Globalization—A good thing or a greed thing?

Man sitting on a bench telecommuting to China

Roger Kashlak, Ph.D., professor of management and international business, discusses how the globalization of business—and business education—has introduced a risky culture of immediate gratification to new corners of the world, and points out the potential for a more responsible approach to business issues as emerging economies in Africa and Latin America continue to grow.

Historically, U.S firms ventured overseas after saturating their huge domestic market and gaining competitive cost efficiencies which were then leveraged across borders. As both U.S. and global competition increased, the pressure of lowering factor costs while increasing productivity caused firms to seek country-level comparative advantages for various linkages of their respective value chains.

While these patterns were seen initially in manufacturing industries, service industries were not far behind in terms of global expansion. During the past 25 years, globalization has been further catalyzed by significant political and economic shifts. The events of 1989 were followed by a boom of economic integration pacts. These macro-level, supply-side led agreements broke down trade barriers and associated costs—costs that were in turn to trickle down to the worldwide masses and foster an era of unencumbered exuberance, innovation, investment, and growth.

During this time, many U.S. MBA programs flocked overseas as well, forming partnerships with leading European and Asian universities. Today, competition is intense on those continents; for instance, there are more than a dozen Executive MBA programs in the tiny nation of Singapore alone. Through these programs, the U.S. exported its baby-boomer business culture of immediacy, greed, and spending beyond one’s means by creating the Ponzi effect of letting future projected revenues pay off excesses of the present. These short-run business ideals saw many initiatives, including wars started in the early 2000s, financed by credit cards rather than new revenues. Yet, the mandate of short-run gains at the expense of long-term stable growth worked for political leaders who have been reelected, for corporate bottom lines, and for consumers who bought the newest and nicest—albeit a bit unaffordable—cars, houses, and electronics for which their children and grandchildren will eventually pay.

Countries such as Greece, Portugal, Italy, Spain, and the United States have yet to come to understand these debt issues and are mired in a way of thinking where short-run gains supersede long-term investment in infrastructure, health care, education, jobs, and people. It is precisely this thinking that will cause over-optimism and irrational speculation that must come crashing down with the realization that current liabilities cannot be paid without increasing debt and interest payments.

Now, there are opportunities to educate the newest of the emerging economies in Latin America and Africa. As Jesuit business programs expand to these continents, a responsible, sustainable way of doing business must be on the agenda: Move these countries off of a dependence on commodities; move away from the 1980s notion that greed is good; and end the thinking that increased spending without necessary revenues is sustainable. Quite possibly, a rational approach to longer-term growth may bring an era of social justice not yet seen as these emerging countries have the opportunity for all in society—not only those who understand derivatives and short-selling—including their children and grandchildren to see an encouraging future.