Building a Smarter Economic Future The UK Economic Development Conference 2009

1. Building a Smarter Economic Future The UK Economic Development Conference 2009 7-8 October 2009Royal Bath Hotel, Bournemouth

2. Professor Alex De Ruyter Business School Universityof the West of Scotland The Changing Global Economy – sectors for the Future (or Foresight Revisited?)

3. •Global Shifts… …Changes taking place in the UK and World economy; the challenges of China and India; financial crisis in the USA; the possibilities and prospects of recession; and the implications for localities in the UK.

4. Global Shifts … •The map of the world in terms of production, trade, investment etc. is continuously shifting … … what have been some of the most significant shifts? Manufacturing production and trade Services production and trade FDI Origins FDI Destinations Changing Patterns of Income … etc.

5. Other Recent International Trends • Different forms of communication • Growth in international travel • Growth in leisure pursuits • Changing demography: ageing populations • Growth in currency transactions • Changes in global security and responses • Growth in regional trading arrangements • Growth in bi-lateral trade and investment agreements

6. Global Shifts … • Rapid emergence of China (and India) • Continued dominance of the US (?) • Uneven performance of European economies • Integration of a group of ‘transition’ economies in Central and Eastern Europe • Emergence of a number of newly-industrialised economies in East Asia • Weak economic performance of most Latin American and African economies • Credit crunch and impact

7. So where are we now … ? • •Dicken (2007) suggests we can see the global economy today through three scales … • The Macro Scale • The Micro Scale • The MesoScale

8. The Macro Scale • At a macro level, the world economy has evolved from a bi-polar model centred on North America and Western Europe … to a global triad • Today there are three main pillars to the global economy: North America, Europe and East Asia • These account for 85% of total world manufacturing output, and 81% of world merchandise exports • Around 80% of all FDI also originates from this triad

10. The Micro Scale • The triad presents an overall view of the structure of the global economy, but each of us lives and works in specific communities that may or may not lie within that triad … • … Most economic activity is clustered, and thus place-specific, and this constitutes the micro scale of the global economy. It is organised around: • Cities • Regions • … not necessarily nations

13. The Meso Scale • Between the global triad and the localised agglomerations of activity that characterise production lies a scale of economic-geographic organisation • This might be thought of as corridors of economic activity, for example • The north-west and south-east axis of Europe • Emerging urban corridors in Pacific Asia

16. Globalisation • Many of these changes have been described as “globalisation” - a complex, multifaceted phenomenon incorporating changes in economic, political, cultural, social relationships. • In particular, globalisation refers to the changes in relationships due to the combining of: • New technologies • Spread of market capitalism • Reduced significance of “territory” • So globalisation has meant • New and more integrated global markets • New global (and local) actors • New norms

17. Implications for communities • As markets have become global, there have been clear economic, political, cultural and social implications for communities … • Businesses need to recognise that they operate in global markets • This presents both threats and opportunities • Most crucially, businesses need to understand that globalisation is linked with the creation and distribution of knowledge and information • Success means innovating and staying one step ahead • There is also a need to recognise and respond to ‘opposing tendencies’ • For example, regionalisation and localisation are important counter forces to global markets • Global businesses able to respond to local markets • Local businesses able to project themselves globally?

18. Friedman’s Nine Questions … • How fast is your company? • Is your company harvesting its knowledge? • How much does your company weigh? • Does your company dare to be open on the outside? • Does your company dare to be open on the inside? • Does the management ‘get it’? And can you change the management if they don’t ‘get it’? • Is your company willing to shoot its wounded and suckle the survivors? • How good is your company at making friends? • How good is your company’s brand?

19. Implications for Communities • Many of the implications of globalisationidentified for firms can also be applied to societies more generally • Friedman’s nine questions apply to countries as well as companies • This is not surprising, given that societies are built around institutions, including firms • All institutions will be influenced by processes of globalisation in some way • There are economic, social, cultural, political implications for countries and regions as the world has become more deeply inter-connected

20. The Significance of Firm ‘Clusters’ • Globalisation does not remove a fundamental characteristic of economic activity: it tends to be geographically localised to some degree • Dynamic ‘clusters’ of firms can give significant advantages to both small and large businesses in competing in a global economy • It is interesting that local ‘clusters’ of firms have become influential as ‘globalisation’ has gathered pace • for example, the work of Michael Porter

21. Where will the UK jobs be? • Transport & Communication • 500,000 new jobs by 2017 • Business Computing & Financial Services • 1.3 million new jobs by 2017 • ...and in contrast... • Manufacturing • Less than 1.5% p.a. between now and 2017 • Source: UK Commission for Employment and Skills Report 2008

22. The recession and credit crunch… • US spending binge • Imbalances in economy… internationally and domestically • Financial de-regulation • End of low prices from China… • Asset price bubble… burst 2006-7 • Syndication of debt… • Global contagion • IMPACT ?

23. Impact? • Recession + credit crunch… • Business failures • Inward investment? • Land prices… • Impact on regeneration opportunities • De-industrialisation • Need to re-balance economy? • Debt advice, housing support… • Skills, retraining, intervention in economy?

24. Implications for Policy… • •Plant closures: staggering the impact and giving people options • - Importance of skills acquisition • Wage subsidies to support struggling firms • •National labour market policies built on local initiatives and local knowledge (Brinkley et al 2008) • •Reinvigorating industry policy and fostering high-tech sectors (Bailey and MacNeill 2008) • •Measures to tackle inequality • Public works and infrastructure development

25. Summary • Patterns in economic activity • Global shifts in activity, driven by various factors • A range of other, underlying trends • A triad of three dominant world regions • But within this triad, a complex micro and meso structure to economic activity • Globalisation – a multi-faceted and contested term • Financial de-regulation, asset boom… credit crunch • … impact on economies and societies • Identify and support key (emerging) sectors