Adapting to Globalization

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While working in the corporate world I learned that as organizations age, they tend to falter because they keep doing what originally made them successful rather than adapting to a changing world. The corporate giants of yesteryear have either disappeared, lost most of their heft, or have been taken over.

It seems to me that nations are also vulnerable to this problem. During last century’s world wars, European powers were still wrangling over colonies in Africa and Asia. They didn’t realize that the world had changed. They didn’t know that the era of colonialism was over. Today in the U.S. we hear many cries to recapture the glories of the past by returning to the policies of the past. We keep trying to recapture a world where there were two super powers with their respective spheres of influence.

We no longer live in a 20th century world.  Globalization has arrived. Travel and technology has tied places together that used to be remote. One of the ways I think we miss this point is our old-fashioned view of corporations. We still think in terms of corporations as residing within a single nation. We consider GM to be a “U.S.” corporation, for example. Yet corporations are global.  They trade globally; they produce goods globally, and most importantly, they are owned by citizens of many nations.

Most Americans assume that big corporations have a loyalty to a nation. Corporations fundamentally are not patriotic. Their mission is not to support a particular nation. Their mission is the make a profit for their owners. They may make a show of some patriotic action, but it is done for the sake of public relations rather than to aid one nation over another.

The old adage that what’s good for GM is good for America doesn’t apply in the way it once did. Prosperity in the nations that make up a company’s marketplace is good for its bottom line, but prosperity in the nations where it makes most of its products may mean higher costs as wages rise. Bringing jobs to America doesn’t necessarily help the bottom line of companies that we think of as “American.” Companies can do better by hiring workers in poor nations and selling their goods in rich nations like the U.S. This is one reason we have seen jobless recoveries recently.

In the face of globalization, our nation must be more active in managing its own economy than in the past when we could rely on a free market of patriotic corporations whose interests were tied to the success of their home nation. We must rethink how we regulate commerce, and we must look for ways to encourage innovation within our borders.

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