A Quartet of Globalization Stories

♠ Posted by Emmanuel in ,,, at 11/16/2007 04:29:00 PM
The current issue of TIME has four stories on globalization that should be of much interest. They concern (1) faster African growth; (2) the emergence of Argentina, Brazil, and Chile (ABC) as regional economic heavyweights; (3) Big Pharma seeking its fortunes in China; and (4) Denmark's relaxed, pragmatic attitude towards globalization. It's all good stuff. First, here is a potentially heartening tale about how higher economic growth is at long last happening in the African continent. (The World Bank has also noted the improving growth prospects for Africa with its recently released publication the Africa Development Indicators 2007, though fortunes of various countries there remain somewhat mixed):
Two African entrepreneurs; two very different stories. Together they illustrate the promise and pitfalls of business on the world's second fastest-growing continent. Africa? That's right. In October, the IMF predicted that sub-Saharan Africa's real GDP will grow 6.75% in 2008, versus 7.2% in Asia, 3.2% in Europe and 1.9% in the U.S. Growth rates in several African countries evoke the Asian tigers of two decades ago, prompting keen international interest. In October, London-based New Star Asset Management announced the creation of a $200 million Heart of Africa Fund.
Second, TIME describes how Latin American countries Argentina, Brazil, and Chile have emerged as economic powerhouses in the region by taking disparate paths:
Although Latin America attracts nowhere near the foreign direct investment (FDI) that Asia or even Eastern Europe does, competitiveness is on the rise among South America's ABC countries--Argentina, Brazil and Chile. Like most other Latin countries, the ABCs were pulled on the economic torture rack during the 20th century between socially negligent capitalism and fiscally profligate populism. But today they lead a potent common market, Mercosur. (Chile is an associate member.) And while each has a leftist President--Chile's Michelle Bachelet is also a socialist--the ABCs are spelling a model, "pragmatic socialism," says Jerry Haar, an international-business professor at Florida International University in Miami and a co-author of Can Latin America Compete? "They're managing the precarious balancing act between Milton Friedman and Santa Claus," says Haar, "drawing both to a more globally competitive middle."
Third, I have been following for quite a while now Big Pharma's efforts to reinvent its business model and perhaps rely less on blockbuster drugs sold in the West for revenues. Unsurprisingly, Big Pharma is now setting its sights on China where there are plentiful medical researchers and patients to test new formulations with. Importantly, drug trials can be done in China more cheaply, though there are once again CSR issues here. China should also become a large market in itself:
Asia has become the next frontier for pharmaceutical firms desperate to find their next blockbuster drug while keeping research costs low. In 2006, big drug companies doubled R&D investment in China and India over the previous year, to $2.2 billion. Nearly all of that went into China, thanks to generous government support and strong infrastructure. Beijing wants to attract more than 2% of the world's R&D budget, or about $10 billion, by 2010...

China isn't just a huge laboratory; it is the world's seventh largest Rx market and rising. Last year's sales of $13.6 billion are expected to double by 2010. With an aging Chinese population increasingly plagued by cancer, diabetes and heart disease, "we're incredibly bullish on the marketplace possibilities," says Liam Condon, president of Bayer Healthcare China, which recently doubled the capacity of its Beijing factory. "We are going to launch over 20 new products in the next five years," he says.
Fourth and perhaps most interesting for European and American readers is the cool "don't sweat it" attitude our Danish friends have taken to globalization. Instead of fighting the forces of globalization tooth and nail, the Danes have chosen a more pragmatic attitude in ensuring that the benefits of globalization accrue to the country. Of course, this is a highly specific example that will be hard to replicate elsewhere--small, homogeneous population and all that--but it's worth reading about nonetheless for clues:
Last year Danish toymaker Lego announced plans to outsource most of its manufacturing to Eastern Europe and Mexico. Of 1,200 blue collar jobs at Lego's headquarters in the town of Billund, only about 300 would remain.

You might think this would make union leaders at Lego hopping mad. You'd be wrong. "We thought it was the best way to keep as many workers' places in Denmark as possible," maintenance man and union shop steward Poul Erik Pedersen tells me. "We aren't against the management. We want to make sure that they make money and we make money." Then, unprompted, he takes the argument a step further: "There are some good things about outsourcing. Where the jobs go, the standard of living is growing, and then they can afford to buy more Legos or other things from the West."

In most of the developed world, globalization is a deeply fraught topic. Not in Denmark. There, 76% of respondents in a recent poll said globalization was a good thing. And why shouldn't they? Living standards in Denmark are among the highest in the world. Per capita income trails that of the U.S. but is distributed far more equally. Unemployment is just 3.1%. The country exports more goods and services than it imports. And while only two Danish corporations (shipper A.P. Moller-Maersk and the Danske Bank) are big enough to make the FORTUNE Global 500 list, Denmark has more than its share of smallish, nimble, outward-looking firms well positioned in growth areas ranging from alternative energy to health care to high-end furniture.