What Does Dicken (1986) Mean When He Argues That Internationalisation Is Best Viewed As A “mosaic Of Essay, Research Paper
” The world economy is changing in fundamental ways. The changes add up to a basic transition, a structural shift in international markets and in the production base of advanced countries. It will change how production is organized, where it occurs, and who plays what role in the process. ” (Ref.i, Cohen,S.S. and Zysman,J. 1987) The global economy is changing dramatically with evidence of an increasingly extensive market for the production of goods and services and international trade. Methods of direct international investment are being controlled by an explosion of transnational corporations which span the globe. In effect there has been an increase of internationalisation. This is the, “notion that each country’s economy has become less self-contained and more part of a global process of production and change.” (Ref.ii, Harris,L.1988) In short, the world economy has become more open and accessible to each country’s fiscal activities with regard to trade, finance, investment and labour for example. This internationalisation is not a new phenomena and can be traced back many centuries to the first incidence of international trade. Throughout this evolution, internationalisation has affected different places in different ways, emphasizing a changing pattern of geographical inequality and the changing globalization of economic activity has proved its erratic nature, as Dicken (Ref.iii,1986) quotes Storper and Walker (1984), internationalisation can be described as, ” a mosaic of unevenness in a continuous state of flux”. Evidence of the evolution of a global market dates back to the period which Wallerstein has labelled the ‘long sixteenth century’. At this time (1450-1640), countries of the now Western World were witnessing an expansion of trade, with regard to rare items such as, spice, fine cloth and other exotic goods from exotic places, for the minority of its population. Also during this period, mercantilism became increasingly important as the core, semi-periphery, periphery notion was established. An important feature of this mercantilism for the core countries of the North, was colonialism as it was illustrative of a nation’s wealth and power. The earlier colonial powers were Spain and Portugal with their acquisitions in the Americas. They later became semi-peripheral and the North West of Europe, e.g.England, the Netherlands and France became the core economic leaders dominating the new world trading system. Industrialisation, which began in Britain in the late eighteenth century and which spread first across Europe then to the United States during the nineteenth century, enhanced the development of the already founded global economy. There existed more opportunities for trade between countries as most industrialising nations had to look beyond their borders for markets in which to sell their surplus output from the modern industries, and for extra raw materials needed when national supplies were exhausted, in an attempt to keep up with industrial demands. Imports were mainly from the core countries own colonies and exports of manufactured goods were primarily textiles, then heavier goods such as iron and steel. By 1870, Britain had become the ‘workshop of the world’ as it was producing almost one-third of the world’s entire manufacturing output. It can therefore be seen that from the first incidence of internationalisation of economic activity, the core-periphery structure emerged and that the industrialisation period, of the eighteenth century onwards, reinforced it. From the start, changing patterns within this structure are obvious; Spain and to a lesser extent Portugal, originally core countries, declined to semi-peripheral status and the U.S., initially a peripheral nation, improved itself to core status and the leading world industrial power of the twentieth century, taking Britain’s place. At the same time, peripheral nations had been involuntarily taking the back-seat in global economic activities and hence increasing the effects that this process has had on geographical inequality. Together with increasingly extensive flows of international trade, based on the core-periphery structure, the global economy has witnessed an expanded mobility of capital (and labour) from country to country. In particular, the outflows of money and workers from Europe to the mineral-rich overseas countries, helped to provide the increased supplies of foodstuffs and raw materials needed to feed Europe’s fast growing population and industry. So, during this period there was a redistribution of capital and labour, which became necessary for the expansion of the international economy. The global economy witnessed a considerable growth in foreign investment in the mid to late nineteenth century, with the establishment and growth of financial institutions, such as commercial banks and investment houses. These facilitated borrowing and lending and made foreign investment easier. Capital markets, such as ‘the City’, in London, became more diverse in dealings and thereby enhancing international trade and foreign investment. This method of importing and exporting capital is beneficial to both the lending and borrowing nation in that it facilitates the diffusion of technological knowledge and hence increases productivity in the borrowing nation. However, when it comes down to it, the recipient country is in debt and the gap widens between rich and poor. The international economy, which had grown up during the nineteenth century, came to a standstill with the outbreak of war in 1914. Four years of conflict involving all the great industrial nations left severe problems for the world economy that were never completely solved in the economic restructuring of the post-war period. World-wide depression of the early 1930’s and the collapse of the Gold Standard caused even more of a rapid decline in the world economy, and it was only after five more years of war that the shattered global economic system, could engage in post-war reconstruction. In order to rebuild the international economy, an International Conference was held at Bretton Woods, New Hampshire in July, 1944, where delegates planned the establishment of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank). These operations were to enable the transfer of goods and services from one country to another, free of restrictions on trade or controls; and to help finance post-war economic reconstruction and to aid the developing nations, respectively. In the immediate period after World War Two, world production rose and economic recovery continued and by the early 1950’s, the first stage of post-war recovery of the international economy had been largely completed. The manufacturing industry grew at an unprecedented rate as it became more internationalised in character and international co-operation produced large flows of resources, commodities, ideas and technology. However, this period of internationalisation of economic activities differed from that of the second half of the nineteenth century, in that the century before, an interdependence had strongly existed between the industrialising nations and a number of underdeveloped countries. Whereas in the post-war period, such interdependence was less evident as industrial countries had fewer economic incentives to aid the Less Developed Countries, hence widening the gap between North and South. Despite this obvious unevenness, the decade of post-war reconstruction can still be seen as one of the most successful periods in the history of the international economy. Also during this period of restructuring the world economy, the International Trade Organization (ITO) was set up to encourage the expansion of world trade and employment and the first General Agreement on Tariffs and Trade (GATT) was signed which was principally a non-discriminatory approach encouraging international trade and also condemning quantitative trade restrictions. As a consequence, the Western industrial nations experienced an improvement in trading conditions, as there was a shift in foreign demand away from food and raw materials and towards capital goods. This created malevolence and disfavoured the exports of the previously primary producing nations. Throughout these highs and lows in the world economic system, first Britain was, and now the U.S. is, the major dominating power at the head of a small group of core economies. Recently, the U.S.’s domination of the global economy has been challenged by West Germany, and now Japan and the Newly Industrializing Countries (NIC’s) of East and South East Asia (Taiwan, Singapore, Hong Kong and South Korea.) Former peripheral nations, these NIC’s have grown substantially in manufacturing. However, global economic growth is still extremely uneven and the majority of the peripheral LDC’s have substantial debts, and exist barely on the margin of survival – which creates tension between the rich and poor nations. Together with increasingly extensive flows of international trade, based on the core-periphery structure, the global economy has witnessed the growth of international investment by means of international conglomerates. Development of companies with links outside their home country, such as the East India Company, emerged from the fifteenth century and were mainly involved with trading and exchanging. However, from the late nineteenth century, companies began to gradually broaden their horizons with regard to production. By the early twentieth century, the U.S., Britain and other Western European countries had links in manufacturing across the globe. Since the 1970’s, there has been a massive growth in the scale and complexity of this international investment. The major channel of this foreign direct investment is via the transnational or multinational corporation (TNC/MNC). Fundamentally due to the advent of the computer, improved telecommunications, especially the satellite, and the acceleration of the movement of capital, large TNC’s have developed and expanded, investing in subsidiary networks worldwide. The TNC occupies the central role in the process of the New International Division of Labour (NIDL), which emerged in the geography of the world economy over the last few decades. This notion took over from the Old International Division of Labour (OIDL), as there appeared a shift in industrial production from core to periphery. By 1983, just five countries – the U.S., Japan, West Germany, France and China produced over three-quarters of the worlds manufacturing total. During this period of change, the U.K. lost its standing; the U.S., although still the worlds leading producer of manufactured goods, had significantly lost its absolute dominance; whilst Japan grew considerably in production levels. The emergence of the NIC’s also played a major role in the NIDL, as rapid growth took place. It is down to the strategies of the TNC that created this diverse new phenomena. The emphasis was on the minimization of labour costs; they were searching for cheap, controllable labour at a global scale. The importance of the TNC in the world economy can be measured by their annual turnovers in comparison to the Gross National Product of entire nation states. All of the top fifty TNC’s – including Exxon, General Motors, Ford Motor Company and IBM – are more successful economically than some of the smaller peripheral nations. For example, Ford Motors annual turnover is approximately $50 billion and Colombia’s GNP is approximately $38 billion. TNC’s as a whole tends to be unevenly distributed , both geographically and sectorally. Figure 1 shows how U.K. transnational manufacturing investment is geographically spread throughout the world. It is evident that the most investment is concentrated in certain regions – the U.S., Western Europe and Australia. Outside these core areas, U.K. manufacturing investment is spread extensively but thinly. Similar patterns are evident in other core areas and the most rapid growth overall has been by West German and Japanese transnational investment. There are also signs of increasing TNC growth in the NIC’s, but despite these advancements by former developing nations there is still evidence of an unequal distribution of the internationalisation of capital and production via the TNC’s. The responsibility for overseeing and controlling the activities of TNC’s lies within the developed world. The corporate headquarters is the focus of overall control of the entire TNC. Here, the high level strategic decisions that shape and direct the whole enterprise are made. Regional headquarters constitute an intermediate level in the corporate hierarchy and will usually spread geographically over several countries. The main headquarters will be located in global cities, of which London, New York and Tokyo form the control points of the global economy. The global pattern of production and trade of the 1990’s is more complex than it was half a century ago. Although there is still a major dominance of the developed market economies, almighty changes have taken place. In the post-war period, manufacturing industry grew at an unprecedented rate and became more internationalised. Deep recession in the late 1970’s and early 1980’s (caused by many reasons including the oil crisis of 1973), hindered this newly advancing world economic growth, but by the late 1980’s, economic recovery, although uneven, was in sight. This new world economic recovery involved the development of trade in commercial services rather than in manufacturing. For the past few centuries, since the internationalisation of economic activities first became apparent, the core-periphery notion has been predominantly evident. In recent years this phenomena has not solely been exclusive in determining the pattern of trade. This has appeared evident as the world has witnessed a tremendous growth in international flows of goods and services controlled by the East and South East Asian NIC’s. Emphasis in respect to the global manufacturing system has been put on the Pacific region and has increasingly grown to become one of the major developed market economies. Together with the other developed market economies of the world – North America and Western Europe / the EEC, this new area of growth and economic development – East and South Asia – it is possible to see the world economy is moving steadily towards a multi – polar global economy. To adopt Ohmae’s (1985) term (see figure 2), this ‘triad’ of powers “sits astride the global economy like a modern 3-legged Colossus.” (Ref.iv, Dicken,P. 1992). North America, the EEC and East and South East Asia are the dominating powers of global production and trade and the older more traditional theory of a core, semi-periphery, periphery structure has become outdated. This new multi-popular global economy, through its evolution and its existing inequalities is what Dicken (1986) was addressing when he quoted Storper and Walker (1984) in stating that internationalisation was ” a mosaic of unevenness in a continuous state of flux “. It can therefore be seen that Dicken’s statement is a valid one as, since internationalisation first became a distinctive feature in the role of economic activities five centuries ago, this notion has altered dramatically via the internationalisation of capital, trade, investment, labour and finance. Throughout this development of fiscal activities the ‘unevenness’ that Dicken refers to is evident in the geographical inequalities that this process has produced. From the beginning of a more global, integrated economic system, specific nations have developed their own economies to become part of this contemporary multi-polar global economy whilst others are still deep-set in financial difficulty and merely surviving. As the twenty-first century approaches, it remains to be seen whether a further enhanced global economic system will emerge, for it remains sceptical as to whether other developing countries will follow the same path as that set by the NIC’s, thus representing a more apparent move towards a truly globalized economy. BIBLIOGRAPHY Allen,J. & Massey,D. (eds.)(1988) – Restructuring Britain-The Economy in Question. SAGE Publications, London. Dicken,P. (1986) – Global Shift-Industrial Change in a Turbulent World. Harper & Row Ltd, London. Dicken,P. (1992) – Global Shift-Internationalisation of Economic Activity.(2nd ed.) Harper & Row Ltd, London. Hodges,M. (1974) – Multinational Corporations and National Government. Saxon House, Farnborough. Kenwood,A.G. & Lougheed,A.L. (1971) – The Growth of the International Economy 1820-1960. George Allen & Unwin Ltd, London. Knox,P. & Agnew, J. (1989) – The Geography of the World Economy. Edward Arnold, London. Lall,S. 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