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This will result in an unsatisfactory grade for the work submitted or for the entire course. It may also result in academic dismissal from the University. IB7012­8 Isabel Wan, PhD Global Economic Environment Assignment 1 Faculty Use Only 2 Introduction Technology, infrastructure improvements, and reductions in trade barriers are at the core of increased international trade. In the past twenty years the countries around the world are becoming increasingly interdependent. Alex Tabarrok’s video, How ideas trump crises, is indicative of the way the world’s economy should work; will be analyzed for the advantages, disadvantages, and realities. The concepts of competitive and comparative advantage are exceptionally important as one looks towards global trade and the globally competitive environment. As technology continues to link one side of the world to the other, the population as a whole becomes stronger and more capable. While increasing the overall capability, the worldwide community will need to make a conscious decision about how much information can be shared and still provide a competitive advantage. To be able to understand the concept of world trade further, this week’s discussion will include a further look at the following: (a) competitive advantage and international competitiveness, (b) interdependence among world trading nations and (c) open trading system. Interdependence Among World Trading Nations The main factors causing the world’s trading nations to become increasingly interdependent, first begins with technology. As each year passes, connectivity increases through the internet, cell phones, and various communication methods. While many years ago, the only way to travel to and from another country was by boat. The travel time alone would take an individual months or years. Now one can travel to the ends of the earth in just a few days, rather than months or years. While travel is not only an exceptionally quick process, communication transmissions play a significant role in bringing nations together. Two other key 3 factors that further develop interdependence among nations are the removal of political walls and innovation (Tabarrok, 2009). While each factor is a key concept that brings the world together; there are many other factors that negatively impact globalization and can be very disruptive. As globalization increases, the world market will be impacted in both positive and negative aspects. Commodity prices have significant levels of volatility in uncertain global economic situations. Previously it would take the other side of the world days or weeks to be impacted by the changing market conditions in a developed country (Ji & Guo, 2015). Open Trading System The one word that comes to mind when discussing an open trading system is, impossible. After watching Tabarrok’s (2009) video, the concept of developing an open trading system is an idealistic improbability. An open trading system would certainly have global impacts both positive and negative. By encouraging open trading, more people will benefit from one idea. To provide an example where the positive value of an open trading system can be seen is in the arena of energy. If the world market pushes up the price of oil, a limited resource, the number of energy patents increase. Governments should take this concept into consideration and limit the level of undue influence oil tycoons and their lobbyists provide and focus on the greater good. The concept that was referenced in the video was one by Thomas Jefferson. If other light their candle by his candle, they they will get light and will not diminish his own. This concept can apply when looking at the big picture. If a large majority of a population suffered from the same disease, the dedication of resources would be turned to solve the problem. More people would then care about fixing the problem, and once a solution is found, more people would be affected. This certainly would be a benefit of open trading. Another benefit would entail global 4 knowledge. By increasing the levels of education held around the world, the more people can begin to put their heads together to create solutions. Tabarrok (2009) referenced that by increasing the education levels of a country, the more people can share the burden of developing new ideas and technologies which will promote the growth of a world market. While this is an excellent theory, it is idealistic and unrealistic. The world can certainly move towards a more global trading environment, but the concept of sharing ideas to the point Tabarrok (2009) discussed is more something out of a dream world than a possibility. People are people, and with that, we as a society always want more. Until one can change human nature, this concept will remain just that, a concept. The Russians and Chinese have tried this concept within their own countries by implementing communism. While the concept was to treat everyone equally and rationing its citizens worked to a point. As the citizens were rationed, government officials did not not have to abide by the same policies. They government officials received benefits and higher pay; taking them out of the communist system they were implementing. In addition, the concept of Thomas Jefferson’s candle metaphor and the ability of one person to light their own candle off of Jefferson’s candle. The individual that lit their candle from his would not extinguish nor diminish his light. While this concept could work with one or two people, what would happen if one hundred, one thousand, or everyone in the world tried to light from the same candle The result would end in Jefferson’s light being extinguished. While one could say that Jefferson wouldn’t need a light because the population would have an enduring light, one would have to ask then, what would Jefferson have to offer the world The metaphor is flawed as well as the overall theory. While increasing the amount of people that are exposed to the idea is an excellent one, at some point 5 the candleholder no longer has light and will be the one who is left with nothing. Tabarrok’s philosophies about having one idea and world market is idealistic and optimistic to a fault. While it is true that an increase of innovation and ideas will help the general population and create growth, this concept is only possible to a point. Tabarrok’s ideal world works in a bubble where we as a nation didn’t fear other countries getting rich. His ideal world does not exist and will be unable to exist in the type of society we have today. For instance, the concept of intervening and developing a full blown cancer drug would be amazing for the individuals facing death, their families, and society. The problem with this is that we as one nation would begin to suffer. The individuals would be saved and the balance to society would be impacted. The mere population increase around the world would cause the government to implement a ban on multiple child births. It could also impact the world’s food supply as there is only so much land to farm. Until other ways of developing a supplement is created, the poverty levels and shortage in food supply alone will significantly increase the rate of death of a different group of people rather than the individuals with the disease. Tabarrok (2009) develops each of these notions but why he believes that all things would be better if GDP increased, technology is shared freely, and disease is cured. The next question to be asked is, at what cost One has to wonder what makes him so sure his idealistic concept is for the good of the world when we as a global power can not get rid of terrorism on our own. In addition, even the mere concept of racism, which is alive and well will not end in our lifetime or potentially ever. This is a product of the human condition. Until humans become less greedy and find a way to get along with each other in society this human condition will continue. Tabarrok (2009) also states that GDP will continue to increase and grow at significant 6 rates, but to what point Just because the amount of money spent to increase the GDP increases does not mean that there is more money in the world. We as a nation can continue to make more money and spend, but does that truly mean there is actually more, or does it mean economists are analyzing something that is truly not there Who will be affected when the money no longer holds value but is a number on a spreadsheet Competitive Advantage and International Competitiveness Each and every culture abides by a differing set of values and norms. The values and norms both are part of a given culture and are instilled from birth. Education, social systems, and the economy all work towards developing an international competitiveness (Apsalone & Sumilo, 2015). International competiveness also is a byproduct of a county’s ability to access to a variety of networks. Efficient networks include such items such as (a) strong logistics’ network, a well­developed infrastructure, (c) efficient custom’s clearance procedures, and (d) developed governmental regulatory systems. A firm’s level of competitiveness is dependent on any number of factors, but those that are most prominent are: (a) customs, (b) infrastructure, (c) service quality, (d) timeliness, (e) international shipments, and (f) tracking and tracing (Önsel Ekici, Ş., Kabak, Ö., & Ülengin, F, 2016). As global world is developed, one must be careful and think through the competitive advantage prior to extending information globally to ensure there is a balance between profitably and productivity. An example of violating this concept can be seen daily within social marketing arena. The social marketers that are wealthy and who are doing well are those that have figured out a strategy that works and monopolizes on it. If in fact they share all of their techniques, their monopoly would be shattered and their value in this market decreased to a point of non­ 7 existence. Essentially the concept of competitive advantage in the international business environment is dependent upon creating value for customers around the world. There is a direct correlation that is developed between financial performance and value. In order to provide value, a company’s members must identify ways to increase innovation. By doing so, not only will the company increase value, but the economy will also become stronger (Colby & Dobni, 2015). Conclusion Overall the concept of improving infrastructure and reductions in trade barriers increase globalization. Throughout this discussion, Alex Tabarrok’s video provided a foundation for discussion of global trade and the value and concerns of a interdependent market. Those items that make globalization possible are communication methods, transportation, infrastructure improvements, and reductions in trade barriers. There is certainly a truth to the statement that improvements in technology will benefit the population as a whole, which will make the population a stronger and more capable entity. While increasing the overall capability, the worldwide community will need to make a conscious decision about how much information can be shared a competitive advantage still provided. While the concept of making the world a better place is a noble cause, the negative effects of growth and improvement need to take into account surrounding factors. To be able to understand the concept of world trade further, this week’s discussion will include a further look at the following: (a) interdependence among world trading nations and (b) open trading system, and (c) competitive advantage and international competitiveness. 8 9 References Apsalone, M. & Sumilo, E. (2015). Socio­cultural factors and international competitiveness. Business, Management & Education / Verslas, Vadyba Ir Studijos, 13(2), 276­291. doi:10.3846/bme.2015.302 Carbaugh, R. (2013). International economics. (14th Ed.) Florence, KY: Southwestern Colby, E. & Dobni, C. (2015). Innovation ­ the next level of sustainable competitive advantage for your organization, and you! (2015). Workforce Solutions Review, 6(5), 22­25 Ji, Q., & Guo, J. (2015). Market interdependence among commodity prices based on information transmission on the Internet. Physica A: Statistical Mechanics and Its Applications, 42635­44. doi:10.1016/j.physa.2015.01.054 Önsel Ekici, Ş., Kabak, Ö., & Ülengin, F. (2016). Linking to compete: Logistics and global competitiveness interaction. Transport Policy, doi:10.1016/j.tranpol.2016.01.015 Tabarrok, A. (2009). How ideas trump crises. Retrieved from http://www.ted.com/talks/alex_ tabarrok_ foresees_economic_growth