Magazine article Management Review

Isolationism in a Global Economy

Magazine article Management Review

Isolationism in a Global Economy

Article excerpt

A growing paradox facing the United States is the simultaneous rise of a new spirit of isolationism amid the increasing globalization of business. Viewed independently, each of the two trends seems to make sense. In juxtaposition, however, isolationism amid globalization is simply unachievable.

The end of the Cold War brought on a widespread expectation that the United States could safely cut back its military establishment. Government leaders could shift their attention from foreign policy to the domestic problems that face the American people. That simple approach was not bound to last.

Many recent disturbing events overseas-- in Haiti, Somalia, Bosnia and China--remind Americans that we still live in a dangerous world. It does not make sense to dismantle our military establishment.

But, in a far less dramatic way, it has become clear that the rest of the world is going to have an increasingly powerful impact on American business. History tells us that trying to shut ourselves off from these "foreign" influences just does not work. When imperial China tried to do that some 500 years ago, it rapidly went from being the world's most advanced and powerful nation to a poor backwater.

The rapidly growing global marketplace is a source of great actual and potential benefit to American entrepreneurs, workers and consumers. Those who identify with the change are likely to be the winners; those who resist will lose.

The global marketplace has rapidly shifted from just a simple-minded buzzword to complex reality. International trade is growing far more rapidly than domestic production, to a point where companies hardly have a choice about participating. Six basic points illustrate why.

1. Americans do not have to do anything or change anything to be part of the global marketplace. Even if a business does not export a thing and has no overseas locations, its owners, managers and employees are still part of the global marketplace. The same goes for its suppliers. The issue has been decided by technology. The combination of fax machines, universal telephone service (including cellular), low-cost, high-speed copiers and computers, and speedy jet airline service enables money, goods, services and people to cross most borders rapidly, if not instantly. And that goes especially for what is the most strategic resource--information.

A dramatic example of the ease of business crossing national borders occurred during the Gulf war. On the first day of the Iraqi attack on Kuwait, a savvy Kuwaiti bank manager began faxing his key records to his subsidiary in Bahrain. By the end of the day, all the key records had been transferred out of Kuwait. The next morning, the bank opened as a Bahraini institution, beyond the reach of the Iraqis. Literally, a bank was moved from one country to another via a fax machine.

American businesses are no longer insulated because of vast distances from other producers. Every American is subject to competition from overseas. If that force has not hit a region yet, it probably is on its way.

2. Employees, customers, suppliers and investors in U.S. companies are increasingly participating in the international economy. Large numbers of American companies have deployed most of their assets overseas: Citicorp (51 percent), Bankers Trust (52 percent), Digital Equipment Corp. (61 percent), Chevron (55 percent), Exxon (56 percent), Mobil (63 percent), Gillette (66 percent), and Manpower Inc. (72 percent). Increasingly, U.S. firms are establishing factories, warehouses, laboratories and offices in other countries. One-half of Xerox's employees already work on foreign soil.

A recent survey of American manufacturing companies showed that becoming an internationally oriented company usually pays off. Sales by firms with no foreign activities grow at only half the rate of those with foreign operations. Firms with international activities grow faster in every industry--and profits are higher. …

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