Can the U.S. Be an Export Nation in a Difficult International Economy?

The IMF says the global economy will grow slower than expected this year while another recent announcement states that China superseded the U.S. in terms of purchasing power this year. Both are game changing events in what appears to be a long played out economic drama. Even though the news is not positive it does provide an opportunity for the U.S. to focus on improving its infrastructure to lower costs and retool for better managing international markets.  

Slower International Economic Growth:

International markets are expected to experience slow growth in the near future according to an October 7th report by the International Monetary Fund (IMF). The IMF initially thought the world economy may grow as high as 3.7% this year but have revised that number down to a weaker 3.3%. The slowing economy could make it more difficult for companies that are trying to export overseas to locations where the economy is lack luster.

Growth in advanced economies and emerging economies are widely different. Advanced economies should experience a 1.8% growth rate this year and a 2.3% growth rate in 2015. Emerging economies are expected to have a higher rate of 4.4% based upon their riskier investment portfolios.   Companies are attracted to the cheaper and more lucrative emerging economies for new investments.

The IMF argues that one of the difficult challenges facing economies is the ability of countries to enact reform and change to improve upon their competitive positions. Countries should select which changes are needed and beneficial and then move down the path of change to make things happen. Political capital and the ability to share objectives will naturally have an impact on the success of reform efforts. 

Chinese Wealth and Influence:

The IMF states that China’s economy is larger than the U.S. in terms of purchasing power (1). China has surpassed the U.S. on purchasing power parity (PPP) meaning that once the Gross Domestic Process (GDP) is adjusted the Chinese have significant purchasing strength in the global market making them more influential than in the past. They have become a direct competitor and market changer.

National wealth creates influence among business stakeholders. When national wealth is high countries are able to better bargain for deals, influence international stakeholders, and obtain the resources needed to adjust and be more innovative. As China rises on the international scene a new alternative takes shape which becomes viable for nations seeking the best deal between two large economic countries (U.S. and China). 

Needed Improvements:

A slower international economy and a more powerful China is not the end of the game. It provides an opportunity for the U.S. to direct its efforts toward implementing its own growth oriented strategies to draw investments and improve the overall economic functioning of the nation. When difficulties arise decision-makers are encouraged to put down petty differences and focus on solutions through collaborative problem-solving.

Economic hubs act similar to emerging markets but have the additional benefit of being within a more stable national economy. Their growth potential as a localized entity is higher than national rates but can also influence those national rates. Emerging technology and manufacturing hubs are prime examples of flush investment and growth opportunities that have not been fully explored. 

Within the U.S. there are examples of hubs that developed organically through like-minded stakeholders. Understand where these hubs are located, encouraging mutual development within these hubs, and creating awareness of investment opportunities has a long-tail impact on the national economy. As hub members become more innovative they will naturally export products and raise their income opportunities by drawing in more investment interest to feed their growth. 

The point between A and Z has many stops and twists along the path. At times we have become our own worst enemies in the sense that other considerations beyond the health of the nation regularly take precedence. We must only look at the political spectrum to see this distraction at work. Americans desire employment opportunities and this comes through building ground-based products and services that have international penetration. Government should move upwards in its development to lower costs, empower local economies (i.e. hubs and clusters), reduce debt, improve infrastructure (i.e. how hubs interact on a national level) and focus on founding fundamental principles that encourage basic human motivation. 

IMF Report

Using Training to Raise Global Competitiveness

Companies need training and development to bridge the skill gaps between needed market competencies and employee skills. Research by Bersin and Associates are presented to help highlight the differences in these skills on a global scale and how this led to major unemployment concerns in many countries (O’Leonard, 2012). They provide a number of recommendations for organizations that seek to develop their talent for competitive advantages. 

A study entitled World of Work Report by the International Labor Organization indicates that unemployment could be around 208 million globally in the next year or so (International Labor Organization, 2013). They highlight the problems as uneven opportunities, creating jobs and macroeconomic approaches. The focus of countries should be to develop the right skills and create opportunities for youth. 

 “The labour market and income situation is uneven but can be improved by consolidating the rebalancing process in emerging countries and finding the right balance between employment and macroeconomic goals in advanced economies. Progress towards reducing economic and social inequalities would pave the way for a lasting recovery (International Labor Organization, 2013).”

Even though chronic unemployment is higher than ever before others are being relied on to fill skill gaps. Training rose 9.5% in the last year to around $800 per person while hours spent in training also increased. A total of $67 billion within the U.S. was spent in 2011 (O’Leonard, 2012). Companies are attempting to meet these skill gaps by reinvesting in motivated employees. 

To provide better training at a more effective price many companies are relying heavily on social media, e-classes, social learning, and alternative forms of training. In 2011 the total spent on alternative training doubled to around $40,000 per large organization. Training costs have begun to decline and were at $51 per hour in 2011 which is the lowest in the past 6 years. 

Most organizations are still not doing well. 6% of HR organizations ranked themselves as highly skilled with 56% ranking themselves low. They are unsure of how to measure training and move people to higher skill levels. Their metrics are not well developed and moving to higher effective training programs is difficult. 

The author recommends that changes are needed in order to further develop employees to take on new skills and abilities to gain corporate competitive advantages. They are as follows:

- Starting to encourage collaborative and generative learning connections. Use virtual education and advanced methods to lower costs and improve upon the use of social learning to create higher skill sets. 

-Continue to recognize and reward productivity gains. Rewarding employees for improvement in their skills helps them stay motivated during the developmental process. 

O’Leonard, K. (2012). Mind the global skills gap. Chief Learning Officer, 11 (8). 

International Labor Organization (2013). 2013 World of Work Report. Retrieved March 10^th, 2014 from http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/publication/wcms_214673.pdf

Technological and Labor Skill Advancement Increases Economic Output

Economic systems have both inputs and outputs. When outputs exceed the total inputs, the system is seen as unsustainable. A paper by Brestschger and Valente (2011) delves into a method of measuring the sustainability of resource rich countries. Even though their focus is on oil producing countries, they do have some broader implications. 

Most studies seem to rule out the concept of technological progress and trade gains to determine economic viability. Technology has the ability to lower the cost of transactions and increase overall outputs. Thus, technological advancement can lead directly to an export market and more sustainable system. 

Net investment is a concept that focuses on the net increases in all the productive assets of the local economy. Such net investment are measured by adding all of the technology and labor productivity increases and subtracting things like depletion of natural resources. The more information available the more accurate such evaluations become. 

The model proposed by the authors includes an expression of net investment from:

1. International trade in different types of inputs

2. productivity growth in final sections

3. cost-reducing technology in resource extraction

A large percentage of resource-exporting countries are unsustainable because of negative net investments. This means they are losing resources and not hedging the influx of capital to ensure that sustainable growth beyond these resources occurs. According to net investment, the economic capital flow is moving outward.  

If w were to apply the findings of this study to other areas using a similar schema we would conclude that economies that can raise their value of products and export them on the market have net inward flows of value. The wealth of an area increases while those countries that export resources without raising the values significantly are less sustainable.  Technology and local labor skill have the ability to convert lower value products to higher value outputs that increase local wealth. When considering global economies hubs can use local technology and skills to purchase lower value inputs from other places in the world and develop them into higher value products that are sold on the market to increase the wealth of an area. 

Bretschger, L. & Valente, S. (2011). International trade and net investment: theory and evidence. International Economics and Economic Policy, 8 (2).

Defining the Elusive Concepts of Globalization

Globalization is a trend that has been fully embraced by some and treated as an unwelcome guest by others. The concept of globalization entails the need for change and further development in order to meet its widespread market pressures. Understanding globalization creates a stronger framework for understanding how it impacts international business and underlying perceptions of human capital. Through the development of a greater understanding there is the possibility of better management of global alignment.

Globalization was first mentioned in 1983 when Theodore Levitt explained how technology would drive the world into a single conversational platform that would result in global markets and brands (Govil & Rashmi, 2013). Markets begin to consolidate and new forms of business develop in order to compete in and traverse those markets. Those businesses that do not factor in the changing market and its globalizing effects may be end losers in the international game. 

There are many different ways in which to view the concept of globalization. Globalization can be seen as moving a national state into a global state (Stojanov, 2012). During such transition local workers align skills to the needs of the international community and are capable of working within firms that have international products and services. Companies seek out such local candidates when considering choices of expansion and international investment. 

Globalization is a concept of free trade that fits within a Capitalistic structure (van Meerhaeghe, 2012). Such free trade comes with the movement of products, money, labor, and businesses from one part of the globe to the next. Countries are no longer defined simply by their country of origin but become defined by a more transient global business environment.  More competitive structures create more business interest and investment.

As these products, business, labor, and investment shift from one place to the next there will be locations that naturally lose out on the benefits globalization has to offer. For example, income equality can result in places like South-East Europe or the Commonwealth of Independent States (Elmawazini, 2013). This is due to the loss of investment, poor governmental structures, tax structure, human capital, infrastructure and other factors that make such places more difficult to conduct business and therefore less lucrative for investment. 

As a by-product of greater global awareness human rights and worker rights also become more globalized. For example, globalization of law, legal accountability, human rights, conflict resolution, and doctrines of equal standings become more common (Brysk & Jimenez, 2012). Economics and value systems exist together and as economics become porous across borders the concepts of ethics and human rights also become defined by those new economic assumptions. 

At present, there is no single way to measure globalization. Some indexes measure investment, some economic output, some educational attainment, and others human capital earning power. Each of these indexes has advantages and disadvantages but is limited in scope and effectiveness. Using multiple indexes of important key indicators is more accurate than relying exclusively on a few single benchmarks.

Globalization has both positive and negative effects on economic strength. Those countries that are more capable of aligning their systems to the new global structure are more likely to succeed in the long run. As this transition occurs there will be challenges of basic assumptions, adjustments of wealth, needs for new skills, and times of political upheaval.  What we believe today may not be what we believe a few decades down the road. Times are changing and with this come new opportunities for success or failure.

Brysk, A. & Jimenez, A. (2012). The globalization of law: implications for the fulfillment of human rights. Journal of Human Rights, 11 (1).  

Elmawazini, K., et. al. (2013). Trade globalization, financial globalization and inequality within south-east Europe and CIS countries. Journal of Developing Areas, 47 (2). 

Govil, S. & Rashmi, J. (2013). Globalization of Markets. Advances in Management, 6 (6).

Stojanov, D. (2012). Dialectic of globalization and economic science. International journal of innovations in Business, 1 (4). 

van Meerhaeghe, M. (2012). Globalization: concept, outcome, future-a continental view. European Journal of Law and Economics, 33 (2).