Borderless Economy Calls for New Politics : Economy: The world is on the threshold of a quantum leap in material wealth, if it’s not derailed by nationalist emotion.
When Sony purchased Columbia Studios and Mitsubishi bought a substantial interest in Rockefeller Center, the opinion pages of American newspapers, reflecting the political mood, warned of a “Japanese invasion.” Japanese commentators responded in their columns and on their front pages with charges of “bashing” by the United States.
Yet the financial sections of these newspapers discussed the same events in terms of “joint ventures” or “corporate tie-ups.”
These divergent perceptions--which are likely to be repeated with the latest news that Japanese concerns plan to purchase Southland Corp. (7-Eleven stores) and a major interest in Saks Fifth Avenue--illustrate the conflict between fact and myth that has led to so much acrimony between the United States and Japan. The opinion pages reflect a fiction rooted in the 19th-Century notion of the nation-state. The financial pages reflect the reality of today’s borderless economy.
Because of this borderless economy, the world stands at the threshold of a quantum leap in material wealth--if this promising future is not derailed by nationalist emotion.
The economies of the great global triad--America, Japan and Europe--are so interwoven that loosening a few threads could unravel the entire cloth and expose us all to a depression.
We often hear about Japanese investments in America, but tend to forget that the reverse situation also exists. IBM Japan has more than 1,000 corporate affiliates and more than 19,000 employees in Japan. Texas Instruments is Japan’s strongest competitor in the production of semiconductors. Estee Lauder is Japan’s most successful cosmetics manufacturer. In 1989, the top 2,000 American companies operating in Japan had an annual production value greater than that year’s $49-billion U.S.-Japan trade deficit.
This transnationalism is particularly clear in the auto industry. Ford owns about 25% of Mazda. General Motors, with 34% of the stock, is the largest shareholder in Isuzu and owns 5% of Suzuki. Chrysler owns 25% of Mitsubishi.
Nissan and Toyota have established major auto plants in the United States. Honda even exports cars back to Japan from its American plants.
In Europe, Ford and GM each share about 12% of the European market. Mitsubishi and Daimler-Benz are negotiating a plan of intensive cooperation in automobile technology, aerospace and microelectronics.
It is difficult to designate the nationality of these successful global corporations. They fly the flag of their customers, not their country. They thrive on the loyalty of denationalized consumers.
The key to enduring prosperity for any nation lies in recognizing the emergence of the “triad marketplace” and actively participating in it. Insiders will prosper and grow strong. Outsiders and protectionists will wither because they will be unable to earn the allegiance of consumers who have plenty of choices.
The borderless economy has two key characteristics: global commonality and regional differentiation.
As national boundaries lose significance for both consumers and corporations, the commonalities of the triad become more important than national differences. At the same time, regions within national boundaries have very distinct attributes, tastes, needs and interests. This means, for example, that Osaka might compete with Tokyo and Los Angeles with New York.
To be successful, corporations must adopt a strategy of “global localization,” as Sony’s Akio Morita has phrased it, or as I prefer, a strategy of “insiderization” with a multilocal approach. This simply means that successful companies will base their strategies on an appreciation of the unique character and needs of regions within national borders.
Most Japanese companies have learned to differentiate their markets in the United States by regional attributes. For example, they have seen that subcompact cars sell best in the heavily urbanized regions while larger cars seem to fit the tastes of consumers in the Midwest and South.
By contrast, most American businesses still view Japan from 12,000 miles away. At that distance, Japan’s regional consumer patterns are as indistinguishable as individual stars in the Milky Way.
But the commonalities of the triad economy are far greater than the unique attributes of localities. In our management consulting work, we have found that 80% of what applies in the United States also works in Germany. The consumer desires of the Japanese shinjinrui --the generation younger than 30--are far more similar to the same generation in Los Angeles or Paris than they are different.
As national borders continue to erode, what will emerge?
The future’s winners will not be nations, but regions, such as Alsace-Lorraine, Wales, Kansai or Orange County. The winning corporations will be those that serve the global consumer well.
Politicians around the world will have to turn their energies away from preservation of the status quo to the more important mission of creating a political framework for the borderless economy.
The European vision does not extend beyond 1992. The Japanese vision is even more shortsighted: We have been meekly hiding behind America’s nuclear umbrella, implementing the obsolescent assignments of Gen. Douglas MacArthur. Meanwhile, the end of the Cold War has removed America’s postwar sense of mission.
A borderless economy inside a political vacuum spells peril. Without a workable framework, the danger is great that new villains will be created to put flesh on the old skeleton of nationalism. Without the Russians as archrivals, might an America without a mission cast the Japanese or Germans in that role?
A xenophobic scenario such as this is what most threatens our full passage to the borderless economy. Only the creation of a political culture that reconciles the duality of citizen and consumer can clear the way.
