The international system had experienced multi-polarity, bi-polarity, and uni-polarity. In the new world order, the emergence of different dominant players in the international system is undeniable. We may say that it’s just like the 20th century, distinctly multi polar. We have countries that dominates the world order, or what we call the major powers, China as the soft power who’s slowly gaining influence, the US who dominated everything after the Cold War and is threatened by China’s influence, the EU whose economic influence and capacity plays a big role in international political economy, India and Japan with their technological advancement and other more countries. Some are deceived that the world order, power, and influence is concentrated in these countries only. Regional powers already plays a big role, also the INGO’s and NGO’s, regional trading blocs, the media, and other factors that makes the world borderless.
The concentration of power nowadays doesn’t remain with the few, now it’s distributed, according to their level of improvement and development, influence, and necessity. In the era on non-polarity power and influence are starting to lose its value. This situation is starting to rattle the United States, because being the hegemonic country that they are, non polarity simply means that their influence to the international arena is not that strong anymore, and anyone can be a major player just like them.
The US led war on terrorism displayed their aggression; however, the “You’re either one of us or against us” foreign policy doesn’t work anymore. The US spends billions of dollars on its operations in the Middle East, earn trillions of dollars, and have the world’s largest GDP. But this doesn’t equate to power anymore. The decline in US’ influence is obvious; I think Iran made a statement when they retaliated from US with the inspection on Iran’s uranium enrichment. Devaluation of dollar is also evident, other currencies are now used in foreign trade and economic agreement, also its purchasing power is starting to minimize. I think this proves how the US influence and position in the world has declined.
However, given that the power of the US is already declining, it doesn’t necessarily mean that someone has taken over and they already have a direct competition. It’s just that it’s evident that right now, the existence of too many players in the world order guarantees check and balances and transparency, which means that the US can’t just do whatever they want and bypass the international law.
Non polar world can be positive or negative. For some, the world would suffer from anarchy knowing that no one is one step ahead, or it could be good for some knowing that the playing field has already been equalized. But even if a non polar world isn’t bound to happen, the US policy needs to be changed because right now, we can see the flawed system. Allocation of funds is wrong, poor regulation in the mortgage market and credit crisis had made it worse, health insurances gone bad etc.
US will try to combat non polarity by its strong military force, this includes pre emptive strikes because according to them, the best defense is offense, and I think that this way of thinking is completely flawed. By doing this, they think that they’re combating terrorism, assuming but not conceding that they’re able to do that, they’re also disrupting the status quo in which a strikes should be the last resort. If the US wants to maintain their status, then they should change their trade policies because trade is a powerful tool.
So, what should the United States do? Since dealing with the whole world will get difficult as time goes by, the US should try to take baby steps if they want to maintain their status. This means that negotiations should be done with few parties, they should enter bilateral agreements first. Since non polarity can be inevitable in a few years time, the only thing left to do is to maximize what they have and to change some of their flawed systems and policies which might be the cause of US’ failure.
But even if there are harms in a non polar world, that doesn’t give the US the right to take further radical actions. Also, its not that bad after all, equalizing the playing field is not a bad thing, and if there’s moderation, which I assume there will be because of other major players, over lapping is not bound to happen or if everything will be in moderation.
Wednesday, January 27, 2010
WTO (World Trade Organization)
Problems and Challenges
The challenge right now for most developing countries is how to be an industrial based economy and be successful with it and how to maximize the trade and investment that it offers. Given that trade and performance of commodity dependent economies is starting to slow down, it made development efforts for them unattainable. Another challenge for these developing countries is how to minimize their competition, since these countries offers cheap labor, their main export is labor itself. The Philippines for example is one of the countries who exports semi-conductors and micro chips, but in reality the raw materials are being imported here to have it finished and then that’s when they export it, in short the only thing that we exported is the labor because the materials were also imported from more advanced and developed countries. This kind of setting somehow worked for a few countries like South Korea and Taiwan, but for most like East Asian countries and Latin American countries, it didn’t work. They always remained from where they started and also even technological development was difficult to achieve. Another problem is that deindustrialization has been rampant that manufacturing has been ignored and production has been slow. Output wasn’t obvious and determining the amount that developing countries earn is starting to get tricky because of the labor intensive manufacturing.
Policies
For developing countries to survive the status quo, there are options to choose from in order to compete. If they do what China and India did, competition will work for them although the results wouldn’t be shown immediately. If developing countries would maximize the use of their laborers to manufacture and industrialize, being in the first stage of development would be attainable, also if they rely on the domestic industries and rely less on foreign markets, in a few years they can stand on their own. Regional economic integration would help to pursue development and sustainable strategies. If there’s a chance for the developing countries to increase their tariffs and tax as well, it would be possible that they won’t be a dumpsite for the developed countries, but this is highly unlikely because WTO won’t allow it because its an organization used by hegemonic countries to forward their self interest in a more diplomatic way, so even increasing interest rates is impossible. So the best thing to do is to integrate with economic region and make a plan on how to develop, sustain, and stabilize world trade in their advantage.
Globalization with a Human Face
The article by Yilmaz Akyüz states that globalization has indeed intensified world trade, for developing countries, this means laborers, workers, and the like. Industrialization for developing countries hasn’t been attained yet so the next best thing for them is labor, which they offer in a very cheap price. Narrowing the gap between the rich and the poor countries should be the goal according to the article but we don’t see this happening because if you think about it from the grass roots level, the developed countries doesn’t really want to do this because if they do, they won’t be having countries to exploit. The last bullet point in the article says that equity, justice, and choices should be for everyone and this article was written 1999, after a decade we don’t see any changes, because the MNC’s and TNC’s owned by developed countries are the ones who are still in power, and still has the say. Their Corporate Social Responsibility in developing countries is not practiced that much because they decrease the level, so instead of helping the countries to developed they just allow it to stay as it is and not upgrade it. Competitive Market was the goal during 1999, and until now it is the goal. Yes, maybe people everywhere are now connected, maybe what we have right now is a borderless world, we feel the recession of developed countries or some sort, but they don’t suffer the same. So, leadership should come from who? If they allow the developing countries to take the lead to sustainable development and assist them, maybe living in a borderless world is something that everyone would want to have.
The challenge right now for most developing countries is how to be an industrial based economy and be successful with it and how to maximize the trade and investment that it offers. Given that trade and performance of commodity dependent economies is starting to slow down, it made development efforts for them unattainable. Another challenge for these developing countries is how to minimize their competition, since these countries offers cheap labor, their main export is labor itself. The Philippines for example is one of the countries who exports semi-conductors and micro chips, but in reality the raw materials are being imported here to have it finished and then that’s when they export it, in short the only thing that we exported is the labor because the materials were also imported from more advanced and developed countries. This kind of setting somehow worked for a few countries like South Korea and Taiwan, but for most like East Asian countries and Latin American countries, it didn’t work. They always remained from where they started and also even technological development was difficult to achieve. Another problem is that deindustrialization has been rampant that manufacturing has been ignored and production has been slow. Output wasn’t obvious and determining the amount that developing countries earn is starting to get tricky because of the labor intensive manufacturing.
Policies
For developing countries to survive the status quo, there are options to choose from in order to compete. If they do what China and India did, competition will work for them although the results wouldn’t be shown immediately. If developing countries would maximize the use of their laborers to manufacture and industrialize, being in the first stage of development would be attainable, also if they rely on the domestic industries and rely less on foreign markets, in a few years they can stand on their own. Regional economic integration would help to pursue development and sustainable strategies. If there’s a chance for the developing countries to increase their tariffs and tax as well, it would be possible that they won’t be a dumpsite for the developed countries, but this is highly unlikely because WTO won’t allow it because its an organization used by hegemonic countries to forward their self interest in a more diplomatic way, so even increasing interest rates is impossible. So the best thing to do is to integrate with economic region and make a plan on how to develop, sustain, and stabilize world trade in their advantage.
Globalization with a Human Face
The article by Yilmaz Akyüz states that globalization has indeed intensified world trade, for developing countries, this means laborers, workers, and the like. Industrialization for developing countries hasn’t been attained yet so the next best thing for them is labor, which they offer in a very cheap price. Narrowing the gap between the rich and the poor countries should be the goal according to the article but we don’t see this happening because if you think about it from the grass roots level, the developed countries doesn’t really want to do this because if they do, they won’t be having countries to exploit. The last bullet point in the article says that equity, justice, and choices should be for everyone and this article was written 1999, after a decade we don’t see any changes, because the MNC’s and TNC’s owned by developed countries are the ones who are still in power, and still has the say. Their Corporate Social Responsibility in developing countries is not practiced that much because they decrease the level, so instead of helping the countries to developed they just allow it to stay as it is and not upgrade it. Competitive Market was the goal during 1999, and until now it is the goal. Yes, maybe people everywhere are now connected, maybe what we have right now is a borderless world, we feel the recession of developed countries or some sort, but they don’t suffer the same. So, leadership should come from who? If they allow the developing countries to take the lead to sustainable development and assist them, maybe living in a borderless world is something that everyone would want to have.
Culture: Part II
Porter’s Competitive Strategy
For Michael Porter a firm's relative position within its industry determines whether a firm's profitability is above or below the industry average. The fundamental basis of above average profitability in the long run is sustainable competitive advantage. As stated in the summary of Chapter 2, there are two types of advantage, the low cost and the differentiation advantage. These 2 advantages combined with scope of activities which of course the firm would like to achieve, will lead to three generic strategies which will lead to a good performance. The three generic strategies are cost leadership, differentiation, and focus.
In cost leadership, the company or the firm would want to be the low cost producer in its industry. A low cost producer must find and exploit all sources of cost advantage. If a firm can achieve and sustain overall cost leadership, then it will be an above average performer in its industry, provided it can command prices at or near the industry average.
In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a premium price.
The generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others.
The focus strategy has two variants
(a) In cost focus a firm seeks a cost advantage in its target segment, while in (b) differentiation focus a firm seeks differentiation in its target segment. Both variants of the focus strategy rest on differences between a focuser's target segment and other segments in the industry. The target segments must either have buyers with unusual needs or else the production and delivery system that best serves the target segment must differ from that of other industry segments. Cost focus exploits differences in cost behavior in some segments, while differentiation focus exploits the special needs of buyers in certain segments.
All the strategies mentioned have a grave effect in the performance of a firm; however, different strategies have different adverse effects. In the strategies that are mentioned above, the differentiation strategy relates to the article more than anything else. If consumers would see a product as a unique necessity, then they will buy it without questions, even if there’s going to be an existence of imitations, given that they’re going to offer quality, then sustaining their progress wouldn’t be that much of a task. Given that now, economic culture is already changing in a slow pace, yet sustainable way, the assurance that firms can invest in risks like this is not something that they’re going to regret. Even if they invest in research or something like that, the products that would be purchased from them is much more than what they invested, superseding their capital, gaining more than what they thought they can.
Cost leadership, if successful would also benefit the company, if you can produce products in a much lower price compared to your competitors given the same quality, then the logical thing for consumers to do is to purchase your products. But how is that attainable? Multi National Companies. They invest in countries with cheap labor, the salary that they give the workers is more than what domestic companies can offer, but they don’t lose anything because even if they offer more than what domestic companies can, they’re still able to save up because the standard of living is different. Workers from these countries, who offer cheap labor will perform well, will be trained just like how the workers from developed countries are being trained, and will receive the same incentives. Take the call center industry for example. It solves the problem of unemployment for some, and worsens the problem of under employment on the other hand. People will work well, even if they’re in a less developed, cheap labor country, thru globalization, which is being epitomized by MNC’s, economic culture has already been changing.
Focus strategy however can be detrimental to the consumers, because in this strategy, especially the differentiation focus, the firms just exploits the special needs of the consumer. This means that if in case such product will be needed in times of emergency, calamities, etc. the firms can choose to increase or lower their price because it wouldn’t be surprising if they have they monopolize the product. It works for them because they will always earn.
Sophistication of ideas would always be incorporated in the sudden change of economic culture. As globalization spreads, as nations embrace what globalization has to offer, changes will happen and the common goal is prosperity. However, traditional culture will always come in the way. Those who grew up with it would stick with it, the young generation; those people who strive to live better, those individuals who wish to improve their living standards will be the actors to pursue innovation and change, to make things work, to go with the flow.
Is culture the source of underdevelopment?
No one would want to compromise their progress for a belief which they know is hampering them from improving. Some cultures just had no choice but to under develop because they have no option. These countries were never given the opportunity to develop, the economic system that they’re in has nothing to offer but flawed economic culture, no incentives, and also prosperity at some point became unattainable. Even if the people in the less developed countries have poor work ethics, can we blame it on them and them alone? They work just as hard as people in the developed countries, the benefits that they get are not the same, sometimes there isn’t any, and the salary just won’t compensate, given these reasons can you blame them? No.
Nowadays, we see MNC’s transferring their companies, factories, and offices in countries which offers cheap labor, they spend less, earn more, and those who’re employed by these companies gets more than what local industries has to offer. Let’s take the call center industry in the Philippines as an example, if you observe those people who works in call centers, they can be really stressed after work, rant about their customers and all that, however they perform accordingly to the rules that are set by the company, provide quality customer service, or at some point exceed the expectation, they do this and it can be surprising that they’re able to because these foreign companies came from a country that has a different economic system and culture, and since the workers will provide service to foreigners, they are being taught to adopt the same culture and economic culture. If one’s economic culture knows that they won’t get any reward from slacking off, if they notice that almost everyone is progressing, they know that they have to adapt to changes, which in the long run will benefit them.
So is there really an unproductive culture? Or is it just because cultural differences played a big role which hindered on country to another from doing transactions and negotiations? Actually, the readings made it clear, and I think that it’s universal that everyone would want to progress and prosper; it’s just that country that weren’t given a chance to do so become hopeless about it.
Also, culture isn’t the only thing that should be blamed for underdevelopment, different institutions should also be responsible for lack of training and knowledge of their people. The government in some countries still believed in flawed economic theories and ideologies, they speak according to their emotions, educational institutions only preach what they want to preach, which sometimes is based on influence, personal feelings and false matter. The quality of the work force then leads to the ones who’re unproductive or pessimistic about progress and prosperity.
At the end of the day, the individuals will still have to choose their own path, to prosper and progress on their own by adapting the changes in the economic system and culture which is now being brought by MNC’s and adapt to its system which may or may not change their way of living.
For Michael Porter a firm's relative position within its industry determines whether a firm's profitability is above or below the industry average. The fundamental basis of above average profitability in the long run is sustainable competitive advantage. As stated in the summary of Chapter 2, there are two types of advantage, the low cost and the differentiation advantage. These 2 advantages combined with scope of activities which of course the firm would like to achieve, will lead to three generic strategies which will lead to a good performance. The three generic strategies are cost leadership, differentiation, and focus.
In cost leadership, the company or the firm would want to be the low cost producer in its industry. A low cost producer must find and exploit all sources of cost advantage. If a firm can achieve and sustain overall cost leadership, then it will be an above average performer in its industry, provided it can command prices at or near the industry average.
In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a premium price.
The generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others.
The focus strategy has two variants
(a) In cost focus a firm seeks a cost advantage in its target segment, while in (b) differentiation focus a firm seeks differentiation in its target segment. Both variants of the focus strategy rest on differences between a focuser's target segment and other segments in the industry. The target segments must either have buyers with unusual needs or else the production and delivery system that best serves the target segment must differ from that of other industry segments. Cost focus exploits differences in cost behavior in some segments, while differentiation focus exploits the special needs of buyers in certain segments.
All the strategies mentioned have a grave effect in the performance of a firm; however, different strategies have different adverse effects. In the strategies that are mentioned above, the differentiation strategy relates to the article more than anything else. If consumers would see a product as a unique necessity, then they will buy it without questions, even if there’s going to be an existence of imitations, given that they’re going to offer quality, then sustaining their progress wouldn’t be that much of a task. Given that now, economic culture is already changing in a slow pace, yet sustainable way, the assurance that firms can invest in risks like this is not something that they’re going to regret. Even if they invest in research or something like that, the products that would be purchased from them is much more than what they invested, superseding their capital, gaining more than what they thought they can.
Cost leadership, if successful would also benefit the company, if you can produce products in a much lower price compared to your competitors given the same quality, then the logical thing for consumers to do is to purchase your products. But how is that attainable? Multi National Companies. They invest in countries with cheap labor, the salary that they give the workers is more than what domestic companies can offer, but they don’t lose anything because even if they offer more than what domestic companies can, they’re still able to save up because the standard of living is different. Workers from these countries, who offer cheap labor will perform well, will be trained just like how the workers from developed countries are being trained, and will receive the same incentives. Take the call center industry for example. It solves the problem of unemployment for some, and worsens the problem of under employment on the other hand. People will work well, even if they’re in a less developed, cheap labor country, thru globalization, which is being epitomized by MNC’s, economic culture has already been changing.
Focus strategy however can be detrimental to the consumers, because in this strategy, especially the differentiation focus, the firms just exploits the special needs of the consumer. This means that if in case such product will be needed in times of emergency, calamities, etc. the firms can choose to increase or lower their price because it wouldn’t be surprising if they have they monopolize the product. It works for them because they will always earn.
Sophistication of ideas would always be incorporated in the sudden change of economic culture. As globalization spreads, as nations embrace what globalization has to offer, changes will happen and the common goal is prosperity. However, traditional culture will always come in the way. Those who grew up with it would stick with it, the young generation; those people who strive to live better, those individuals who wish to improve their living standards will be the actors to pursue innovation and change, to make things work, to go with the flow.
Is culture the source of underdevelopment?
No one would want to compromise their progress for a belief which they know is hampering them from improving. Some cultures just had no choice but to under develop because they have no option. These countries were never given the opportunity to develop, the economic system that they’re in has nothing to offer but flawed economic culture, no incentives, and also prosperity at some point became unattainable. Even if the people in the less developed countries have poor work ethics, can we blame it on them and them alone? They work just as hard as people in the developed countries, the benefits that they get are not the same, sometimes there isn’t any, and the salary just won’t compensate, given these reasons can you blame them? No.
Nowadays, we see MNC’s transferring their companies, factories, and offices in countries which offers cheap labor, they spend less, earn more, and those who’re employed by these companies gets more than what local industries has to offer. Let’s take the call center industry in the Philippines as an example, if you observe those people who works in call centers, they can be really stressed after work, rant about their customers and all that, however they perform accordingly to the rules that are set by the company, provide quality customer service, or at some point exceed the expectation, they do this and it can be surprising that they’re able to because these foreign companies came from a country that has a different economic system and culture, and since the workers will provide service to foreigners, they are being taught to adopt the same culture and economic culture. If one’s economic culture knows that they won’t get any reward from slacking off, if they notice that almost everyone is progressing, they know that they have to adapt to changes, which in the long run will benefit them.
So is there really an unproductive culture? Or is it just because cultural differences played a big role which hindered on country to another from doing transactions and negotiations? Actually, the readings made it clear, and I think that it’s universal that everyone would want to progress and prosper; it’s just that country that weren’t given a chance to do so become hopeless about it.
Also, culture isn’t the only thing that should be blamed for underdevelopment, different institutions should also be responsible for lack of training and knowledge of their people. The government in some countries still believed in flawed economic theories and ideologies, they speak according to their emotions, educational institutions only preach what they want to preach, which sometimes is based on influence, personal feelings and false matter. The quality of the work force then leads to the ones who’re unproductive or pessimistic about progress and prosperity.
At the end of the day, the individuals will still have to choose their own path, to prosper and progress on their own by adapting the changes in the economic system and culture which is now being brought by MNC’s and adapt to its system which may or may not change their way of living.
Culture: Part I
Attitudes, Values, Beliefs, and the Microeconomics of Prosperity
The first three words mentioned above are the words that would best describe culture. If there is an economic and human progress in a certain state or nation, we know that one way or another, their progress is somehow intertwined with the kind of culture that they have, the beliefs and values that they uphold. “Economic Culture” is how we call the beliefs, attitudes, and values that influences the economic activities of institutions and individuals. Different countries with different cultures were able to obtain economic progress, the beliefs and values that influenced them maybe different, but these countries were able to achieve economic prosperity. These countries include Japan, United States, Italy, etc. which also had a series of unfortunate events economically speaking, they went through recessions, and crisis, just like all of us, but the way they managed to handle it is a different story. In Chapter 2, the author discussed the existence of unproductive culture, cultural differences, in today’s modern economy, globalization of markets, etc.
Prosperity (Comparative and Competitive Advantage)
In this part, I’m going to define comparative and competitive advantage so we can easily brush up on our International Trade Theories. Comparative Advantage is theory that countries should specialize in the production of goods and services they can produce most efficiently. It may be agricultural products, minerals, or even services. Competitive Advantage on the other hand is when a firm is able to deliver the same quality of products at a lower price (cost advantage) or even exceed the quality (differentiation advantage). Most of the time, developed countries are the ones who possess this kind of advantage, those who are equipped with the right equipment, technology and can mass produce.
We determine productivity by wages, national income per citizen, and the quality of work that they give back to their firms, thus, making productivity the basis of competitiveness. The way global economy works right now, the level of competition is not only about the quality or uniqueness of the product, today, it’s also about the strategies used by the firms and nations. Whether the source of economy of a country is industrial or agriculture, what matters the most is for the firm or the country to be able to organize what they have in order to be more productive, for the individuals of that country to prosper. The way we see it right now, comparative advantage already gave way to competitive advantage. Right now, the competition is not about what we have but what we make, those countries that in years have developed strategic plans already had improved their standard of living.
Prosperity (Microeconomic and Foundation)
As stated in Chapter 2 “The microeconomic foundations of productivity rest on two interrelated areas: the sophistication of company operations and strategy, and the quality of the microeconomic business environment”. The sophistication of ideas contributes to countries prosperity, but sometimes, even if there are ideas, implementing it would be difficult due to feasibility and efficiency issues. If there is a sustainable improvement in the quality of products and if there is a certain degree of specialization in a nation’s input, then we can say that economic development is successful. Microeconomic capabilities and incentive will create more advanced form of competition, which creates quality of products, incentives for individuals, thus leading to prosperity. Economies that are less developed has little local rivalry, vigorous competitive rivalry will help economies to advanced, by having such rivalry will make local industries to have a sudden shift from what they’re doing, they’re going to try to be more innovative, creative, and competitive.
Cluster is a network of industries and institutions; they are competitors that are geographically concentrated. This kind of organization is an avenue for industries to be more innovative and improve faster because of geographical reasons. Silicon Valley, Hollywood, and Wall Street are just some of the clusters which have an advanced or developed economy. In this kind of organization, the government also has a role. They need not provide anything to the industry, however providing the needs of the individual such as education, efficient physical infrastructure etc. in order for the individuals to function well and competitively when they work in the companies. The good thing about cluster based policies is that it is more decentralized, also it encourages not only state but also local levels.
Prosperity (Economic Policy and the Process of Development)
Economic progress can be defined as a continuous gain when it comes to the nation’s business, its developments, and its increasing level of competitiveness, sophistication, and productivity. There are many different ways of determining if an economy is developing. We can measure it thru the local healthy rivalry, development in technology, sophistication of home demand, increasing investments, etc. These are role of the private sector. The government plays a significant role in order for this to be achieved. Working with private sectors is a must; this should be done in order to establish trust on both parties, also to discuss on how they’re going to achieve their goal of progress, with universities to produce competitive educated individuals, and other institutions or organizations. Expanding investments and capitals will also help for an economy to progress.
Prosperity (Implications of beliefs, attitudes, and behavior)
Productivity is the key tool to achieve prosperity. This is the basic belief that helped economies to progress. Controlling resources, military, government agencies etc. doesn’t entail economic progress. Lack of framework can be a hindrance for individuals or even their leaders, because without it they won’t see how the modern day economy works. There maybe imposing parties of what to do and what not to progress, however there are still some beliefs that are ought to be changed to achieve this goal. For some, rigid hierarchy is needed to maintain control, but some are too blind to see that sometimes, it can be the source for failing to develop because of the abuse of power, monopoly is good because for sure there is only one distributor, but it also close their minds that their might be other companies whose quality is far way better than what they have, self-contained family relationships should determine partnership, but also they fail to see the abuse that might happen or lack of interest, assurance that the partner will work well is questionable, since its family, they can get away with the responsibility is easily. A deeper understanding of economic culture is needed by some in order for them to deal with their weaknesses and beliefs.
Changing it will be hard because it’s already embedded on them, dealing with it in a manner that would hopefully benefit them someday is the challenge that is difficult to face.
Why do nations have unproductive cultures?
So the question that pops in our minds is written above. The author gave us several answers. The first is that economic culture in some countries is greatly influenced by ideas, theories, and paradigms. Ignorance about the international economy is one reason. Ideas became an integral part of their beliefs, channeled thru their educational institutions, government leaders and officials, intellectuals and other means. What they know may include flawed theories, but sometimes this flawed theory that is being applied is convenient and is benefiting one party. For example, military dictates everything at would rather starve their people than to let go of their flawed ideologies.
Second, past and present microeconomic context might have a strong effect to economic culture. The way people behave in this society has something to do with the amount, or the benefits that they can from the kind of economic system that they’re currently in. Workers in developed countries have employment benefits (i.e health insurance, loan, salary increase etc) that is why their work ethics is good. If you compare it with the workers in less developed countries, they have no incentives at all so there’s is no reason to work harder, which means you can’t blame them if they have poor work ethics. If the economic system in one’s country encourages such behavior that is flawed, then chances of changing it and improving is unattainable. If you observe people who migrate from less developed countries to developed countries, you will notice that there is a sudden shift with their performance and economic culture, that’s because the economic system that they’re currently in doesn’t tolerate their flawed behaviors.
Third is that social policy have a strong influence on economic culture because they have an influence in the economic context. Social policies affect the workers attitude in work, savings, education, investing, unintentionally; they influence a certain aspect of a nation’s economic policy. This makes social policy and economic culture intertwined.
Given these explanations, we can say that economic culture can be learned in two ways, directly and indirectly. In some countries, beliefs, attitudes, and values may include self interest and all that, but also social and moral values. Economic culture is hard to change; it’s with the nation for years, decades, or centuries. If economic culture can’t be changed, then maybe modifying it would help, and hopefully in a positive way that would work in their advantage.
Global Convergence around the Culture of Productivity
Politics and economy has always been intertwined. Protectionist policies were established to protect local industries and domestic products, politicians know that if they implement this, the locals would favor them, thus making them the favorite of their country. Protectionist policies by developed countries made it even more difficult for less developed countries because now they are forced to sell their products in a cheaper price. What made it worse is that since less developed countries already have few income, they became the “dumping site” of developed countries, vast amount of foreign aid were given to them which lead to an even more disastrous economies, dependent leaders and ineffective leaders. Global politics caused by the Cold War made nations to change their economic policies. The ability of less developed countries to improve was very limited. If there was any incentive for them to work better, if they know that there is a bright future ahead of them, it is safe to assume that they won’t under perform, that they’re going to strive to do great. However, opportunities never arised, in the economic system that they’re in, which is the cause of their slow paced development and backwardness.
Today seems to be a whole lot different. Globalization now provides powerful discipline on flawed behaviors. Being unproductive is a taboo. Being productive has its rewards; it can be Direct Foreign Investment, technological advancement, and doors for economic opportunity. Progress and prosperity will only happen to those countries that are willing to embrace everything that it offers, and everything that it requires, which includes the change of their economic culture for some.
What we’re seeing right now is a common international economic culture that cuts across the economic culture that some countries uphold. A common set of beliefs, attitudes, and values that would cater to development, progress, and prosperity is what’s going to be upheld. The pressure of performing well, being competitive, and being productive will be the reason for flawed ideas and ideologies be erased from their economic culture. Oppurtunity of the global economy will be grabbed by everyone for them to improve. Hard to imitate competitive advantage will result for one to excel more, so being unique with high quality would be a key for advantage. Given that globalization offers learning experience for countries with flawed ideologies, adapting to changes in the international arena would be a lot easier given that information is already wide spread and means of communication has never been this easy.
The result is that nations are striving to be as productive as they can be, to be as competitive as they can be, and to assure quality as much as they can. Given this, the improvement of different countries with their economic culture is noticeable and so as their positive effects. The negative effects are yet to be know, but given that the flawed ideas and ideologies are slowly being forgotten, then it’s a good sign that negative economic culture do change in a slow, yet more effective and sustainable way.
The first three words mentioned above are the words that would best describe culture. If there is an economic and human progress in a certain state or nation, we know that one way or another, their progress is somehow intertwined with the kind of culture that they have, the beliefs and values that they uphold. “Economic Culture” is how we call the beliefs, attitudes, and values that influences the economic activities of institutions and individuals. Different countries with different cultures were able to obtain economic progress, the beliefs and values that influenced them maybe different, but these countries were able to achieve economic prosperity. These countries include Japan, United States, Italy, etc. which also had a series of unfortunate events economically speaking, they went through recessions, and crisis, just like all of us, but the way they managed to handle it is a different story. In Chapter 2, the author discussed the existence of unproductive culture, cultural differences, in today’s modern economy, globalization of markets, etc.
Prosperity (Comparative and Competitive Advantage)
In this part, I’m going to define comparative and competitive advantage so we can easily brush up on our International Trade Theories. Comparative Advantage is theory that countries should specialize in the production of goods and services they can produce most efficiently. It may be agricultural products, minerals, or even services. Competitive Advantage on the other hand is when a firm is able to deliver the same quality of products at a lower price (cost advantage) or even exceed the quality (differentiation advantage). Most of the time, developed countries are the ones who possess this kind of advantage, those who are equipped with the right equipment, technology and can mass produce.
We determine productivity by wages, national income per citizen, and the quality of work that they give back to their firms, thus, making productivity the basis of competitiveness. The way global economy works right now, the level of competition is not only about the quality or uniqueness of the product, today, it’s also about the strategies used by the firms and nations. Whether the source of economy of a country is industrial or agriculture, what matters the most is for the firm or the country to be able to organize what they have in order to be more productive, for the individuals of that country to prosper. The way we see it right now, comparative advantage already gave way to competitive advantage. Right now, the competition is not about what we have but what we make, those countries that in years have developed strategic plans already had improved their standard of living.
Prosperity (Microeconomic and Foundation)
As stated in Chapter 2 “The microeconomic foundations of productivity rest on two interrelated areas: the sophistication of company operations and strategy, and the quality of the microeconomic business environment”. The sophistication of ideas contributes to countries prosperity, but sometimes, even if there are ideas, implementing it would be difficult due to feasibility and efficiency issues. If there is a sustainable improvement in the quality of products and if there is a certain degree of specialization in a nation’s input, then we can say that economic development is successful. Microeconomic capabilities and incentive will create more advanced form of competition, which creates quality of products, incentives for individuals, thus leading to prosperity. Economies that are less developed has little local rivalry, vigorous competitive rivalry will help economies to advanced, by having such rivalry will make local industries to have a sudden shift from what they’re doing, they’re going to try to be more innovative, creative, and competitive.
Cluster is a network of industries and institutions; they are competitors that are geographically concentrated. This kind of organization is an avenue for industries to be more innovative and improve faster because of geographical reasons. Silicon Valley, Hollywood, and Wall Street are just some of the clusters which have an advanced or developed economy. In this kind of organization, the government also has a role. They need not provide anything to the industry, however providing the needs of the individual such as education, efficient physical infrastructure etc. in order for the individuals to function well and competitively when they work in the companies. The good thing about cluster based policies is that it is more decentralized, also it encourages not only state but also local levels.
Prosperity (Economic Policy and the Process of Development)
Economic progress can be defined as a continuous gain when it comes to the nation’s business, its developments, and its increasing level of competitiveness, sophistication, and productivity. There are many different ways of determining if an economy is developing. We can measure it thru the local healthy rivalry, development in technology, sophistication of home demand, increasing investments, etc. These are role of the private sector. The government plays a significant role in order for this to be achieved. Working with private sectors is a must; this should be done in order to establish trust on both parties, also to discuss on how they’re going to achieve their goal of progress, with universities to produce competitive educated individuals, and other institutions or organizations. Expanding investments and capitals will also help for an economy to progress.
Prosperity (Implications of beliefs, attitudes, and behavior)
Productivity is the key tool to achieve prosperity. This is the basic belief that helped economies to progress. Controlling resources, military, government agencies etc. doesn’t entail economic progress. Lack of framework can be a hindrance for individuals or even their leaders, because without it they won’t see how the modern day economy works. There maybe imposing parties of what to do and what not to progress, however there are still some beliefs that are ought to be changed to achieve this goal. For some, rigid hierarchy is needed to maintain control, but some are too blind to see that sometimes, it can be the source for failing to develop because of the abuse of power, monopoly is good because for sure there is only one distributor, but it also close their minds that their might be other companies whose quality is far way better than what they have, self-contained family relationships should determine partnership, but also they fail to see the abuse that might happen or lack of interest, assurance that the partner will work well is questionable, since its family, they can get away with the responsibility is easily. A deeper understanding of economic culture is needed by some in order for them to deal with their weaknesses and beliefs.
Changing it will be hard because it’s already embedded on them, dealing with it in a manner that would hopefully benefit them someday is the challenge that is difficult to face.
Why do nations have unproductive cultures?
So the question that pops in our minds is written above. The author gave us several answers. The first is that economic culture in some countries is greatly influenced by ideas, theories, and paradigms. Ignorance about the international economy is one reason. Ideas became an integral part of their beliefs, channeled thru their educational institutions, government leaders and officials, intellectuals and other means. What they know may include flawed theories, but sometimes this flawed theory that is being applied is convenient and is benefiting one party. For example, military dictates everything at would rather starve their people than to let go of their flawed ideologies.
Second, past and present microeconomic context might have a strong effect to economic culture. The way people behave in this society has something to do with the amount, or the benefits that they can from the kind of economic system that they’re currently in. Workers in developed countries have employment benefits (i.e health insurance, loan, salary increase etc) that is why their work ethics is good. If you compare it with the workers in less developed countries, they have no incentives at all so there’s is no reason to work harder, which means you can’t blame them if they have poor work ethics. If the economic system in one’s country encourages such behavior that is flawed, then chances of changing it and improving is unattainable. If you observe people who migrate from less developed countries to developed countries, you will notice that there is a sudden shift with their performance and economic culture, that’s because the economic system that they’re currently in doesn’t tolerate their flawed behaviors.
Third is that social policy have a strong influence on economic culture because they have an influence in the economic context. Social policies affect the workers attitude in work, savings, education, investing, unintentionally; they influence a certain aspect of a nation’s economic policy. This makes social policy and economic culture intertwined.
Given these explanations, we can say that economic culture can be learned in two ways, directly and indirectly. In some countries, beliefs, attitudes, and values may include self interest and all that, but also social and moral values. Economic culture is hard to change; it’s with the nation for years, decades, or centuries. If economic culture can’t be changed, then maybe modifying it would help, and hopefully in a positive way that would work in their advantage.
Global Convergence around the Culture of Productivity
Politics and economy has always been intertwined. Protectionist policies were established to protect local industries and domestic products, politicians know that if they implement this, the locals would favor them, thus making them the favorite of their country. Protectionist policies by developed countries made it even more difficult for less developed countries because now they are forced to sell their products in a cheaper price. What made it worse is that since less developed countries already have few income, they became the “dumping site” of developed countries, vast amount of foreign aid were given to them which lead to an even more disastrous economies, dependent leaders and ineffective leaders. Global politics caused by the Cold War made nations to change their economic policies. The ability of less developed countries to improve was very limited. If there was any incentive for them to work better, if they know that there is a bright future ahead of them, it is safe to assume that they won’t under perform, that they’re going to strive to do great. However, opportunities never arised, in the economic system that they’re in, which is the cause of their slow paced development and backwardness.
Today seems to be a whole lot different. Globalization now provides powerful discipline on flawed behaviors. Being unproductive is a taboo. Being productive has its rewards; it can be Direct Foreign Investment, technological advancement, and doors for economic opportunity. Progress and prosperity will only happen to those countries that are willing to embrace everything that it offers, and everything that it requires, which includes the change of their economic culture for some.
What we’re seeing right now is a common international economic culture that cuts across the economic culture that some countries uphold. A common set of beliefs, attitudes, and values that would cater to development, progress, and prosperity is what’s going to be upheld. The pressure of performing well, being competitive, and being productive will be the reason for flawed ideas and ideologies be erased from their economic culture. Oppurtunity of the global economy will be grabbed by everyone for them to improve. Hard to imitate competitive advantage will result for one to excel more, so being unique with high quality would be a key for advantage. Given that globalization offers learning experience for countries with flawed ideologies, adapting to changes in the international arena would be a lot easier given that information is already wide spread and means of communication has never been this easy.
The result is that nations are striving to be as productive as they can be, to be as competitive as they can be, and to assure quality as much as they can. Given this, the improvement of different countries with their economic culture is noticeable and so as their positive effects. The negative effects are yet to be know, but given that the flawed ideas and ideologies are slowly being forgotten, then it’s a good sign that negative economic culture do change in a slow, yet more effective and sustainable way.
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