What Is Understood by the Triad and Globalism - Coursework Example

Topic: 340062 - What is understood by the Triad and Globalism? What role does the triad play in globalism and how does it impact on East Asia? 1. Introduction: This paper seeks to analyze and discuss the question: “What is understood by the Triad and Globalism? What role does the triad play in globalism and how does it impact on East Asia?” This paper maintains that the triad eventually helps globalism, which aims from world integration. 2. Analysis and Discussion 2.1 What is the meaning of triad? Moore and Rugman (2005) said that the word “triad” was coined by Japanese consultant and author Kenichi Ohmae which refers to the economies of Western Europe, North America and a small number of East Asian nations, particularly Japan. Moore (2005) quoted Ohmae to have argued that these economies are the critical ones from a viewpoint of innovation, trade and investment. The classification of the countries into triad is based on the viewpoint of innovation, trade and investment. This means that these countries would take the lead in introducing new products ahead of other countries in the. It also happened that there three countries are where we find the countries with high GDP according to the last available data from World Bank. (Wikipedia- GDP, 2006) In further discussing, Moore Rugman (2005) categorized a triad by discussing where MNEs around the world belongs by saying: “The vast majority of Fortune 500 companies on which we could compile data (320 MNEs) are home-triad based, having only modest sales in the other two regions. A set of 36 are “bi-regional,” with at least 20 percent of their sales in two parts of the triad. Only 10 of the 500 are truly global, with at least 20 percent of their sales in all three parts of the triad. Overall, this is a picture of regionalization, not globalization.” (Moore and Rugman, 2005) In proving the result of its study, Moore and Rugman (2005) said it had examined the Fortune Global 500 which deals the largest firms by revenues in the world. The authors did observe intra-regional sales of 380 of the 500 firms that were included in the list. The author found that these 380 firms account for 79.2% of the total revenues of all 500 firms. Thus, researchers concluded that the average revenue for a firm in the top 500 was $28 billion, ranging from Wal-Mart at $220 billion to Takenaka at $10 billion and that the average sales of a firm in the set of 380 is $29.2 billion. What is notable too, is the authors’ finding that across these 380 firms, the average intra-regional sales represent 71.9%. (Paraphrasing made) 2.2 What is the globalism? Jessup, (n.d.) said: “Strategically, globalization refers to actors' attempts to promote the global coordination of activities on a continuing basis within (but not necessarily across) different institutional orders or functional systems. Such attempts can be pursued through different material and social technologies on the interpersonal, inter-organizational, inter-institutional, or inter-systemic levels. Examples could include: interpersonal networking (e.g., the Chinese diaspora); strategic alliances orchestrated by transnational enterprises (alliances which may include more local or regionally-based firms as well as not-for-profit organizations); the institutional design of 'international regimes' to govern particular fields of action; and projects for world government or global governance. The forms of coordination proposed for globalization vary widely and none are guaranteed to succeed -- witness the market-led globalization favored by the World Bank, the horizontal 'global governance' favored by proponents (especially NGOs) of international regimes, and plans for more top-down inter-statal (or even world) government. Thus viewed, what is generally labeled nowadays as 'economic globalization' rarely, if ever, involves full structural integration and strategic coordination across the globe?” The concept of globalization is really a broad term as to include a wide range of processes as cited by Jessop, B. (n.d.) may actually include among the following others: (a) Internationalization of national economic spaces through growing penetration (inward flows) and extraversion (outward flows); (b)formation of regional economic blocs embracing several national economies -- including, most notably, the formation of various formally organized blocs in the triadic regions of North America, Europe, and East Asia -- and the development of formal links between these blocs --notably through the Asia-Pacific Economic Cooperation forum, the New Transatlantic Agenda, and the Asia-Europe Meetings; (c) growth of more 'local internationalization' or 'virtual regions' through the development of economic ties between contiguous or non-contiguous local and regional authorities in different national economies -- ties which often by-pass the level of the national state but may also be sponsored by the latter; (d) extension and deepening of multinationalization as multinational companies and transnational banks move from limited economic activities abroad to more comprehensive and worldwide strategies, sometimes extending to 'global localization' whereby firms pursue a global strategy based on exploiting and/or adjusting to local differences (Jessop, B. n.d.) On the other hand, IEL (1999) said: “To some, globalization means the displacement of an indigenous culture by a foreign culture. To the environmentalists, globalization is the despoilment of virgin lands, deforestation of the rain forests, and the destruction of rare species. From the cultural point of view, critics see globalization as a two-fold threat: one as a challenge to the integrity of the indigenous culture, and two as a de facto sovereign that is both invisible and uncontrollable. There is a dichotomy in the perceptions of globalization. The same people who wish to attract foreign investment want to erect controls to behavior of foreign direct investment (FDI). The problem is that foreign investors are extremely sensitive to capital controls and political instability. Critics are not limited to the developing countries. Thus we witness the resistance of the French intellectuals and politicians to the corruption of the French language by English terms. Purists and nationalists see language, in both its formal and silent forms, as the expression of culture. Not only the "drug store" is becoming universal, but also "Wal-Mart" is taking over European retailing. Ten or twenty years ago it would have been unthinkable that fast food outlets would suffocate Constitution Square in Athens. The television "talk" shows in Athens use more English than Greek terms.” The term globalization has in fact a very broad meaning hence it could mean cultural integration. IEL (1999) mentioned that the degree of adaptation or resistance to foreign cultural schemata varies among societies. It cited the Schumpeterian concept of creative destruction where there is there is a constant struggle between groups that wish to speed up the process of integrating new ideas, processes, and products and those who want to slow down the speed of losing existing norms. IEL expressed concern how to measure integration which could refer to the number of foreign subsidiaries operating in a country, number of foreign words integrated in a language, the dismantling of long-established trade and investment barriers or the integrative behavior is multidimensional. (IEL, 1999) (Paraphrasing made). 2.3 What role does the triad play in globalism and how does it impact on East Asia? Knowing the meanings of triad and globalization, we can now answer the question. However, Since the thesis of the this paper is that triad will eventually helps globalism which in aims for world integration, it would me proper to know how to measure the degree of effect in globalism in integration. IEL (1999) posited that two ways of measuring the impact of globalism. One is by the ratio of exports or imports to GDP while the other is through the resource flow. The first one seems must be easy since the greater the export or import in relation to GDP must tell the extent of transactions made. IEL (1999) explained, “There are, however, some magnitudes that measure the global integration of the world economy. One magnitude is the ratio of exports and or imports to gross domestic product. Both measures are much higher today than they were in the 1960s. For example, in the case of US exports/GDP, both measured at current prices, moved from less than 5 percent in 1960 to almost 12 percent in 1997. And, since the prices of internationally traded goods and services increase at a lower rate than the prices of domestic goods, the percentage would be much higher if we use constant prices for both exports and gross domestic product (GDP). For example, Patricia S. Pollard and Cletus C. Coughlin of the Federal Reserve Bank of St. Louis estimate that "Real exports of goods and services accounted for 16.7 percent of real GDP in 1997." (Pollard, and Coughlin, 1999) Thus we see that at least one adjustment for variation between domestic and internationally traded goods increases the proportion of exports to GDP. It should be noted that goods account for about 70 percent, and services 30 percent, of US exports. Since 1997 was the first year of the Asian crisis that reduced the demand for US-made goods, the proportion would be higher in the absence of the crisis.” (IEL, 1999) As to resource flow, we are quoting IEL (1999) when it said, “Table 1 (Please refer to Appendix A) reveals certain trends. First, while in the 1960s and 1970s government grants and loans dominated the resource flows from the United States to the developing countries, in the 1990s it is private capital flows rather than government or other official flows that play the dominant role. Second, the success of the East Asian countries (see IEL #48 and 49) has reduced the flow of official resources to the region.” Globalization as a rule hasten integration, hence the triad which consisted mainly of developed countries must be help bringing towards faster integration. This must be logical in the sense integration must result in better life for all and it would be have integration where nations will become poorer. It must be easy now to see the role of triad in globalism. Since we found earlier that more 70% of the sale of MNEs are triad-based , the role of triad therefore would be so serve as producers of the needs of the constituent countries since. Specifically, A Japan based MNE need to just to sell its products with East Asia and that would be a big market. An East Asia triad therefore promotes interdependence among its constituent countries which include China, Singapore, South Korea, Taiwan and Japan. 2.4 Does globalism extend to helping the growth East Asian countries in the home triad Asia? What other impacts if any? It would appear that the answer is in the negative. IEL (1999) discussing globalism said that the financial and economic crisis gave rise to negative rates of GDP growth in all East Asian countries except China, Singapore, and Taiwan. With the notable exceptions of the three East Asian countries it could be argued that that the triad had still effect in times of economic crises. In a sense it might have helped these notable excepted countries to survive. Or it might indicate the East Asia as past triad could only help to the extent that the countries could also sustain some economic shocks. IEL (1999) added: “Moreover, with the exception of Japan, China, and Hong, all experienced depreciation of their real exchange rates ranging from 12.4 in Singapore to 68.8 percent in Indonesia.( Pollard and Coughlin, 1999) However, the predicted flooding of the US and European markets with "cheap" East Asian imports and the collapse of the trading system never materialized. The ever-growing US demand for the world’s output carried the world economy”. Note that the existence of East Asia Triad led by Japan may have prevented countries within the triad to experience negative GDP growth rate and depreciation of the currencies for some; hence the triad still benefits still the neighbouring countries economically. 2.5 Given the consistently low current account of the US (part of triad), could it still help the other part the triad? The answer of course is in the affirmative because of the ever-growing US for the world’s output. IEL (1999) confirmed this when is said: “The US economy is the world’s locomotive. For how long can the United States play that role is not certain. It must be remembered that as IMF statistics show, the United States accounts for only 4.6 percent of the world’s population, but in the late1990 it accounted for over 50 percent of the growth in demand. Before the 1997-98 East Asian financial crises, Asia was the main destination of private financial flows. The uncertainties released by the Asian and Latin American financial crises affected the global flow of resources. In 1998, "gross capital flows were sharply lower. [The] unsettled conditions in world financial markets led to substantial slowing in cross-border flows."(Bach, 1999) Both U.S. assets abroad and foreign assets in the United States fell, the former from $479 to $305 billion and the latter from $733 to $542 billion.” If US had a negative current account balance for the past thirty years does that mean that they could have grown in their GDP? The answer of course is in the negative. It is the not the current account balance that measures economic growth and the fact that it had a consistent negative current account does not mean that the US economy were not growing during those years 2.6 What could be the proof that integration is hastened by globalism? IEL (1999) asserts that globalism blurs national borders. It admitted the spread of the multinational corporations, the cross-border movement of goods, services and resources. It further argued that as the NATO destruction of Yugoslavia testifies, globalism has created new legal demands on multinational institutions to delineate legal rights and responsibilities. It also quoted US Supreme Court Justice Sandra O’Connor, in her address at the Navy War College, telling her audience that "The world is increasingly interdependent and demands that we participate in a global community.” (Capitol Watch, 1999). In addition IEL (1999) took Justice Sandra O’Connor in her explanation that the "world trade treaties, ever-improving communications technology and multinational organizations" that "blur the borders between nations and give rise to numerous legal questions.” (Capitol Watch, 1999) Conclusion Triad is believed to eventually trigger globalism while the latter targets economic integration of the whole world including East Asia. The roles that triads play vary globalism centers on promoting further interdependence among countries in East Asian economies as they pass through different stages of development. Although they could be considered phenomena they should not be considered as the all controlling forces of the economies of East Asia. As stated earlier MNE being classified as triad-based MNEs indicate that triad first conquers first their own region or triad to sell their products before actually becoming global. In the nature of things, existing the number of global MNE is only a small part of the total indicating that most are triad based. By their triad based does not mean that they will not eventually become global. In transition to full globalization, strong economies as to innovation, trade and investment of the existing triad are a requirement toward such end. Appendix A- Table 1. US Resource Flows to Developing Countries, 1960-1997. (Source IEL,1997 citing US data classify developing countries as Part I, or "traditional", and Part II countries in transition.)                         1960-69 1970-79 1980-89 1990-97 Total resource flows, net         Million $ 51,298 108,738 189,762 361,021 Percent distribution                   ODA, new 68 37 44 22           Other official 03 06 02 01           Private, net 29 50 45 72 Geographic Distribution              ODA                   Africa 12 17 32 36           Americas 18 11 16 16           Asia 59 56 33 28 Private                   Africa n/a   6   6   3           Americas n/a 73 67 58           Asia n/a 14 23 39 References: Bach, C. (1999) "U.S. International Transactions, Fourth Quarter and Year 1998," Survey of Current Business, 1999, p. 26. Capitol Watch, October 12, 1999 International Economic Letter, Number 52 (1999), {www document} URL Globalismhttp://www.sba.oakland.edu/econpage/newsletters/NewsLetter52.htm#, Accessed October 28,2006 Jessop, B. (n.d.) Reflections on Globalization and Its (Il)logic(s), Lancaster University, Department of Sociology{www document} URL http://www.lancs.ac.uk/fss/sociology/papers/jessop-reflections-on-globalization.pdf., Accessed October 28,2006 Moore, and Rugman (2005), Globalization is about Regionalization, Mcgill International Review, {www document} URL http://www.irsam.ca/mir/Moore%5B27-30%5D.pdf, Accessed October 28,2006 Pollard, P and Coughlin, C (1999)"Going Down: the Asian Crisis and US Exports," Federal Reserve Bank of St. Louis, Review, March/April 1999, p. 33. Wikipedia, 2006, List of Countries by GDP, {www document} URL http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29, Accessed October 28,2006 Read More