Building a Smarter Economic Future

The UK Economic Development Conference 2009

7-8 October 2009

Royal Bath Hotel, Bournemouth

Professor Alex De Ruyter

Business School

University of the West of Scotland

The Changing Global Economy – sectors for

the Future (or Foresight Revisited?)

• Global Shifts…

…Changes taking place in the UK and World economy; the challenges of China and India; financial crisis in the USA; the possibilities and prospects of recession; and the implications for localities in the UK.

Global Shifts …

• The map of the world in terms of production, trade, investment etc. is continuously shifting …… what have been some of the most significant shifts?

Manufacturing production and tradeServices production and tradeFDI OriginsFDI Destinations

Changing Patterns of Income … etc.

Other Recent International Trends

• Different forms of communication• Growth in international travel• Growth in leisure pursuits• Changing demography: ageing

populations• Growth in currency transactions• Changes in global security and responses• Growth in regional trading arrangements• Growth in bi-lateral trade and investment

agreements

Global Shifts …

• Rapid emergence of China (and India)• Continued dominance of the US (?)• Uneven performance of European

economies• Integration of a group of ‘transition’

economies in Central and Eastern Europe • Emergence of a number of newly-

industrialised economies in East Asia• Weak economic performance of most

Latin American and African economies• Credit crunch and impact

So where are we now … ?

• Dicken (2007) suggests we can see the global economy today through three scales …

• The Macro Scale• The Micro Scale• The Meso Scale

The Macro Scale• At a macro level, the world economy has

evolved from a bi-polar model centred on North America and Western Europe … to a global triad

• Today there are three main pillars to the global economy: North America, Europe and East Asia

• These account for 85% of total world manufacturing output, and 81% of world merchandise exports

• Around 80% of all FDI also originates from this triad

The Micro Scale

• The triad presents an overall view of the structure of

the global economy, but each of us lives and works in

specific communities that may or may not lie within

that triad …

• … Most economic activity is clustered, and thus

place-specific, and this constitutes the micro scale of

the global economy. It is organised around:

• Cities

• Regions

• … not necessarily nations

The Meso Scale

• Between the global triad and the localised agglomerations of activity that characterise production lies a scale of economic-geographic organisation • This might be thought of as corridors of

economic activity, for example• The north-west and south-east axis of Europe• Emerging urban corridors in Pacific Asia

Globalisation• Many of these changes have been described as “globalisation”

- a complex, multifaceted phenomenon incorporating changes

in economic, political, cultural, social relationships.

• In particular, globalisation refers to the changes in relationships

due to the combining of:

• New technologies

• Spread of market capitalism

• Reduced significance of “territory”

• So globalisation has meant

• New and more integrated global markets

• New global (and local) actors

• New norms

Implications for communities

• As markets have become global, there have been clear economic,

political, cultural and social implications for communities …

• Businesses need to recognise that they operate in global markets

• This presents both threats and opportunities

• Most crucially, businesses need to understand that globalisation is

linked with the creation and distribution of knowledge and

information

• Success means innovating and staying one step ahead

• There is also a need to recognise and respond to ‘opposing

tendencies’

• For example, regionalisation and localisation are important

counter forces to global markets

• Global businesses able to respond to local markets

• Local businesses able to project themselves globally?

Friedman’s Nine Questions …

• How fast is your company?

• Is your company harvesting its knowledge?

• How much does your company weigh?

• Does your company dare to be open on the outside?

• Does your company dare to be open on the inside?

• Does the management ‘get it’? And can you change the

management if they don’t ‘get it’?

• Is your company willing to shoot its wounded and suckle the

survivors?

• How good is your company at making friends?

• How good is your company’s brand?

Implications for Communities

• Many of the implications of globalisation identified for firms

can also be applied to societies more generally

• Friedman’s nine questions apply to countries as well as

companies

• This is not surprising, given that societies are built

around institutions, including firms

• All institutions will be influenced by processes of

globalisation in some way

• There are economic, social, cultural, political implications for

countries and regions as the world has become more deeply

inter-connected

The Significance of Firm ‘Clusters’

• Globalisation does not remove a fundamental characteristic

of economic activity: it tends to be geographically localised

to some degree

• Dynamic ‘clusters’ of firms can give significant

advantages to both small and large businesses in

competing in a global economy

• It is interesting that local ‘clusters’ of firms have become

influential as ‘globalisation’ has gathered pace

• for example, the work of Michael Porter

Where will the UK jobs be?

• Transport & Communication•500,000 new jobs by 2017

• Business Computing & Financial Services•1.3 million new jobs by 2017

...and in contrast...

• Manufacturing•Less than 1.5% p.a. between now and 2017

Source: UK Commission for Employment and Skills Report 2008

The recession and credit crunch…

• US spending binge

• Imbalances in economy… internationally and domestically

• Financial de-regulation

• End of low prices from China…

• Asset price bubble… burst 2006-7

• Syndication of debt…

• Global contagion

• IMPACT ?

Impact?

• Recession + credit crunch…

• Business failures

• Inward investment?

• Land prices…

• Impact on regeneration opportunities

• De-industrialisation

• Need to re-balance economy?

• Debt advice, housing support…

• Skills, retraining, intervention in economy?

Implications for Policy…

• Plant closures: staggering the impact and giving people options

- Importance of skills acquisition

• Wage subsidies to support struggling firms• National labour market policies built on local initiatives and local knowledge (Brinkley et al 2008)• Reinvigorating industry policy and fostering high-tech sectors (Bailey and MacNeill 2008)• Measures to tackle inequality

• Public works and infrastructure development

Summary

• Patterns in economic activity

• Global shifts in activity, driven by various factors

• A range of other, underlying trends

• A triad of three dominant world regions

• But within this triad, a complex micro and meso

structure to economic activity

• Globalisation – a multi-faceted and contested term

• Financial de-regulation, asset boom… credit crunch

• … impact on economies and societies

• Identify and support key (emerging) sectors