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: The choice matters  Independence  Dependence  Inter-Dependence

Interdependence as an attitude  Existing attitudes towards exchange came from 18 th 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 above 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 Stage-set: From Barter to 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, objects of worship  Finding an idea  Developing it  Creating a market  Moving overseas  Creating a religion

A means to see, then avoid the limitations of business  Egocentric  Ethnocentric  Polycentric  Region-centric  Geocentric  Non-centric

1776 – Adam Smith and Absolute 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 analysis  Reductionism  Cause-effect thinking  Life as a machine  Loss of meaning  Loss of intent  Loss of intentions  Reversion of Order

The 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 centuries of Western Trade Theory      18 th Century – Adam Smith 19 th Century – David Ricardo 20 th Century – Heckscher Ohlin 20 th Century – Leontief Paradox 20 th Century – Buren Stan Linder

19 th Century Comparative Advantage: 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 18 th and 19 th Century Western Production  Capital  Labor  Raw materials  Land

Notes on the Historical Foundations  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 1933- 1949 Heckscher-Ohlin factor 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 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 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: Overlapping 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 Product 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 Assumes  A new product is introduced at home  The product matures in its home market  Product becomes standardized  Product as a cash cow begins to level or decline in home market  Product is internationalized

1970 – Technology Gap Theory    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 Theories  Governmental roles  Intra-industry trade  Imperfect competition   Market imperfections Porter’s competitive advantages/diamonds

Resources for Governmental Management 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 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 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 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 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 levels  Local – with those you know, and have known  National – within a nation  International – between nations  Multinational – many nations  Transnational – transcending nation-states  Global – one world  Virtual – transcending worlds

Theory of Globalization of 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 unfortunate 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 … ..

 Then there was hopelessness in the land  Then there was an abundance of fertilizer  And, then there was a chance for new beginnings  What is this new beginnings stuff?

From 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 – differences 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 and distribution of goods and services that are:  Appreciative of nature  Appreciated by others  Accepting of the irreversible  Avoiding the recyclable  An enhancement to living systems Picture – Swedish Lapland