Dr hab. Tomasz Dołęgowski, Prof.. SGH,
SGH – Warsaw School of Economics – World Economy
Faculty
Globalization and Regionalization in
International Relations Competitiveness in the Global Economy
Lecture - concept
• The meaning of global economy
• Globalization. Global capitalism, alliance
capitalism and the knowledge-based economy
• The concept of competitiveness
• Institutions and economic growth
• The competitiveness policy
• Sectoral approach
• The ethical and axiological aspects of
globalization and competitiveness
• Globalization and Regionalization in Int.
Relations
• Inspirations: J. Dunning, F. Fukuyama,
institutional economists, modern catholic social
teaching.
Some of the purposes
• Purpose of lecture: to examine the forces determining the
competitiveness of corporations and countries (regions,
regional alliances of countries) and the role which
governments have played in shaping these events.
• We shall pay particular attention to the competitiveness of
U.S. and Europe (also their multinational companies), as
well as Pacific rim countries.
• We shall examine the nature, extent of and reasons for the
internationalization of business (via trade, foreign direct
investments and cooperative alliances) and the way in
which this has impacted on the competitiveness of the
countries (and regions within countries) in which they
operate.
• We shall also analyze the actions of governments in
affecting the location of investment by domestic and
foreign based MNEs, and in creating and sustaining the
competitive advantages of their indigenous resources and
capabilities.
Global Economy: Some theoretical
aspects
•
Global Economy: system of world-scale,
long-term economic links between
countries.
•
Traditional international economy:
domination of foreign trade.
Modern global economy: foreign trade +
regional integration + development of
transnational corporations (TNC, MNC).
From traditional theories of foreign trade
to modern theories of transnational
production and theories of localization.
•
•
Global Economy – some theoretical aspects
• International Economics – International Economic
Relations (macro approach) and International
Business (more micro approach).
• Foreign Trade and Foreign Direct Investments.
• Foreign Trade Theory: includes macro and micro
aspects.
• International Business: Foreign Trade +
International marketing + International
Management + International Finance. Particular
concentration on FDI (Foreign Direct
Investments) and Transnational Corporations: the
important actors of modern global economy.
• International Economics: part of the economics
dealing with international transactions in goods,
services, financial flow and movement of the
factors of production.
Competitiveness in the Global Economy
Global Economy: system of world-scale, long-term
economic links between countries.
Globalization – definitions:
Globalization refers to the growing interdependencies of
countries worldwide through the increasing volume
and variety of cross-border transactions in goods and
services, and of international capital flows; and also
through the rapid and widespread diffusion of all kinds
of technology. (IMF 1997)
Globalization: Extending and deepening the economic
interdependence between nations;
Globalization
Today’s globalization is characterized by unprecedented
degree of free and fast movement of capital around the
whole globe, and by the global institutions of a financial
superstructure. Capital has acquired predominance
over other factors of production, economic activities
are coordinated by globally integrated financial and
capital markets.
Globalization
Selected sources of globalization:
• Technological progress (in industry,
telecommunication, IT, transportation);
• Deregulation and liberalization;
• Political changes.
Globalization: microeconomic (TNC’s) and
macroeconomic (international
cooperation, regional integration) aspects.
Globalization
Debate on relations between globalization and regionalization:
• Is regionalization (regional integration) a part of
globalization process?
• Or rather it is a way to balance and to control globalization?
Interpretations of Globalization and global economy:
• just extending and deepening the economic
interdependence between nations
• or rather domination of capital and big corporations,
economic imperialism of financial capital, delocalization as
well as weak position of governments.
The concept of the network economy.
Globalization-future
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Theories about the future of globalization:
a/ The theory of F. Fukuyama (the end of history)
b/ S. Huntington (The clash of civilizations).
In XIX century oposition between K. Marx and M.
Weber: directions of development.
c/ The “Triade” concept (K. Ohmae)
d/ The theory of modernization vs. the theory of
dependence (e.a. concept of I. Wallerstein: core periphery – semi-periphery)
e/ The future of the traditional nation – state: from
the theory of “global network economy” to
traditional concept of W. Link (state will be also in
the future the main actor in global game)
B. Barber: Jihad vs. Mac World (?)
Globalization - modern capitalism – J. Dunning
Modern global economy according to J. H.
Dunning:
•Global capitalism (global scale of operations,
global actors…)
•Alliance capitalism (alliances between
companies, countries)
•Knowledge-based capitalism (the role of science,
education, services – the role of human capital
and social capital).
•From the land-based capitalism (economy), via
industrial capitalism to modern capitalism (global,
alliance and knowledge-based)
Globalization – J. H. Dunning
The Changing World Economic Scenario:
The increasing importance of all forms of
intellectual capital in both the assetcreating and asset-exploiting activities of
firms.
The growth of cooperative ventures and
alliances between, and within, the main
wealth-creating institutions.
The liberalization of both internal and crossborder markets.
The emergence of several new major
economic players in the world economy.
Globalization – J. Dunning
The unique features of global capitalism:
• Cross-border transactions are deeper, more
extensive and more interconnected than they
have ever been.
• Resources, capabilities, goods, services are more
spatially mobile than they have ever been.
• Multinational enterprises (MNE’s) play a more
significant role as creators and disseminators of
wealth, than they have ever done before; and they
originate from, and produce in, more countries
than ever before.
• There is more real and financial volatility in crossborder markets – and particularly in capital and
exchange markets – than there has ever been.
• The advent of the digital environment and
electronic commerce is completely changing the
character and location profile of transactions.
J. Dunning - Globalization
Some paradoxes of the emerging global economy:
• a/ cooperation and competition (coexistence)
• b/ globalization and localization: the paradox of
space
• c/ the role of governments: the paradox of “less,
yet more”, of centralization and decentralization
• d/ human consequences of globalization: paradox
of benefits and disbenefits.
Other:
• globalization vs. global governance
• Globalization supports and does not support
democracy.
J. Dunning - Globalization
Actors of the global economy:
• States
• Markets
• International regional blocks
• International (transnational) organizations
• Transnational corporations
• Non-governmental organizations.
The world production and exchange:
• The world production
• The world exchange: (movement of goods, movement of
services, movement of capital, movement of labor -people).
• New economy, e-finance (e-economy, e-business).
Dunning - Globalization
Global Economy: Important international institutions and
organizations:
Global:
• United Nations
• OECD
• UNCTAD
• IMF/World Bank
• UNC TNC
• WTO
• ILO.
Regional:
• European Union
• NAFTA
• Mercosur
• ASEAN
• EFTA and CEFTA.
Dunning - Globalization
Forms of Macro-organization
(coordination) in modern global
economy:
• Markets
• Hierarchies
• Governments
• Alliances
• Mixed (hybrids).
Theories of foreign trade and foreign
direct investments
International trade theories:
• Theory of absolute trading advantages (costs) (A. Smith)
• Theory of comparative trading advantages (costs) (D.
Ricardo)
• The Heckscher-Ohlin factor-proportions Theory (explains
the country’s trade in terms of its factor endowments: of
labor and capital). A country has comparative advantage (is
able to export those products) in which its most abundant
factor is used relatively intensively
• Neo-factor theories: add new factors (human capital,
natural resources)
• Neo-technology theories (e.g. technological gap).
Theories of Foreign Direct Investments:
• Traditional neo-classical approach
• Location theories
• Oligopolistic theories
• Internalization theories
• International Product Life Cycle
• J.H. Dunning Eclectic Paradigm (OLI).
Competitiveness - introduction
• Competitiveness – the ability to
compete (long-term)
• Competitiveness – the ability to
compete and to generate long-term
and sustainable growth of
organization (company, sector,
region, country, group of countries,
system…)
Competitiveness - introduction
• According to the World Competitiveness Report
competitiveness is the ability of a country or a
company to, proportionally, generate more wealth
than its competitors in world markets.
• The World Competitiveness Yearbook 1996
presents new definition. Competitiveness is the
ability of a country to create added value and
thus increase national wealth by managing assets
and processes, attractiveness and
aggressiveness, globality and proximity, and by
integrating these relationships into an economic
and social model.
Competitiveness
COMPETITIVENESS (national competitiveness) is
an ability of a country (national economy) to the
long-term, effective and sustainable growth in the
conditions of the open economy. In effect the
structure of economy and export follows the
structural changes (tendencies) of the global
economy.
Determinants of competitiveness:
• amount and structure of resources
• efficiency of resources exploitation
• economic system and institutions
• international (global) economic environment.
Competitiveness
Competitiveness – how to measure it?
Competitive position and competitive ability.
• Competitive position – ex post – share in the
world trade, trade turnover and balance, rate of
exchange, terms of trade… - more “static”
approach
Competitiveness ability – more “dynamic”
approach:
• Competitiveness (long – term competitiveness,
competitive ability): the main economic indicators
(rate of growth, inflation, internal and foreign
debt, domestic and foreign trade equilibrium),
indicators of structural changes in economic
development, economic efficiency, labor
efficiency, indicators of position in international
trade.
Competitiveness
Competitiveness – levels of research:
• Micro - level (company, product…)
• Mezzo – Level (networks, sector level)
• Macro – level (state, region)
• According to some authors also Megalevel (regional blocks like EU) as well as
Meta level (system).
Controversies concerning competitiveness
(P. Krugman vs. J. Dunning and M. Porter)
Competitiveness – traditional
and modern approach
There are at least two groups of approaches
to the concept of competitiveness:
• Traditional approach – competitiveness
treated as (only) an economic reality.
Concentration on micro level and foreign
trade;
• More modern approach – competitiveness
treated mostly as an economic reality, but
not only – pure economic competitiveness
treated as a part of broader concept.
Competitiveness discussed on several
levels.
How to make national
economy more competitive?
• Liberalism vs. Protectionism
J. Dunning: The State should first of all:
• Concentrate on the quality of institutions
and institutional environment of their
economies (in order to reduce transaction
costs)
• Work for increasing the competitiveness
of their factors of production (resource
creator and improver)
• Improve the quality of infrastructure.
Regional dimension of
competitiveness
• The role of clusters in the promotion of
competitiveness and innovations
J. Dunning – conclusions of “Regions, Globalization
and the Knowledge Economy”:
• Carefully planed and executed locational strategy
of MNEs is becoming and increasingly important
factor influencing their global competitiveness.
• Growing mobility of firm-specific core
competencies is placing increasing responsibility
on microregional authorities to ensure the
availability and quality of location-bound
complementary assets to attract the right kind of
mobile investment.
Institutions and
competitiveness
• Institutions are the legal, administrative
and customary arrangements for the
repeated human interactions. Their major
function is to enhance the predictability of
human behavior.
• Institutions as (also) the rules of game.
• Institutions: formal institutions (law,
constitution, property rights), informal
(morality, religion, customs, culture,
ethics), system of enforcement.
Institutions and
competitiveness
• The character of the interacting
institutions (liberties, religion, ethics, law,
economic environment, social behaviors)
determines the character and the scale of
the transaction costs.
• Institutions: important impact on the
character of economic development.
Character of institutions can stimulate
growth, or create barriers on the way
towards more efficient structures.
Institutions and transaction
costs
• Transaction costs can be defined as the
costs of all resoruces required to transfer
property rights from one economic agent
to another. They include the costs of
making an exchange (eg. Discovering
exchange opportunities, negotiating
exchange, monitoring and enforcement)
as well as the costs of maintaining and
protecting the institutional structure
(judicary, police, military forces).
• Transaction costs: lack of trust and
confidence, information assymetry…
Institutions and
competitiveness/development
• „The European Miracle”
• The models of institutional environment and
models of the state/economic developmentGlobal capitalism vs. regional models of the
system - Unification or co-existence?
• American model of economic system, social
system and corporation (corporate governance)
• European model (models): submodels
(Scandinavian, continental, mediterean…)
• Asian models (Japan, Korea, China…)
• Individualism vs. Communitarism
• Concept of Social Market Economy and
Ordoliberalism. Economic, social, ethical
implications.
Institutional Competitiveness
• With institutional competition national
governments have to compete for internationally
mobile resources
• The core of the idea of the competing institutions,
governments and jurisdictions is that voters can
vote with their feet and that factors of production
can move to other places as well. Competition
among the government means, that the immobile
factors of production compete for those factors,
which are internationally mobile by providing
favorable conditions of production.
The main world ranks of
competitiveness
The main world indexes of competitiveness:
• The World Competitiveness Yearbook
• The Global Competitiveness Report
• The Index of Economic Freedom
• The Human Development Report (Index)
• The Transparency International Corruption
Perception Index.
The Competitiveness Indexes
Competitiveness Factors (The WCY)
• Economic Performance (domestic economy,
international trade, international investments,
employment, prices…);
• Government Efficiency (public finance, fiscal
policy, institutional environment, business
legislation, societal framework);
• Business Efficiency (productivity, labor market,
finance, management practices, attitudes and
values);
• Infrastructure (basic infrastructure, technological
infrastructure, scientific infrastructure, health and
environmental protection, education).
The Global Competitiveness
Report
GCR:Stages of Competitive Development:
• Factor-driven (institutions, infrastructure,
macroeconomic stability, health and
primary education)
• Investment/efficiency-driven (education,
goods market efficiency, labor market
efficiency, financial market sophistication,
technology, market size)
• Innovation-Driven (business
sophistication, innovations).
Competitiveness indexes leaders
• WCY: USA, Hong-Kong, Singapore,
Switzerland, Denmark, Sweden, Australia,
Canada, Finland, Nederlands
• GCR: Switzerland, USA, Singapore,
Sweden, Denmark, Finland, Germany,
Japan, Canada, Neederlands
• IEF:Hong-Kong, Singapore, Australia, New
Zealand, Ireland, Switzerland, Canada,
USA, Denmark, Chile
• TI: New Zealand, Denmark, Singapore,
Sweden, Switzerland, Finland
• HDI: Norway, Australia, Iceland, Canada.
Indexes - opinions
Competitiveness Indexes: Main problems of
evaluation
• Soft data (qualitative information): the results of
evaluation have a risk of reflecting culture –
bound perceptions rather than facts;
• weighing of competitiveness factors (importance
of various factors may differ across countries);
• erroneous policy prescriptions: some factors are
loosely related to competitiveness.
Example: openness is highly-valued, but is specific
mostly for small countries…
The Paradigm of Locational Competition and
competitiveness (Siebert):
• Locational competition is geographic competition,
competition between places, between cities, between
regions, and between countries. These spatial compete
with each-other for mobile production factors in factor
markets, i.e. for mobile capital, technical know-how, highly
qualified labor.
• Countries compete with their taxes, their infrastructure and
their institutional setups. Mobile capital can leave a country
when conditions there become unfavorable, for example
when taxes are raised. Taxation drives capital out of the
country, whereas infrastructure attracts capital. Obviously
there is a trade-off between these two effects.
• In addition to tax competition and competition in providing
public goods (infrastructure competition), there is also
competition between institutional rules, i.e. between
product standards, permitting procedures, or other legal
regulations (institutional competition).
• Locational competition will have its impact on national
economic policies. Governments will be forced to look at
international benchmarks for their own policies.
Social capital
• The important role of human capital
and social capital
• Social capital: the level of trust in the
society/economic life as well as
ability to cooperate
• The authors: F. Fukuyama, D.
Coleman
• Social capital and efficient
institutions reduce the transaction
costs.
Competitiveness according to
Timo Hamalainen
Key determinants of national competitiveness (T.
Hamalainen):
• Productive resources
• Technology
• Organizational efficiency
• Product market characteristics
• International business activities
• Institutional framework
• The role of government
Timo Hamalainen
Paradigm shift of the world economy: from
the technological paradigm to the macroorganizational paradigm.
• Two often-neglected competitiveness and
growth factors (groups of factors):
organizational
arrangements
and
government role.
• The current paradigm shift tends to
challenge both markets and governments
as organizational arrangements. This
requires a new division of labor among
public,
private
and
third
sector
organizational arrangements.
Timo Hamalainen
• The societies that will most
rapidly adjust their socioeconomic systems to the
changed technoeconomic
environment will perform best in
the years to come due to the
increasing returns associated
with systemic adjustment.
Timo Hamalainen
• Interesting evolution of T. Hamalainen:
from competitivenss to social innovations
and the concept of sustainable well-being
(treated as a part of new open industial
policy).
The examples of the most
competitive economies
• Finland: the level of institutions, social
capital, infrastructure, sustainable
development, education. Quality of
government, corporate governance and
the private sector (social dialogue on the
national and corporate level)
• Competitive corporations
• The role of specific institutions (state,
public-private partnership) – SITRA
European Union – Lisbon Strategy
Lisbon Strategy: EU should be in 2010 the most competitive
region in the world. Sources of EU Competitiveness:
Knowledge-based economy, innovations, sustainable
development.
• Basic aspects of Lisbon Strategy:
• Education and human capital
• New technologies
• Information society
• New employment and mobility policy
• Productivity of labor (particularly in services)
• Investments in infrastructure (Trans European Networks)
• Synergy between competition policy, industrial policy and
sustainable growth/development policy.
EU – Lisbon Strategy
• Question: The current visions
(concepts) of the future EU and EU
competitiveness policy vs. the
concepts of Constitutional Political
Economy and the Theory of
Institutions.
• The links between competitiveness
policy and cohesion policy (regional
policy) – implications for the Central
Europe.
EU – Lisbon Strategy
• Competitiveness of the European Union: The Lisbon
Strategy- sources of the weaknesses
• Relative weakness of the most EU countries. Big
differences between EU countries (high competitiveness of
Finland and Ireland);
• Economic and the quality of life performances of EU
countries lower than US (30%) and Japan (13%);
• Relative low productivity of labor, high labor costs, high
unemployment, low mobility of labor;
• High fiscalism (high taxes);
• High costs of services;
• Low level of innovations;
• overregulation;
• High costs of common agriculture policy.
Prospects for competitiveness:
• Europe, America and the Pacific Rim
(Asian countries) – who will be the
leader in XXI century?
• Regional integration outside Europe:
NAFTA, MERCOSUR… - prospects
for competitiveness.
National competitivenesscorporate competitiveness
• From cost competitiveness to the role of
quality and crucial unique competences
• Particularly: role of time – based
competition and competitiveness (Just-intime), lean management, TQM.
Modern concepts:
• key - competences competition and
competitiveness;
• added-value chain;
• logistic supply chain;
• network models.
TNC-transnational corporations
Forms of company internationalization:
• Foreign trade, establishing representative
office, licenses, franchising and jointventures, establishing of subsidiaries,
alliances, mergers, acquisitions, creation
of common multinational enterprises.
• From national corporations and foreign
trade to multinational corporations,
transnational corporations, global
corporations (global corporate strategies).
Transport policy and
competitiveness
• Infrastructure, Transport and Logistics:
implications for company indicators,
competitiveness on sector level,
competitiveness of regions, national
economies
• Particularly interesting implications of
high speed trains for development
(regions)
• competitiveness of air companies/airports
(the case of alliances)
• Transport and sustainability
(controversies).
• Criteria: economic criteria, technology,
organization, time…
Competitiveness, ethics and
sustainable development
• Ethics in Economy and Business Ethics
vs. Modern reflection about
competitiveness
• Ethical reflection – old and new (ethical
reflection older than economy)
• Intellectual sources of ethical reflection in
business and economy: utilitarian theory
(A. Smith), kantian theory, virtue ethics,
religious philosophy (catholic, protestant)
• Utilitarian theory: support for capitalism,
stockholder approach
• Kantian – stakeholder approach.
Competitiveness, ethics and sustainable
development
• The concept of CSR (Corporate
Social Responsibility) and
Sustainable development (economic
development, ecological
development, social development)
• CSR: underlines the role of
stakeholders: owners, managers,
workers, suppliers, clients, local
community, environment…
For and against CSR
• The debate between M. Friedman (the
main social function of the
corporation is to bring profits,
market as a school of virtues) and
stakeholder approach (eg. E.
Freeman, N. Bowie – corporation as a
moral community)
• CSR – oriented global initiatives:
codes of conduct, activity of Global
Compact, Caux Round Table…
Caux Round Table
• Ethical capitalism: private interest and
common good. Ethical leadership in
business and society
• Kyosei principle: „To live and work for the
common good”
• Human dignity and dialogue between
stakeholders, on civilizational level,
business – governments…
• Arcturus innovations matrix – instrument
to make organization more competitive
and ethical
The main principles of Catholic
Social Teaching
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•
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•
•
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Freedom and human dignity
Personalism
Principle of solidarity
Principle of subsidiarity
Common good
Oposition against liberal
individualism and collectivism
(marxism).
Catholic social teaching on
competitiveness and global economy –
John Paul II
The main principles of John Paul II
Teaching:
The role of work: cooperation with God,
participation in creation and redemption,
dignity of work
Positive opinion about business, market and
democracy – within the law and morality
The role of freedom, rule of law,
participation, solidarity
Encyclical letters: Laborem exercens,
Centesimus Annus.
John Paul II and Michael Novak
• Common points with ordoliberals as well
as M. Novak („The Spirit of Democratic
Capitalism”, „The Universal Hunger for
Liberty”, „Business as a Vocation”, „On
Cultivating Liberty”)
• Importance of relations: market –
democracy -free society – rule of law –
morality – religion. Democracy and market
need the moral and legal backgrounds.
The role of spiritual inspiration.
Benedict XVI
• Benedict XVI: Caritas in Veritate:
• The idea of Integral Development:
development of each person and the
whole person
• Concentration on adequate antrophology
• The role of trust (social capital?)
• The state – market – civic society
• Support for CSR, microcredits, etical
investing
Implications for Poland and
Central Europe
• Legacy of difficult history and old system
• 20 years of Transformation: successes
and problems
• Debate about the European strategy
• Debate about institutions, tradition and
modernization. Relations between
freedom, competitiveness and solidarity
• What to do withe the legacy of
„Solidarność” and John Paul II?
Final questions
• How to make national economy and corporations
more competitive?
• The role of institutions, social capital and moral
values in competitiveness – creation process
• How to improve institutions and social capital?
• Should the state be rather active or passive
player?
• How to make European Union more competitive
and responsible?
• CSR and Sustainable development vs.
Competitiveness – allies or enemies?