In the lead up to the London Olympics, a blogger for Bloomberg Business explained it this way:
Garment manufacturing is a low-cost commodity business. Most of the value in the apparel industry comes from design, technology, sales, marketing and distribution – not manufacturing. The successful players in apparel, such as Ralph Lauren and Nike, figured this out long ago. ... But just because America doesn’t manufacture apparel anymore doesn’t mean we can’t lead the industry.
In fact, the world’s largest apparel companies are almost all US-based, including Nike, (and) ... Ralph Lauren, to name a few. ... Nike has created more than 15,000 new jobs in the US (during the past decade), and Ralph Lauren almost 10,000. And unlike the low-paying production jobs next to sewing machines, these are well-paying jobs in marketing, accounting, design, and management.
These companies are winning globally by out-designing, out-innovating, and out-marketing the competition. Nike, for example, is unveiling a new TurboSpeed running suit at the London Olympic Games. …Nike’s gear will be used by teams from many countries, including Russia, China, and of course, the US. What Nike and Ralph Lauren don’t do is make their own products, in the US or elsewhere – and this has become their competitive advantage.
It’s clear that the Chinese are good at producing low-cost garments. The US, on the other hand, is good at innovation and design, software and medical equipment. Meanwhile, Japan has a highly skilled labour force that uses technologically advanced equipment to produce cars and electrical equipment.
The Italians, of course, are known for their fabrics and fashions. And Australia exports its raw materials to the world. We have an abundance of natural resources that we cannot use and are able to sell the surplus to other countries, giving us a world market of over 7 billion people.
Everyone benefits when countries specialise in the type of production at which they’re relatively most efficient. This includes the millions of people in emerging markets who have climbed out of poverty because of the free flow of goods and services across borders.
Regrettably, this fact is often overlooked by the anti-globalisation protest movement. Ironically, these activists are more than happy to use the outputs of globalisation – cheap cars, low-cost electrical items, affordable designer clothing and iPods to name a few.
What the protesters fail to understand is that global free trade promotes economic growth, creates jobs, makes companies more competitive and lowers prices for consumers. Free trade is a global economic engine which is the biggest eliminator of poverty and creator of opportunity that the world has ever seen.
Posting Date: 12 November 2012
Should governments privatise?
Margaret Thatcher started doing it in the late 1970s. Ronald Reagan jumped on the bandwagon in the early 1980s. The Japanese followed suit in the mid-1980s. Now everyone’s doing it – privatisation is sweeping the world. Both developed and developing nations are divesting themselves of government owned enterprises including railroads, airlines and telecommunications.
The motivation to privatise is typically driven by a combination of three factors: (a) the desire to raise cash to retire government debt; (b) the need to reduce subsidies to profit-losing state enterprises; and (c) the hope that private investors will bring managerial practices and technology to upgrade utilities.
In the extreme, privatisation results in the transfer of ownership and control of state services and enterprises to private ownership. But more common are public-private partnerships in which the facilities are still owned by the government but managed privately.
Supporters of privatisation claim that governments are bureaucratic, inefficient and incompetent at providing services. Public sector defenders, on the other hand, label the private sector as greedy, unethical and prone to corporate failure. While neither sector has a perfect track record, it’s unhelpful to tarnish either with sweeping generalisations.
For my part, I do not see privatisation as inherently good or bad. My contention is that it has to be done right. Privatisation works best when there is vigorous competition among alternative service providers. There also needs to be a clear understanding of which enterprises are best suited for a public-private partnership approach.
Privatisation in Australia started in earnest with the sale of the first tranche of the Commonwealth Bank in 1991. It continued with the privatisation of Qantas airlines (which began in 1992) and has since gained momentum to include the partial sale of Telstra and the sale of Sydney Airport.
Australian governments, both Commonwealth and State, have now privatised a significant portion of the public sector. This includes electricity and gas in Victoria and electricity in South Australia. We’ve also witnessed the sale of the State Bank of NSW, the State Bank of Victoria, GIO in NSW and SGIO in Western Australia.
Privatisation is not a panacea to public sector woes nor is it a licence to print money for the private sector. While many people worry about the government selling off the family silver, privatisation is an important element of microeconomic reform which is designed to improve market efficiency by limiting government interference in the economy.
Like all public policy debates, the privatisation debate is an emotive battlefield. Politicians, interest groups and the general populace treat privatisation arguments like warfare. Once you pick a side, you’re expected to support all of your side’s arguments and attack every argument mounted by the enemy side, lest you be accused of being a traitor.
I think we need to be a bit more pragmatic. A case-by-case approach to privatisation is essential – as is an open mind – to the potential social and economic benefits of any asset sale. Transparency is also crucial as taxpayers understandably want to know that asset valuations are realistic and that procedures for calling for bids and evaluating offers are fair.
Posting Date: 14 March 2011
Global banking laws
While on holidays recently, I saw many things which are legal in Europe but illegal under Australian law. In London, I saw crowds of people drinking on footpaths outside pubs. In Dubrovnik, I saw dogs being walked in the lobby of a five-star hotel. In Zurich, I saw scores of cyclists riding on roads without bicycle helmets. And in Frankfurt, I saw smokers light-up in sidewalk bars, cafés and restaurants.
What’s right and what’s wrong depends on where you are in the world. From how much income tax you pay to which side of the road you drive on, nation-states determine their own sovereign laws. But this is changing. While elected governments still make national laws which are binding (“hard law”), unelected experts are increasingly making non-binding international rules (“soft law”) which countries are adopting.
In a globalised world with cross-border trading, the emergence of “soft” international law invariably results from the inadequacy of “hard” national laws. A good example of this is banking regulation. Until the early 1970s, banking regulation was considered the exclusive preserve of national policy makers. However, the collapse of a German bank and a US bank in 1974 showed that financial crises were no longer confined to one country.
It became clear that coordinated international action was needed to prevent shock waves from one nation’s problems reverberating worldwide. As a result, the central bank governors from the G10 countries began
