.  So, what is the answer then???  Where does the U.S. position itself in the global market?

Only time will tell.  But to remain a successful country I strongly feel that our ability to take risks, our ability to pioneer new methods and practices, and our ability to invent and innovate are our future strengths.  I believe that there will be a movement in the U.S. to buy locally produced commodities, goods, and services not only because they are the best available, but also the cheapest.  I anticipate that we will “want” less and fulfill more “need” locally, and this will improve our quality of life, standard of living, and also improve our position globally as we reduce foreign dependency.  We will invest locally, but sell our innovation both nationally and abroad. Our next national chapter may be the localization of American commerce under the globalization of our capitalism.

*I’m happy to report that the 35W bridge down the street from me that collapsed last year will reopen, incredibly, in the next 45 days.

Advertisements

0 Responses to “The Localization of American Commerce under the Globalization of Capitalism”



  1. Leave a Comment

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s




Read on BusinessCard2

BusinessCard2 on Twitter

RSS BusinessCard2: New Cards

  • An error has occurred; the feed is probably down. Try again later.
BusinessCard2 Facebook App

%d bloggers like this: