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International Business Week 5 International development
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Week 5: International development11 October 2022 15:03
GLOBAL INEQUALITIES ONLINE 11:00 GUEST-SPEAKER
- 736m extreme poverty worldwide Enterprise Scotland
- COVID disproportionate impact on poor: job loss, disruption in services such as
education and health care A Chinese alternative?
- First time since 1998, poverty rates increases since economy falls into recession
and drop in GDP per captia. Erase almost progress last five years CHINA AND FDI (Direct Foreign Investment)
During the inward internationalisation process (since 1978), China attracted a large amount of FDI through joint ventures and original
WHAT DOE WE MEAN BY INTERNATIONAL "DEVELOPMENT" equipment manufacturing
Developed: the west, industrialised countries… The skills, technical know-how, and managerial competence acquired from their foreign partners has prepared them for their subsequent
International development refers to the improvement of quality of life for populations, outward internationalisation since the late 1990s
generally through economic growth but also wider (more sustainable) areas of focus The government has been the driving force behind their internationalisation to strategically develop the country
CHANGED FROM INWARD INVESTMENT TO FOREIGN INVESTMENT!!
DEVELOPMENT STRATEGIES
OECD (2012: 3): 'The Strategy is based on the assumption that countries at varying levels
of development contribute to the achievement of global sustainable economic growth,
and that all countries can prosper by learning from one another, generating ideas
FDI into China
together, and improving our policies based on the principles of inclusiveness and
flexibility' C
Joint ventures with Western firms import ‘best practices’ adapted to suit the Chinese environment that are hailed by the Chinese media
Thinking critically about international development as good models to be followed by domestic firms.
SUSTAINABLE DEVELOPMENT GOALS However, there is also a large, under-employed rural population migrating to cities in search of employment. This segment of the labour
MYTH 1: POWER OF FREE MARKETS market is the least protected by legislation, and hence the most vulnerable to exploitation by MNEs and other enterprises
17 GOALS TO TRANSFORM OUR WORLD 'Today's wealthy countries achieved success through a steadfast In practice, management can become a mix (possibly incoherent) of different practices (derived from Chinese SOEs, private sec tor and
commitment to the free market’ Western firms)
--> questioning MYTH 1: implement the elements that are less costly, both financially and administratively, such as signing employment contracts and to ignore
Between the mid C19th and WW2, the US had the most protected the more costly aspects, such as contributions to employee welfare insurance or union recognition’
economy in the world
After both World Wars, protectionist approaches were vital in the pursuit
of recovery and reconstruction
PREVIOUSLY: GATT
Successive rounds of multilateral negotiation eliminated substantial CHINA IS REPLACING USA IN TRADE
numbers of import restrictions and reduced tariffs
However, did not actively pursue globalisation or even free markets
What GATT achieved was a sense of stability, security and equity,
ODA + OFFICIAL DEVELOPMENT ASSITANCE facilitating economic growth
'The Foreign & Commonwealth Office uses ODA, known as overseas aid budget, to DESPITE HAVING GATT + PROTECTIVE POLICIES (NOT HAVING FREE
support and deliver the government’s 2015 Aid Strategy in developing countries.’ MARKET) = STILL PROSPER
The 'Washington consensus'
DEVELOPMENT STRATEGIES?
From the 1990s, the WC came to be the standard formula of stabilise,
However, there many are critical voices, for example: liberalise and privatise
Developing economies are encouraged to open themselves up to
international trade and investment as the route to economic growth
‘too often, the poverty of certain communities or nations is used as a pretext for
However, this often ignores alternative strategies that have worked
elsewhere, e.g. import substituting industrialisation SUMMARY:
promoting investments that are primarily designed to improve incomes and The state can have a powerful role in supporting economic and industrial • FDI often involves the importing/exporting of HR practices creating important strategic choices
development • There are a range of forces shaping the practices within MNEs and their international joint ventures
lifestyles for the better off. • We cannot study the practices of a joint venture (or other firms created through FDI) without consideration of the global context
‘This is achieved by creating low-waged employment in burgeoning cities whose TARIFFS
= Taxes on imports or exports THE ENVIRONEMNT FOR INTERNATIONAL BUSINESS
buckling urban fabric is another manifestation of acute development distress’ - Specific: fixed charge per unit on imported good
e.g. €151/100kg for Feta cheese entering the EU • Globalisation – increasing interconnectedness (remember multidimensional), mixed views on where we are headed
Why?
International development is rooted in an idea of ‘developed’ economies supporting • Formal institutions – can’t operate without rules, many designed to facilitate free trade and reduce transaction costs
Parts/ingredients produced somewhere else but put together in one
country. MADE IN UK: PARTS PRODUCED ELSEWHERE BUT PUT TOGETHER
those that are ‘developing’, albeit commonly presented as collaboration for sustainable IN UK • Informal institutions – part of the above but also a useful way of thinking about national differences
futures FABRIC OF ILLUSION
Myth 2: The American way is best
• FDI – political contexts and interactions create changing, dynamic and at times uncertain contexts
'The neoliberal American model of capitalism represents the ideal that all
Often focused on seeking to overcome poverty
developing countries should seek to replicate ’ • Global disparities shape IB operations, important to fully consider the implications for international businesses
It is also rooted in a particular set of assumptions about economic growth and how to IMF/WORLD BANK
Their loans and political influence have focused on poorer , developing and
become ‘developed’ (CAPITALISM) emerging economies
This has essentially meant substantial political influence and control
exerted over these countries by the US and the West
Conclusion
D
Also creating significant opportunities for international businesses with ❖ IB has to attend to the contexts in which these businesses operate
e.g. privatisation and greater welcoming of foreign private investment
amongst the loan conditions
❖ The world’s 'centre of economic gravity' is changing and developing economies
QUESTIONING MYTH 2 are among the key drivers of global economic growth (OECD, 2012)
Economic growth rates in the UK/US in the neoliberal era of 1980-2000
were nearly identical to the interventionist era of 1960-79
Importantly, the 'boom' years under neoliberalism led to
❖ There are different routes to ‘development’
greater inequality
The financial crisis may also suggest limits to this approach (and note the
❖ The state really does matter
degree of state intervention, nationalisation and subsidies in response)
FORTUNE CONCENTRATED TO JUST CERTAIN GROUPS = INEQUALITY
Import substitution industrialisation
Through approaches such as ISI (see also infant industry protection),
governments insulate domestic industries from foreign competition
This may include forms of nationalisation in the given industries but also
finance (eg to ensure investment)
Deter foreign competition with tariffs, quotas and subsidies
Once these industries are established may then reopen to competitive
forces and 'free markets'. WHEN FLOURISHING --> OPEN UP TO FREE
MARKET. STATE = KEY ACTOR
Myth 3: Developing economies need
'neutral' institutions SUMMARY
'Developing economies need the discipline provided by international
institutions and by politically independent domestic policymaking
institutions’
QUESTIONING MYTH 3
There is no evidence that technocratic (selected based on their expertise
in a given area of responsibility) approaches fare better than democratic
policymaking and there are questions about the legitimacy of the former
(e.g. transparency, accountability)
Non-political institutions typically meet the needs of investors, lenders
and (international) businesses rather than the wider national interest
LECTURES Page 1
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