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Independence
Dependence
Inter-Dependence
Interdependence as an
attitude
Existing attitudes towards exchange came from
18th Century ideas. These mostly come from a
dichotomy between independence or dependence.
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
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
18th Century – Adam
Smith
19th Century – David
Ricardo
20th Century – Heckscher-
Ohlin
20th Century – Leontief
Paradox
20th Century – Buren Stan
Linder
19th 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 18th and 19th
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.
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