Trade as a form of Exchange

1
Trade as a form of Exchange

• Exchange is one basis for human interaction. It
  includes the economics of trading goods, services
  or things perceived to have value.
• It is also the basis for the attitude and
  practice of inter-dependence as a means of human
  survival.

2
Trading is based on Attitude The choice matters

• Independence
• Dependence
• Inter-Dependence

3
Interdependence as an attitude

• Existing attitudes towards exchange came from
  18th Century ideas. These mostly come from a
  dichotomy between independence or dependence.
• Recent evidence of ecological, sociological and
  technological interdependence illustrates the
  limitations of this false attitude choice.

4
Beyond the Proactive Rising above technological
images

• Reactive go to good old days
• Inactive just stay in place
• Proactive finding waves of the future
• Interactive creating normative worlds

5
Evolution of the Trading Stage-set From Barter
to Banking

• Barter (mercantilism) has evolved into
  sophisticated forms of currency exchange.
• Sophistication is now evolving into counter-trade
  (back to Barter) and transcending the limits of
  money. Is this form of Barter mercantilism?
• Local evolves into regional, the national, the
  international, then global, and then back to
  local. Question is this local the same or
  different?

6
From ideas, to businesses, objects of worship

• Finding an idea
• Developing it
• Creating a market
• Moving overseas
• Creating a religion

7
A means to see, then avoid the limitations of
business

• Egocentric
• Ethnocentric
• Polycentric
• Region-centric
• Geocentric
• Non-centric

8
1776 Adam Smith and Absolute Advantage

• Division of labor evolution of worker skills
  and production methods, via technologies .
  Analysis at the center.
• Invisible hand of markets Where relations
  between parts gets resolved. Consequences are
  paraded as a system it is not.

9
Consequences of analysis

• Reductionism
• Cause-effect thinking
• Life as a machine
• Loss of meaning
• Loss of intent
• Loss of intentions
• Reversion of Order

10
The Challenges of Synthesis

• How to put pieces back together?
• Where to begin?
• Who to believe?
• Relations transcending things?
• Meaning through meaningfulness

11
Beyond criticisms of two centuries of Western
Trade Theory

• 18th Century Adam Smith
• 19th Century David Ricardo
• 20th Century Heckscher- Ohlin
• 20th Century Leontief Paradox
• 20th Century Buren Stan Linder

12
19th Century Comparative Advantage Ricardo

• Commodities are produced, traded and consumed in
  a world where goods should flow between countries
  without restrictions.
• The result is a trading world where advantage
  lies with skill in production and trading.
• Ricardo took Smiths absolute advantage to the
  extreme, where only one product with an absolute
  advantage can have a comparative advantage.

13
The 4 corners of 18th and 19th Century Western
Production

• Capital
• Labor
• Raw materials
• Land

14
Notes on the Historical Foundations

• This was known as neoclassical economics of
  trading theory.
• Smith and Ricardo suggest that nations with
  abundant supplies of one, or more, factors of
  production should concentrate in sectors that
  emphasize the advantages of its factors.
• Now, all that was needed was an accounting
  method.
• This was supplied in the 1980s by Porter.

15
A Swedish interpretation the 1933- 1949
Heckscher-Ohlin factor endowment

• Comparative advantage relies on only labor and
  capital, thus raising the importance of capital
• Swedish firms thus shifted emphasis from land and
  materials to capital.

16
1950 The Leontief Paradox

• Via input-output analysis he showed the
  relationship between labor and capital.
• He then proposed that the U.S. produced
  labor-rich, not capital-rich export products.

17
Dilemmas for Neo-classical theories of trade,
Why

• Autos/steel in Japan?
• Mobile phones in Finland?
• Jet fighters in Sweden?
• Construction in France?
• Hi-tech in Singapore and Hong Kong?
• Sugar in Germany and U.S.?
• Refrigerators in S. Carolina?
• Production in China?

18
1961 Linders Proposal Overlapping Product
Ranges

• Linder instead looked at the demand-side of the
  equation (consumers)
• Factor approaches are no longer relevant in
  manufacturing industries
• Here, success depends on traits of consumers.

19
1966 Raymond Vernon Product Cycle Theory

• Herein the focus moves to the product, and away
  from the country of origin, destination,
  technology of production or other factors.
• Important is the role of information and
  knowledge about products.

20
Product Cycle Theory Assumes

• A new product is introduced at home
• The product matures in its home market
• Product becomes standardized
• Product as a cash cow begins to level or decline
  in home market
• Product is internationalized

21
1970 Technology Gap Theory

• A country can make effective use of gaps in
  products via technical innovations for specific
  foreign markets.
• Useful theory, but leaves out from where gaps and
  innovations arise.
• This theory relies on use of patent application
  data.
• Picture The new Nokia communicator in 1997.

22
1980 Alternative Theories

• Governmental roles
• Intra-industry trade
• Imperfect competition
• Market imperfections
• Porters competitive advantages/diamonds

23
Resources for Governmental Management of Trade

• Exchange rates
• Interest rates
• Corporate taxation
• Wage costs
• Subsidizing capital for exports
• Export promotions
• R D funding for exports
• Governmental purchases of export products
• Foreign aid combined with export sales

24
1990s Management Theory

• Here the importance of non-factor endowments is
  the focus.
• Why do certain structures, cultures, and social
  environments lead to success and failure?
• Emergence of Structure follows Strategy Paradigm.

25
Conclusion of Part One

• To where should we turn, as we turn, and are
  turned?
• What theory(s) are now most helpful?
• Whom should we trust?

26
Part II Terminology of Trade

• Where to go, Where to be, What to rely on, What
  to do?
• Local to global, and then back to the local.

27
Terminology about Trade

• From the local to the global, and back once
  again to where all sales are made and all
  consequences reside.
• Picture Tallin, Estonia

28
International Trade levels

• Local with those you know, and have known
• National within a nation
• International between nations
• Multinational many nations
• Transnational transcending nation-states
• Global one world
• Virtual transcending worlds

29
Theory of Globalization of Business

• An introduction to the non-national, non-rational
  world of business.
• I.e., how to survive IB with your enthusiasm and
  ethics left intact
• The point of it all, for those who require points.

30
Going International An unfortunate progression

• In the beginning there was much hope (freedom to
  move and innovate)
• Then came the accountants (to keep track of
  innovation in new areas)
• Then came the CFOs (to restrict it)
• Then came the strategies (to encourage the
  amoral)
• Then came the lawyers (to litigate blame)

31
And on..

• Then there was hopelessness in the land
• Then there was an abundance of fertilizer
• And, then there was a chance for new beginnings
• What is this new beginnings stuff?

32
From fertilizer arises hope

• Things, like flowers
• In fact, some very nice things with many
  possibilities for good
• Shifting from hierarchies of control of global
  over local, to symmetrical relations of thinking
  globally, acting locally.
• Picture Iowa flowers

33
Therefore what is meaningful differences that
make a difference

• Understanding difference
• Seeking differences that make a difference
• Assume difference over time is change (planning).
• Assume difference in time is reality (designing).
• How can we best select the most real to manage
  the changing?
• How to integrate planning into design.
• Picture Japanese house

34
Design, planning, production and distribution of
goods and services that are

• Appreciative of nature
• Appreciated by others
• Accepting of the irreversible
• Avoiding the recyclable
• An enhancement to living systems
• Picture Swedish Lapland