ECONOMY

Heading toward an explosion of well-being around the world

Globalization is a catalyst for fundamental changes in our societies; many of them will be to the better, but it is a challenge how we handle the rest, said Boston Consulting Group (BCG) President John Clarkeson in an interview with Kathimerini during his visit to Athens last month. BCG is a multinational consultancy company with 61 bureaus in 36 countries. Its head came to Greece to address an event on globalization. He told Kathimerini that there will be a universal explosion of well-being with the addition of 3 billion new consumers from rapidly developing countries. Globalization has various versions. How do you define it? What are the various risks and opportunities from it? Indeed, the term «globalization» is today used by different people to express many different ideas. Some mean the rise in international trade, others the diminishing of distances and others the blurring in the distinction between «domestic» and «foreign.» Of course there also are those who see globalization as equal to the «Americanization» of global economy, culture and society, a definition that creates strong reaction. For me the most important meaning of globalization is the ever-increasing convergence of developed and rapidly developing economies. This interpretation shows that globalization is a catalyst for fundamental changes in our societies. Many of those changes are to the better, while it is a challenge for us how we handle the others. The challenges for developed countries are more or less known: A more unified open economy is also more competitive. For workers there will be significant changes in production and employment. For companies, globalization brings a new sort of competition from newly important countries and companies, a competition for which many people are not prepared. On the other hand, today we easily ignore the opportunities arising in developed societies and economies such as Greece, and this goes even for the most vulnerable companies and employees. After China’s and India’s invasion, globalization has taken a different turn. Do you expect a rise in unemployment and the demise of the European social model? Unemployment may rise in the short term and our social model will keep changing. Yet economic history dictates that real threats to our quality of life come from our own mistakes and not from China’s, Russia’s or India’s. Developed economies have wonderful examples of cooperation between company management and employees to protect the most vulnerable jobs through innovation, flexibility and risk-taking. These companies seek growth and competition; they do not try to isolate themselves behind walls that will eventually crumble. The outcome is up to us and how we respond to and create the conditions. Globalization is more than just China or India: It also is the Balkans, Central and Eastern Europe and the Middle East. So what happens when these countries aim at the Western kind of living? This is the biggest challenge globalization has for us in the West. I believe there will be an explosion in well-being on global level, with such challenges as the protection of the environment and the management of natural resources. Imagine the addition of consumers from rapidly developing economies with a combined population of 3 billion people. Retail commerce, industry, service-providing companies and top tourism destinations such as Greece will address a global market three times as big as today. How do Western firms respond to this environment? Which companies have reacted successfully? There are no predetermined recipes of success. Each company must act according to its ambitions, resources and potential. There are, however, six categories of choices Western companies have successfully taken: – Many companies have become global buyers, profiting from lower production costs of many products in developing countries, such as Wal-Mart and General Motors. – Some companies proceed even further and relocate part of their activity to those states. General Electric and Volkswagen are just two of the companies which have chosen this route. – In rapidly developing countries many firms hire not just low-paid staff for low-added-value jobs, but also become talent seekers using the great human resource supply. This is both in the science and financing sectors and in new ones such as design. The research centers of IBM and Google in India, China and Central Europe are typical examples. – Some firms expanded penetrating new markets and registering significant profits, like Vodafone and Procter & Gamble. – Other companies operate as enablers of globalization. They facilitate free transport of goods, people and ideas between the developed and developing countries, as in the case of shipping companies. – Growing competition has led many companies into reinventing the traditional business model. Here there are opportunities for Greek firms. Take the case of Zara: From a single store in La Coruna, it has become a pioneer in the fast production and distribution of pret-a-porter. How can Greek companies in general, with their pros and cons, compete in this new, globalized economy? The disadvantages are well known and stressed too much. Greece is a relatively small and closed market. Historically, its political environment has not been friendly toward companies (both Greek and foreign). Finally, the disproportionately big state presence in economic activity creates distortions in economy and society in general. At the same time, though, Greece’s advantages could become competitiveness assets amid globalization. Firstly, Greek entrepreneurs are particularly active and creative, mostly due to the peculiarities of local competition. Secondly, the educational level of Greeks is very high: In Boston, where I live, I am stunned by the number of Greek students in universities such as Harvard and MIT. Thanks to its geography and climate, Greece can in the long term provide a very attractive way of living to many creative, talented employees and entrepreneurs, starting from the excellent Greek scientists, researchers and intellectuals scattered around the world. BCG and I are very optimistic about Greece. This is why we decided in fall 2001 to open a bureau in Athens, although at the time the global economy was in deep crisis, entering a period of uncertainty. Several things have to improve for Greece to meet its real potential. Yet the Greeks I talk to know this better that anyone. They also know that whatever happens in Greece is only down to the Greeks and no one else.