As multinational companies proliferate, the boundaries of national identity are dissolvingFeb 01, 2019 11:08AM ● By Kathleen Maris
By Dr. Daniel Ostergaard
International Business Professor,
Darla Moore School of Business, University of South Carolina
There was a time, long ago, when Made in the USA meant just that. The product drew most of its raw materials, its design and engineer specifications, and its manufacturing all within the borders of our great nation. It was a simpler time. Or was it?
International trade is not a new phenomenon. Traces of ancient shipwrecks and caravan routes demonstrate that the very idea of trade goes back thousands of years.
In 1958, Leonard E. Read published a brief essay entitled, “I, Pencil.” This essay traces the “life” of a pencil through the pencil’s own “eyes.” Early in the pencil’s account, it states, “not a single person on the face of this earth knows how to make me.” The pencil goes on to explain that while simple in both form and utility, there are hundreds of humans from scores of countries that all contribute to the making of a pencil. Whereas some harvest the wood, others produce the lacquer, and still others mine resources. All of these contributions collectively result in the production of a pencil. Remarkably, this process happens with thousands of transactions between people and firms that are neither centrally planned nor assigned.
Adam Smith termed this process the “Invisible Hand,” describing the culmination of self-interested actions into unintended social benefits. Part of these benefits, undoubtedly, is the very basis of capitalism itself. Thus, leaving government out of the private sector as much as is reasonable, trade and industry are developed and evolve through repeated action of those myriad individuals whose decentralized efforts may lead to a pencil or may lead to sending humans to explore the cosmos. Either way, the idea of a non-centralized economy has given way to the growth of large multinational corporations (MNCs).
Over time, there has been some criticism of these MNCs as the gulf between haves and have nots has continued to grow, and yet, one need only look across the spectrum of human life to understand the benefits wrought upon modern humanity from these behemothic organizations in the form of advances in medicine, technology, and labor-reduction (e.g., small robots that move around your house unaided to vacuum your floors while you are at work).
At this point, you might be asking yourself, yes, but what does all this have to do with leading in a globalizing world and the role of national identity? What makes a product “American” in the modern age?
South Carolina has attracted numerous foreign companies that have established operations in the state. These manufacturing operations, for example, generate tremendous revenue and employ a large number of our residents. So when my child, who recently earned his first driver’s license, comes to me and says, “Dad, I want to buy an American car,” I have to ask him, what makes a car American?
The headquarters for a car manufacturer may be located in another country, but if the cars are made here by Americans using a great deal of American-made parts, is that not an American car?
It seems that globalization, coupled with the push toward free trade—and if not actually free, at least “free-er” trade—has dissolved some of those boundaries that we used to recognize as foreign.
Today, we have firms with employees from literally all over the world. Modern technology and communications offer us the opportunity to assemble teams in heretofore unexpected combinations. So a firm with teams across multiple countries producing products that are sold in multiple other countries is more likely to be the future of business than not.
But what is the impact of this on us as leaders? And what about our international trade policies? This growing interdependence of economies means that efforts to curtail trade may have unexpected consequences.
Following the 1929 stock market crash, U.S. Sen. Reed Smoot and U.S. Rep. Willis Hawley led Congress to pass the Tariff Act of 1930. As a result, tariffs were introduced or increased on more than 20,000 goods. This move was in part responsible for catalyzing other nations to raise tariffs. By the time the dust settled, global trade had dropped to one-third of its previous levels, undoubtedly prolonging the Great Depression. Interconnected economies affected each other in 1930 just as they do today.
And what do we make of national identity when it comes to today’s interconnected economies? Our South Carolina public high school system has more than 20 languages spoken in the homes of its students. Many of these people are in various stages of becoming U.S. citizens. Should national identity be limited to one country? Does an internal focus on the U.S. only hurt us in other ways across the broad spectrum of our international engagement?
During his first inaugural address, Thomas Jefferson stated, “Peace, commerce, and honest friendship with all nations, entangling alliances with none.” Whether or not our alliances are entangling is left for another article, but in the context of globalization and international trade, our economy is more interconnected than ever. As a result, a newly strengthened and revitalized United States will undoubtedly increase global trade. Thus, the old maxim that a rising tide floats all boats seems to hold true in the context of international business.
One of the challenges to us as international business leaders is how we identify the role of national identity. Can the CEO of a modern MNC only worry about the workforce and policy in her own country? Is it sufficient to think that we can turn a blind eye to the world around us when the world around us is made up of our employees and consumers? Where does all this lead us over the next several decades as human lifespans continue to lengthen and artificial intelligence is projected to replace some number of jobs?
While we may not know exactly what this may mean, the time to start planning for it is now.