GLOBAL CONSUMERISM AND SUSTAINABILITY

Between 1980 and 2010, the middle class worldwide nearly doubled in size, growing to almost 2 billion people. By the year 2030, it is likely to reach nearly 5 billion people. The middle class is the largest group, demographically, in terms of consumers of various products and services. However, growth of the middle class poses pressures on the natural environment and demand for resources, such as energy, food, and raw materials. Rising world population and increased production and consumption raise concerns about sustainability, which refers to meeting humanity’s needs without harming future generations.  On the one hand, rising consumerism is a sign that living standards are improving worldwide; billions of people are emerging from the poverty that besets humanity.  On the other hand, growing population and consumerism pose important challenges to planetary well-being.

The World Economic Forum has proposed various ideas for addressing sustainability, while ensuring people can obtain the products and services they need:
1. Emphasizing durable over disposable. Firms and consumers alike benefit from products that are relatively durable, as opposed to disposable goods that use more resources and fill up landfills.

2. Using renewable versus disappearing resources. Renewable resources are usually more cost-effective and encourage sustainability. For example, energy generated from solar and wind sources can be maintained indefinitely, while fossil fuels are dwindling over time.
3. Sharing resources. Firms and consumers must think increasingly about developing and using goods that they share with others. For example, homeowners tend to use lawnmowers, snowblowers, and other home-care equipment only intermittently. Economies result when such resources are shared among several households.

4. Favoring virtual products and delivery methods.  Online product vendors use resources more efficiently than physical, “brick-and-mortar” retailers. Some products can be offered electronically, which saves paper. For example, many consumers opt for digital books they can read on Kindles, Ipads, and similar devices. Such approaches help reduce the destruction of forests and other resources.

5. Consuming locally grown goods. Many agricultural products must be transported long distances, which contributes to air pollution and needless resource usage. An emphasis on consuming locally-grown farm products can help increase resource sustainability and decrease pollution.

To thrive while preserving natural resources, companies will need to include sustainability in their strategy-making. Managers need to improve their understanding of how resources create new risks, but also produce new opportunities.  Firms must devise sophisticated approaches for conserving resources and offering sustainable products and services.

For example, Otis makes the Gen2 elevator, which uses up to 75 percent less energy than conventional elevators.  Recently, Otis established a green manufacturing facility to produce Gen2’s in Tianjin, China, which reduced site energy use by more than 25 percent. Builders are adopting Gen2 elevators and escalators, to save energy and help the environment. The Dutch consumer products company Unilever is cutting water usage and greenhouse gas emissions in its factories. The firm aims to increase recycling and recovery efforts in manufacturing, and reduce by one-third the use of materials in its product packaging by 2020. The Swiss food company Nestlé works with farmers around the world to help them increase crop yields, while minimizing their water usage and pollution. Nestlé has allied with nongovernmental organizations such as the Rainforest Alliance to focus on how farmers can improve access to clean water and sanitation.

Sources: Business & the Environment, “Food and Beverage Companies Serve Up Sustainability,” October 2011, pp. 1-3; Richard Dobbs, Jeremy Oppenheim, and Fraser Thompson, “Mobilizing for a Resource Revolution,” Mckinsey Quarterly, January 2012, accessed at www.mckinseyquarterly.com; World Economic Forum, Consumer Industry Emerging Trends and Issues (Geneva, Switzerland: World Economic Forum, 2011), accessed at www.weforum.org

THE U.S. ELECTION AND TRADE

THE U.S. ELECTION AND TRADE

By Michael R. Czinkota *

 The candidates in the U.S. presidential election have had heated exchanges. Each one of them tries to pick up those few undecided votes which make all the difference. Clever pollsters are using their newest tools to identify and pursue the maybe’s.

For me, as teacher of international business and trade, I wonder what the victory of any one candidate mean for my field – how will international trade be affected? International trade in goods and services comprises now almost 30% of US GDP –making it a vital component of the domestic economy. The fact that exports have been mentioned several times in the various debates, highlights that politics gradually accepts the importance of trade.

How do the candidates stack up?

First , President Obama: He has led for almost four years now and been able to demonstrate his commitments. He has signed three Free Trade Agreements which had been negotiated by President Bush – but there are 193 countries left. He helped conclude long term negotiations to let Russia enter the World Trade Organization this year. The President has taken a number of trade actions, and even declared Chinese car tires to be too cheap and has limited their import. He has also frequently admonished the Chinese government to increase the value of its currency.   He has promised in 2009 that he will strive to double US. exports in five years.

Now to Governor Romney: He talks about trade in virtually every speech he gives. Just like the young Japanese mother whispers to little Masaaki “export my baby, export a lot”, the governor tries to inculcate key international trade values and desires in his audience. He recognizes the importance of currency values. Through his work in the private sector he has seen the threats and benefits of the global economy, and has recognized that there is no reason for the United States to play second fiddle. At the same time, his experience gathered abroad allows him to understand the importance of different cultures, and the need to consider issues which, at home might be unexpected, but can be routine abroad. He stresses the importance of helping firms to enter global markets and talks about profits as the key motivator to such market entry. He talks in terms of competitiveness both for firms and their employees – which in turn leads him to stress the importance of an internationalized education.

A second term President Obama would devote some attention to trade issues – but, just like Israel, they are not really a core component of his global posture. The entire issue of competitiveness of firms is seen as something at which one throws money (and loses large amounts of it) – rather than the building process of innovation. Plans like doubling exports don’t portray a vision which is what we need in the international arena. There is a big difference whether one talks about straightening out a road versus offering the vision of a national highway system. There is a lot of earnest belief, that government can drive the export success of the nation. Those in the trenches claim that the real trade volume comes from firms, particularly those who have had the inclination and opportunity to research the requirements of their markets abroad.

A President Romney is likely to upset some long term traditions – be they in currency markets or in trade agreements. He is more likely to link specific performance and assistance. It would not be impossible for President Romney to declare the Doha Round of trade negotiations as a failure, and search for a new approach to an expansion of trade. He might be more in the face of partner governments, but his actions would be more swift and perhaps even more harsh. As a firm believer in markets, a President Romney might encourage students to get ready for a globalized economy, explaining that unmotivated, disinterested, or uneducated members of the work force need to change their attitude dramatically if they wish to do well. Mr. Romney is brimming with excitement to do something about the U.S. trade position in the world. It may bring some pain, but still better than another bursting bubble.

So, where does that leave us? Of course there are many considerations based on which we select our favorite. An increasingly important one is trade. I think both candidates will support trade, but it  seems that this support will come with varying intensity. Voters should keep that in mind as they cast their ballot.

 

*Michael Czinkota teaches international business and trade at Georgetown University. He served in trade policy positions during the Reagan and Bush administration. Contact: czinkotm@georgetown.edu

Changes in Goods

Futurity in general is, in many ways, not all that innovative, but reflective of ongoing change. Just consider how different things will be in a mere 50 years – keeping in mind that the ballpoint pen only came to the U.S. market in 1945, the computer game Pong only entered the market in 1972, and electronic or email on personal computers only advanced in the late 1980s. Will we look as retro to our descendants as our ancestors appear to us today (if we bother to look)? Yet, at the same time we are only a brief constant in a world of change.

How Patterns of International Business and Trade Have Changed

Viewed over the long haul, we can distinguish patterns of ebb and flow in the international business and trade arena. Today we often find the claim that “if it’s not on Google it does not exist.” However, long-term observers recognize that, just like Saint Augustin who prayed in about 400 A.D. “Lord, make me chaste, but not yet” policy makers and executives often develop strong if not nontransparent measures to delay or even defeat the easing of international trade and investment flows. There are also the times where change cannot happen quickly enough, where everyone aims to streamline and fast track legislation and international accords by limiting the influence of deliberate legislative votes.