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Continued from previous page
This theme of difference applies not just to emerging economies
but to globalization in general, says Guillén. “I differ from many other
academics and journalists in that I don’t think globalization produces
convergence, in the sense of only one best practice, or only one
market theory. Nor should it. Countries should not try to adopt the
same economic model because how could everyone possibly succeed
if they imitate each other? The name of the game is to decide what
your strengths are and play to those strengths in the global economy.
Globalization should be an opportunity for countries and firms
to differentiate themselves from others, to promote diversity, to
enhance their own performance.”
Look at Germany and Japan, says Guillén. The Germans have
focused on producing high quality manufactured goods rather than
inexpensive, standardized goods. “Germany has three luxury automobiles
on the market. Even VW, which is their ‘mass producer,’
manufactures very high quality cars. The same is true for machine
tools and specialty chemicals. On the other hand, Germans are not
known for their high-tech or service industries.
“Japan is absolutely outstanding at manufacturing relatively high
quality (but not top quality) standardized goods, such as VCRs, TV
sets and autos.”
Taiwan is another example. “Taiwan is next door to Korea and
Indonesia, but unlike them, it doesn’t harbor huge conglomerates that
have made unwise investments in manufacturing. The Taiwanese
economy is made up of small and medium-sized firms, which can easily
adapt to economic changes. Taiwanese companies don’t have
excess capacity right now, while the auto industry in Korea is running
at 40 percent capacity.
“Several decades ago, Germany, Japan and Taiwan chose to emphasize
different approaches. For the most part they have been successful
in this strategy.”
In his study of Korea, Spain and Argentina, Guillén interviewed approximately
250 business group leaders, government officials, labor
organizers and top managers. He conducted surveys analyzing how companies
access foreign markets and how they view foreign investment.
What does he see as the future of these business groups that play
such a prominent role in so many emerging economies?
In Korea, he says, the chaebol have been in trouble twice before
but have essentially been bailed out by the government. “This third
time, it is much more serious because the conglomerates have gotten
too big and invested too much. Everyone says investing is good and
saving is good, but those high savings rates are actually a curse because
when you have so much money you start making unwise decisions
about how to spend it.
“This is precisely what is wrong with some of the emerging
economies. Korea thought it could be the number one semiconductor
manufacturer in the world, the number one auto producer,
number one in steel, number one in electronics. They came close.
But Korea is a tiny country after all, and a lot of other countries
are trying to compete against them. The average
debt/equity ratio among the largest chaebol in Korea is probably
500 or 600 percent. In the U.S. it’s about 200 percent.
“Korea will be helped if there is no recession, if the U.S. and
European economies keep on growing fast and if China doesn’t
collapse. Otherwise, the country will experience a glut in a
number of industries, including cars, memory chips and steel –
commodities where manufacturers compete on the basis of price.
“What would help countries like Korea is less protectionism
in the world and continued growth in the major economies.
They need to find markets for what they are making.
“In the ‘70s and ‘80s, the Koreans started out with the benefit
of low wages and low costs. But now there are other
countries coming up behind them with even lower costs. This
is the problem. It’s a constant race. You move up and you don’t
realize other people are moving towards you from below. You
end up getting caught in the middle.”
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