What is the Western World's Competitive Advantage

Julesie

As the title says really, what is it that the western world can do better than anywhere else?

Personally I feel that regardless of the economic downturn the Credit Crunch has foisted upon us the western world was at a turning point anyway.

I look around at our economy (Ireland) and I just struggle to see what our core business should be. Sure we have a well educated, english speaking workforce but unfortunately for us so do a lot of developing nations too.

Are we the best place to manufacture your goods? No.
Are we the best place to run your finance department? No.
Are we the best place to outsource your customer services function to? No.
Just what exactly can we do?

Over the course of the last century Western economies have been steadily moving higher and higher up the value chain as the developing economies of the world take on more and more of the work we used to do. Just look at Ireland we have gone from a nation of farming to manufacturing to service based in less than a century. I feel like we have now pretty much reached the top of that value chain and are teetering on the brink of falling over the edge.

For a long time we have consoled ourselves with the fact that sure the developing nations may have taken our lower skilled jobs but we have kept the real juicy value add bits for ourselves. The shop floor may have been in Vietnam but the management team sat in London. The development team may sit in Bangalore but the guys coming up with the ideas sat in Dublin. However as the economies of India, China, South East Asia develop there are going to be less and less jobs these guys can't do better than us.

When that happens what is it that we do?

BenjAii

How helpful is it looking at Ireland as a monolithic block of people, who live or die by socio-economic variables ? I don't think the world is a game of SIMS.

Individuals are what make things happen. There are plenty of examples of cities/states who have used their ingenuity to bring prosperity, despite adverse conditions.

Ireland is one of the most business-friendly countries in the world, people here can't ask for anything more on that front.

byrne0f56789

For years we had a dualistic economy with multinational companies favoured by government policy. Then we had the property boom that sucked in most investment capital.

We need to encourage entrepreneurs, and reduce red tape for starting a business. We don't need government grants for business start-ups just reduced red tape and less regulation. Let's cut back on the nightmare employment regulations, CRO filling obligations and the need for start ups to spend most of their cash on professional services, insurance and compliance issues.

Our key advantage in the global economy is our size, we must leverage this a soon as possible to help Irish entrepreneurs bring in a new dawn for our economy.

BenjAii

byrne0f56789 wrote: »

We need to encourage entrepreneurs, and reduce red tape for starting a business. We don't need government grants for business start-ups just reduced red tape and less regulation. Let's cut back on the nightmare employment regulations, CRO filling obligations and the need for start ups to spend most of their cash on professional services, insurance and compliance issues.

Our key advantage in the global economy is our size, we must leverage this a soon as possible to help Irish entrepreneurs bring in a new dawn for our economy.

I'm with you on the need to encourage entrepreneurship. I'm not sure concentrating on reducing red tape is the way to go about it.

I can't say it is that onerous to comply with considering we live in a complex society where business owners must interact with legal, financial, employment issues that by their nature are complex.

We also need to face the fact that as a small island nation most of our entrepreneur generated wealth will have to come from trade with other nations, and that knowledge/intellectual trade is where the money will be.

byrne0f56789

BenjAii wrote: »

We also need to face the fact that as a small island nation most of our entrepreneur generated wealth will have to come from trade with other nations, and that knowledge/intellectual trade is where the money will be.

India wins on software development and China wins on science. I think we already missed the boat on the knowledge economy. However, we do have an opportunity to do well in the "creative economy". Product innovation, unique design and the arts all can be driving forces for the Irish economy in years to come.

Zynks

byrne0f56789 wrote: »

Product innovation, unique design and the arts all can be driving forces for the Irish economy in years to come.

Product innovation and unique design have been the differentiators for Scandinavian countries for a long time. It would take us 1-2 generations to get anywhere close to their standards - if we started investing seriously in this kind of education and culture. I would love to see that happen!

Zynks

If we have any hope, I think the models we should target are the Dutch and Hong Kong ones. International trade, logistics, distribution, de facto gateway to Europe.

Why is it that such large proportion of the goods coming from the Americas go all the way to Rotterdam and then distributed to Europe in feeder services (and road transport)? Ireland would be a logical alternative if we had a serious port infrastructure.

This "middle man" role can also be applied to using Irish knowledge and competence to develop "business engineering" services, or even better, "business engineering" activities to explore and develop our own capital and wealth (if any left around).

We need to stop staring at our own belly buttons and realise the potential of taking business to the world. We might not have much to offer as a consumer market, but we certainly do have a lot in terms of business, only that this has been consistently explored to the benefit of foreign companies.

We need to focus in creating Irish wealth first. If we (and our dear political and business leaders) had the balls required, we could turn into a neat business development machine.

razda07

Zynks wrote: »

If we have any hope, I think the models we should target are the Dutch and Hong Kong ones. International trade, logistics, distribution, de facto gateway to Europe.

Why is it that such large proportion of the goods coming from the Americas go all the way to Rotterdam and then distributed to Europe in feeder services (and road transport)? Ireland would be a logical alternative if we had a serious port infrastructure.

This "middle man" role can also be applied to using Irish knowledge and competence to develop "business engineering" services, or even better, "business engineering" activities to explore and develop our own capital and wealth (if any left around).

We need to stop staring at our own belly buttons and realise the potential of taking business to the world. We might not have much to offer as a consumer market, but we certainly do have a lot in terms of business, only that this has been consistently explored to the benefit of foreign companies.

We need to focus in creating Irish wealth first. If we (and our dear political and business leaders) had the balls required, we could turn into a neat business development machine.

this is a brillaint idea. our best advantage as a country is our poistion between europe and america. we have ties with both. why shouldnt we have a huge port and transport services? the english saw this hundreds of years ago when columbus discovered america, the axis changed from central europe to the atlantic as regards trade.

i agree with you that our leaders lack the balls to turn us nto a business machine. this country has alot more to offer than a housing market.

byrne0f56789

Zynks wrote: »

If we have any hope, I think the models we should target are the Dutch and Hong Kong ones. International trade, logistics, distribution, de facto gateway to Europe.

I agree with Zynks, good point. However, I believe that we need to do a number of things simultaneously. The government should not decide which sectors to support because they will most likely get it wrong.

Overall, we need to focus on cultural change to try reducing peoples' fear of failure. On a practical level, this means reducing regulation and compliance issues for Irish businesses. There will be a lot of talented people without jobs in the next few years, who might not be natural entrepreneurs. These people need to be encouraged to take that leap.

This is actually an opportunity for the Irish economy provided the right environment is created. I agree that we must look at other international models. They key question is, how do we get people to take risks?

BenjAii

Zynks wrote: »

If we have any hope, I think the models we should target are the Dutch and Hong Kong ones. International trade, logistics, distribution, de facto gateway to Europe.

Why is it that such large proportion of the goods coming from the Americas go all the way to Rotterdam and then distributed to Europe in feeder services (and road transport)? Ireland would be a logical alternative if we had a serious port infrastructure.

I hate to rain on this parade but I see a couple of problems with this being our economic future.

Rotterdam has easy connections to the continental European motorway network, we don't; kind of important if you are going to be a logistics hub.

I'd question whether a business that can be automated to the nth degree and run by computers is that great a future anyway.

In any case, its wrong to think knowledge/intellectual trade will be the exclusive domain of China & India, or that it takes 1 or 2 generations to learn something.

Its also more likely that 21st century business will be more about countless smaller companies & businesses. rather than dominated by a much smaller number of gargantuan multi-nationals.

Plenty of room for the nimble and entrepreneurial, whatever there location.

Zynks

BenjAii wrote: »

I hate to rain on this parade but I see a couple of problems with this being our economic future.

Rotterdam has easy connections to the continental European motorway network, we don't; kind of important if you are going to be a logistics hub.

I'd question whether a business that can be automated to the nth degree and run by computers is that great a future anyway.

A few points to clarify further:
- I worked in shipping in Brazil and in Spain (many years ago). The amount of cargo destined to other ports via Rotterdam was huge. It is loaded into feeder ships and then distributed to Northern Europe. Furthermore, with our location we could even get some of the traffic heading to Mediterranean destinations
- Rotterdam Port is responsible for over 70,000 direct jobs according to figures available at http://www.portofrotterdam.com
- Rotterdam is heavily congested and the traffic is still growing: check this report where the UK is also looking into these opportunities: http://www.shortsea.be/html_nl/publicaties/documents/brugge2007-UK%20market%20JJ%20Moyson.pdf
- There is a degree of automation indeed, but it does create many jobs and revenues...plus serious possibilities for corporation taxes

I wasn't saying that this is our economic future, but it is one of many initiatives that would result in a more international economy. The Dutch also are big into European sales, distribution and representation for Asian and pan-American companies...

BenjAii wrote: »

In any case, its wrong to think knowledge/intellectual trade will be the exclusive domain of China & India, or that it takes 1 or 2 generations to learn something.

I've spent time in Sweden and Denmark. I do believe that the perception of style, the level of creativity and the supporting environment for this kind of business will take a long time. It is not a matter of signing up for a course in interior design. It is a way of life.

As for the stength of China and India in the knowledge/intellectual trade, I quote part of a good document found here:

Dimensions of China’s higher education transformation
Large increases in the number of students
The number of graduate and undergraduate students in China has approximately quadrupled in the last six years. Before 1999, the number of students both graduating and enrolling was stable. In 1998, the total number of graduates from tertiary education was 0.8 million; in 2005, it was more than 3 million, a nearly threefold increase. The number of enrolments (of new and total students) has risen even faster and approximately quintupled between 1998 and 2005.
More Ph.D. engineers and scientists in China by 2010 than in the US
It is widely recognized that there will be substantially more Ph.D. engineers and scientists in China in 2010 than in the United States, as China produces three times the number of engineers per year.3 In 2001, only 5% of American 24 year olds with a bachelors degree were engineers, compared to 39% in China and 19% or more in South Korea, Taiwan, and Japan. R.E. Smalley, a Nobel Prize-winning scientist from Rice University, recently concluded that by 2010 90% of all Ph.D. physical scientists and engineers in the world will be Asians living in Asia.4 And among Asian Ph.D. engineers and scientists, most will be produced by China.

It is the level of PhD's that is of most concern. This indicates that innovation is likely to become a new area of strength for them.

BenjAii wrote: »

Its also more likely that 21st century business will be more about countless smaller companies & businesses. rather than dominated by a much smaller number of gargantuan multi-nationals.

Plenty of room for the nimble and entrepreneurial, whatever there location.

Yes, I agree. We need a MUCH more pro-entrepreneurial approach from all parts of Irish society. Our future has to be related to development of clever business, related to innovation, intermediation, aggregation of resources, networking and a supportive environment.

We need foreign investment. We need immigration. But more than that, we need to create our own wealth.

Zynks

Mods, could this thread be moved to Irish Economy? I would like to promote further discussion on this one year old thread. Most discussions today seem to be based on stoning the culprits of our past mistakes, and we need more about what how to mold our future.

KP81

The OP asks: "what is it that the western world can do better than anywhere else?"

From an economic point of view there is no need to have an absolute advantage in anything. As long you have a comparitive advantage you (and everyone else) will prosper. Here is the clearest explanation I could find on this (taken from Wikipedia):

"Two men live alone on an isolated island. To survive they must undertake a few basic economic activities like water carrying, fishing, cooking and shelter construction and maintenance. The first man is young, strong, and educated. He is also, faster, better, more productive at everything. He has an absolute advantage in all activities. The second man is old, weak, and uneducated. He has an absolute disadvantage in all economic activities. In some activities the difference between the two is great; in others it is small.
Despite the fact that the younger man has absolute advantage in all activities, it is not in the interest of either of them to work in isolation since they both can benefit from specialization and exchange. If the two men divide the work according to comparative advantage then the young man will specialize in tasks at which he is most productive, while the older man will concentrate on tasks where his productivity is only a little less than that of the young man. Such an arrangement will increase total production for a given amount of labor supplied by both men and it will benefit both of them"

Simplistically you could think of the West or Ireland as the old man and India and China as the young man. There is still a lot of life and wealth in the old man yet. I hope this post helps people feel better

Flamed Diving

Zynks wrote: »

Mods, could this thread be moved to Irish Economy? I would like to promote further discussion on this one year old thread. Most discussions today seem to be based on stoning the culprits of our past mistakes, and we need more about what how to mold our future.

You sure as hell won't find these answers in the Irish Economy forum.

I suppose I should chip in. China and India's potential growth depends on exports to the West. So if the doomsday predictors are to be believed they would want to offer an explanation as to who Asia will sell her exports to?

cavedave

What would Hayek and Popper say? I believe both would point out that an open society where contrary voices are listened to gives advantages to the west.

If China remains culturally closed, the Chinese Century will never come to pass. Instead, the United States--a country that has struggled with race and racism for centuries, and in the process has become more culturally open and resilient--will dominate this century as it did the last.

lostinsuperfunk

PhD numbers mean nothing. It is quality, not quantity, that counts. IMO the western world still has the edge here, but I'd guess the gap is narrowing. However a huge proportion of PhD students in the West (and especially in the US) are from China, and they may ultimately return home bringing their skills with them.

Zynks

Flamed Diving wrote: »

You sure as hell won't find these answers in the Irish Economy forum.

You are probably right. My hope was to steer the discussions from predominantly "who did it" to "what can we do".

Flamed Diving

Perhaps the question 'Does a problem even exist?' should be raised. According to Krugman, there really isn't one.

viztopia

we must have some kind of an advantage by looking at all the asylum applications to coutries in the western world??

Flamed Diving

viztopia wrote: »

we must have some kind of an advantage by looking at all the asylum applications to coutries in the western world??

Poor people want to live in rich countries. I don't think is really what the OP means though. Have a quick read of this Wiki article to get the gist of it.

http://en.wikipedia.org/wiki/Comparative_advantage

Hasschu

The Western Advantage is fast declining if not already gone. With the downfall of the Roman Empire Europe over time broke up into nation states. These states were continually at war with each other. War and threat of impending death concentrates minds wonderfully. Hence an enormous amount of intellectual and physical resources were expended on offensive and defensive systems. Progress was made across the board in every conceivable area, scientific, industrial, financial, administrative, military, education. Parts of the world like China and India had empires big enough to be invulnerable to external threat so there was no need to be paranoid and prepare for the worst. The Americas were thinly populated and there was little pressure to conquer land.

The West invaded the peaceful poorly prepared areas of the world and conquered vast tracts of territory. The Spaniards, Brits, Portugese, Japanese and French accounted for most of the damage. The invaders are now back in their cages except for the US which still has delusions of saving the world for democracy. It took Ireland over fifty years to recover from the ravages of occupation and take its rightful place in the world. Similarly for China, India, SE Asia and others who are now emerging from their periods of occupation or control by foreigners. One could say the pendulum which swung to the west is now moving east and there will be a new equilibrium in our life time and that is a good thing.

Flamed Diving

Hasschu wrote: »

The Western Advantage is fast declining if not already gone. With the downfall of the Roman Empire Europe over time broke up into nation states. These states were continually at war with each other. War and threat of impending death concentrates minds wonderfully. Hence an enormous amount of intellectual and physical resources were expended on offensive and defensive systems. Progress was made across the board in every conceivable area, scientific, industrial, financial, administrative, military, education.

Yes, the era spanning 410 until the 14th century was a real boon for science and enquiring minds.

Flamed Diving

Worth a read:

http://web.mit.edu/krugman/www/myth.html