Trade as a form of Exchange 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.

Trading is based on Attitude: Trading is based on Attitude: The choice mattersThe choice matters

Independence Dependence Inter-Dependence

Interdependence as an Interdependence as an attitudeattitude

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.

Beyond the Proactive: Rising Beyond the Proactive: Rising above technological imagesabove technological images

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

Evolution of the Trading Evolution of the Trading Stage-set: From Barter to Stage-set: From Barter to

Banking 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?

From ideas, to businesses, From ideas, to businesses, objects of worshipobjects of worship

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

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

EgocentricEthnocentricPolycentricRegion-centricGeocentricNon-centric

1776 – Adam Smith and 1776 – Adam Smith and Absolute AdvantageAbsolute 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.

Consequences of analysisConsequences of analysis

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

The Challenges of SynthesisThe Challenges of Synthesis

How to put pieces back together?

Where to begin? Who to believe? Relations transcending

things? Meaning through

meaningfulness…

Beyond criticisms of two Beyond criticisms of two centuries of Western centuries of Western

Trade TheoryTrade Theory

18th Century – Adam Smith

19th Century – David Ricardo

20th Century – Heckscher- Ohlin

20th Century – Leontief Paradox

20th Century – Buren Stan Linder

1919thth Century Comparative Century Comparative Advantage: RicardoAdvantage: 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 Smith’s absolute advantage to the extreme, where only one product with an absolute advantage can have a “comparative” advantage.

The 4 corners of 18The 4 corners of 18thth and 19 and 19thth Century Western ProductionCentury Western Production

Capital Labor Raw materials Land

Notes on the Historical Notes on the Historical FoundationsFoundations

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.

A Swedish interpretation: the A Swedish interpretation: the 1933- 1949 Heckscher-Ohlin 1933- 1949 Heckscher-Ohlin

factor endowmentfactor 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.

1950 – The Leontief Paradox1950 – 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.

Dilemmas for Neo-classical Dilemmas for Neo-classical theories of trade, Why: 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?

1961 – Linder’s Proposal: 1961 – Linder’s Proposal: Overlapping Product RangesOverlapping 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.

1966 – Raymond Vernon 1966 – Raymond Vernon Product Cycle TheoryProduct 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.

Product Cycle Theory Product Cycle Theory AssumesAssumes

A new product is introduced at homeThe product matures in its home marketProduct becomes standardizedProduct as a cash cow begins to level or

decline in home marketProduct is internationalized

1970 – Technology Gap 1970 – Technology Gap TheoryTheory

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.

1980 – Alternative Theories1980 – Alternative Theories

Governmental roles Intra-industry trade Imperfect competition Market imperfections Porter’s competitive

advantages/diamonds

Resources for Governmental Resources for Governmental Management of TradeManagement 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

1990s – Management Theory1990s – 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.

Conclusion of Part OneConclusion 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?

Part II – Terminology of TradePart 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.

Terminology about TradeTerminology 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

International Trade levelsInternational Trade levels

Local – with those you know, and have knownNational – within a nationInternational – between nationsMultinational – many nationsTransnational – transcending nation-statesGlobal – one worldVirtual – transcending worlds

Theory of Globalization of Theory of Globalization of Business 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.

Going International: An Going International: An unfortunate progressionunfortunate 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 CFO’s (to restrict it)Then came the strategies (to encourage the

amoral)Then came the lawyers (to litigate blame)

And on…..And on…..

Then there was hopelessness in the landThen there was an abundance of fertilizerAnd, then there was a chance for new

beginnings

What is this new beginnings stuff?

From fertilizer arises hopeFrom 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

Therefore what is meaningful – Therefore what is meaningful – differences that make a differencedifferences 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

Design, planning, production Design, planning, production and distribution of goods and and distribution of goods and

services that are:services that are: Appreciative of nature Appreciated by others Accepting of the

irreversible Avoiding the recyclable An enhancement to living

systems

Picture – Swedish Lapland