A Look at the Iraqi Economy

Iraq is in the news daily, yet most of us know relatively little about its economy. This article provides a short economic profile to help fill this void. Reliable economic data about Iraq are hard to come by, forcing economic researchers, political analysts and business strategists to rely on estimates.

Iraq has an estimated population of 24 million people. The country's population is growing at a 2.8 percent average annual rate.

Historically, 95 percent of the nation's foreign currency earnings have come from oil. The CIA World Factbook estimates Iraq's purchasing power parity (proxy for GDP) in 2001 at just under $60 billion. Real GDP is believed to have dropped by 5.7 percent in 2001. Pakistan, Chile and the Czech Republic have comparably sized economies.

In addition to oil, Iraq's other leading industries are: chemicals, textiles, construction materials, food processing. Obviously, defense consumes a large part of the Iraqi government's budget and has a disproportionate impact on the country's economic life.

In 2001, Iraq had estimated exports of about $16 billion--46 percent of which was oil sold to the U.S. Three other countries--Italy, France and Spain--account for a significant share of Iraq's exports. Iraq had estimated imports valued at $11 billion in 2001; with food, medicine and manufactures accounting for most of this total.

Iraq had an almost exclusively agricultural economy until the 1950s. Economic development was strong until 1980's when Iraq began to encounter a series of military conflicts that setback economic growth in a major way.

Iraq’s real gross domestic product (GDP)—that is, its GDP adjusted for inflation—is believed to have fallen by 75 percent from 1991 to 1999. In the late 1990s the country’s real GDP was estimated at about what it was in the 1940s.

The Economist Intelligence Unit believes that it is probable that the regime of the Iraqi president, Saddam Hussein, will be overthrown in 2003, and that the US-led war is likely to begin by April at the latest. These developments could trigger a 5 percent contraction in the Iraqi economy in 2003. It is believed that the regime of Saddam Hussein will try to maximize revenue by illicit trading in oil to keep the country's economy alive.

Hopefully this short profile helps to fill the void for economic information about Iraq.

Economist Argues with Ohio Governor
About the "Real" Problem Facing the State

Ohio has a major state budget problem to fix and the Governor and the Legislature do not agree on how to fix it. Is that the real issue that we should be most concerned about at this moment? One Ohio University economist doesn't think so. Richard Vedder says the real problem is the state's loss of economic competitiveness over the past three decades. Who's right? Actually, both are right.

Governor Taft and the Ohio Legislature need to reach a compromise on how to plug the holes in the state budget. At the same time, they really need to address the state's economic competitiveness, as Vedder suggests, although I am not convinced that Vedder has the right solution in mind. Go here to read Vedder's article.

What do I suggest? For one, let's take a longer term and broader view of our economic competitiveness. Ohio has a $381 billion economy, which makes it the 21st largest economy worldwide. We rank between the Korean economy at $422 billion and the Netherlands economy at $380 billion. With this insight in mind, maybe state officials should be asking themselves where do we want Ohio to rank in the global economic hierarchy ten years from now?

Economic development thinking in Ohio and around the rest of the world is too narrow and too short-term. We "tinker' around the edges of the economy. Why not ask some "power" questions like these:

- How does state and local government spending in Ohio impact the growth of the state's economy? For that matter, how does this spending impact the growth of Ohio's major regional economies. After all, as Wilbur Thompson, one of the grand-daddies of urban economics said some years ago: "state economies are really confederations of local or regional economies."

- If we want the state's economy to growth by x percent over the next decade, how can we use our state and local government spending to help achieve that growth goal?

The truth is I think we are afraid to ask these types of questions because they may lead us to economic development ideas, policies and strategies that are vastly different than our current tinkering. To all who will listen, let's try some "power-thinking."

Latest Russian Economic Growth Forecast

I reported earlier that the Russian economy is growing better than many others across the globe. What's the latest economic outlook have to say?

Russian GDP growth will stay relatively high at perhaps 4.6% in February, however industrial growth may not be as high, at possibly 4%-4.2%. Growth in domestic and foreign trade will be the main driving forces behind economic growth, the Interfax Center for Economic Analysis thinks. Russian industry, though, will be constrained by a drop in internal demand and a growth in production costs, fueled by more expensive component imports, mostly from Europe, and higher transport expenditures.

The outlook for business investment is beginning to improve, according to the latest economic report. "Capital investments, which have fallen consistently in the past year, are set to resume growth in February. The major investment that British Petroleum recently announced in Russia will persuade other potential investors in the Russian oil industry to step up the search for Russian partners. Although the recovery in investments is only just beginning, investment growth this month could still be 3.9%-4.1% higher than in the same month of 2002."

Go here to read more.

Get the Lowdown on the New
Toyota Plant in the San Antonio-Austin Corridor

Earlier this month, Toyota Motor Corp.announced plans to spend $800 million to build a sixth North American vehicle plant near San Antonio that will employ about 2,000 people. Economic developers up and down the I-35 corridor between Austin and San Antonio are setting places at the table for the much hoped for suppliers to Toyota. How many and which ones will come?

Read this article to hear what locals have to say about the new deal--one of few big ones happening during the current economic dry spell.

Why are Health and Health Care
Important to Economic Development?

Health care services is the fastest growing industry in practically every local economy across America. This is also true for many local economies in other countries. The demand for skilled health care workers and professionals is beyond the ability of most local labor markets to satisfy. Nursing shortages exist in most communities today, even with stepped up education and training efforts by nursing schools and hospitals.

Health is the top personal concern to most people, even beyond their jobs. And yes, paying the bill for health care is a major concern for employers and individuals in all age groups.

So, what is wrong with this picture? Very simply, we have not articulated the "value" and importance of health and health care to our economy. We have too many separate thoughts on this issue and we need an integrated picture of this connection.

That's why I want to share an interesting article written by Steward Ngandu, a Masters in Economics student at the University of Zimbabwe, who says: "The link between health and economic growth can also be illustrated as follows: healthy workers are more productive than sick workers. Since labour is a direct input in the production process, falls in the quality of labour will lead to decreases in the output. This is assuming that all other inputs are constant. Now if this output is aggregated across all firms in the country the result is the gross aggregate output of the nation which in economics is called Gross Domestic Product and the growth in this measure of national output is what is referred to as economic growth,will decrease." Go here to read more of what the author has to say.

We are living longer. My article a couple weeks ago discussed the implications of the global aging trend. Health care works. People are living longer, and if other aspects of quality of life are in place, they are living happier and more fulfilling lives--even amidst all the turmoil and uncertainty that has engulfed the world at this time.

What's the hottest industry across the world from an economic development? It's the biosciences, which is a close relative to health care.

As I look into the future, the "market for health" will continue to be of great importance. Holistic medicine, "wellness," gene therapy, nano-medicine and many new things will grow in importance. The Internet will play a much greater role in helping people to "manage" their health, which is a growing reality for all of us. Whether you know it or not, you are a "health care manager."

Somehow we must solve the problem of how we pay for health care. Partisan ideas abound, ranging from the government taking over control of the health system to the accelerated "marketization" of health care. Quality care is not cheap, but who wants anything less than world-class care when you are dying?

I urge the economic development community to put some brainpower into this issue. Health and health care are vitally important to our economic well-being, or as some would say our "economic health." Step up to the plate with some new ideas.

To prime the pump, read this paper by Gerald Doekson and Thomas Harris entitled "Relationship of Health Care to Economic Development." Get it here. Here's another good one by the Conference Board of Canada. Go here.

Perspectives on Manufacturing

I have been sharpening my understanding of the manufacturing sector as a focus for local economic development. Clearly, much has changed in manufacturing, not just in the U.S., but worldwide. Many myths and much misunderstanding abound about manufacturing. I think it is high time for some more sensible thinking about this issue.

I have been reviewing some of the recent research literature on what is happening in manufacturing and where the sector is headed globally. Let me share an article that I found especially interesting on this topic. This is a paper by Andrew Bernard at Yale University and two other researchers. Its title is very appropriate: "Survival of the Best Fit: Competition from Low Wage Countries and the (Uneven) Growth of US Manufacturing Plants." I really like his "best fit" concept, which says we should be thinking of industrial competitiveness in terms of where different industries can find their best locational fit.

Here is an abstract of the paper. "We examine the relationship between import competition from low wage countries and the reallocation of US manufacturing from 1977 to 1997. Both employment and output growth are slower for plants that face higher levels of low wage import competition in their industry. As a result, US manufacturing is reallocated over time towards industries that are more capital and skill intensive. Differential growth is driven by a combination of increased plant failure rates and slower growth of surviving plants. Within industries, low wage import competition has the strongest effects on the least capital and skill intensive plants. Surviving plants that switch industries move into more capital and skill intensive sectors when they face low wage competition."

The authors find two important trends dominating the manufacturing sector over the past 30 years. First, the manufacturing share of employment has fallen sharply while the manufacturing share of real output has fallen far less. Second, the composition of industries within manufacturing has tilted towards the production of capital and skill intensive sectors. Sound familiar? I thought so.

If you want to read the article, go here.

Port Authorities and Economic Development

Port authorities are major players in economic development in many states. Not only because of their role in goods movement, which is vital to the economy, but also through their various special financial and real estate tools that help businesses to grow and expand. Many ports also play an important role in waterfront development and tourism.

Ohio ports, like the Port of Cleveland and the Toledo Port, are major contributors to regional economic development. Their enterprise bond fund program has been a valuable source of funding to many companies expanding in Ohio.

Ports are susceptible to the economic downturn, just like everyone else. Stop by the American Association of Port Authorities' website to learn more about this issue and other trends impacting the port industry. Go here.

Regional Economic Outlook

The latest regional economic forecast from Economy.com reminds us why there are so few economic development deals right now. Our economy is still hurting and in some places it is downright rotten. Here are a few clips from Economy.com's just released regional economic outlook.

"Economic recovery remains muted nearly everywhere. One is hard pressed to identify any local economies enjoying stellar economic growth. The one exception is southeast Florida, where capital flight from South America is stimulating the economy. Southern California is stable. Other areas still expanding are some of the smaller western economies that benefit from rising commodity prices and stable local tourism."

"There are few local economies still in deep recession, although exceptions are easier to find in this case and include Seattle, Atlanta, Denver, San Francisco and Boston. Arguably, the weakest region is now the Northeast, where much of the region remains in recession, struggling with cutbacks among securities and brokerages, software and electronics, telecommunications equipment and services, and state government."

If you subscribe to Economy.com, you can get more information here.

More on the Economic Fall-Out from
a War with Iraq

Top U.S. officials now admit that the threat of a war with Iraq is crippling our nation's economy. No great surprise to those of us outside the Beltway, but now Bush Administration officials are saying it. "U.S. Treasury Secretary John Snow said Thursday that worries about war with Iraq are having a "negative" impact on stock markets and economic activity and made clear he intends to promote President Bush's tax cut package as a needed measure to stimulate growth when he meets with fellow finance ministers and central bank governors over the next two days in Paris."

Go here for more information.

ED Tool Box: We Need Economic
Development Case Studies

This article is a part of our ED Tool Box series, which provides practical advice on how to do things. This article focuses on writing economic development case studies.

Case studies are effective tools for communicating about economic development issues. We have few to draw upon, and we need more. Many business and law schools use them. Businesses use them often to understand their customers and competitors and to describe their success in serving customers. Good case studies help us to learn the general in the specific.

How many times have you said: "Gee, it would be helpful to know how others have done something." As a consultant doing work for many clients in any given year, people call me for this type of information. Sometimes they need "best practice" information. Other times, people want to know the process that another community, region or state followed to create and implement a new program or initiative. Usually, that information does not exist because we have not taken the time to write it down. This is where case studies can be very helpful.

My proposal is that the economic development community spend some time putting pen to paper, or more appropriately today putting your fingers to the keyboard, and produce more case studies on economic development policy and practice.

Why do this? Because it will help all of us to define and communicate the "value" that exists in the organizations, programs and projects that we manage. In today's ever-so-tight budget world, demonstrating your value is essential to competing for resources. Also, case studies help us to learn about what does and does not work in economic development. Case studies can help us to improve our performance.

Who could help on this task? I think several groups could help to generate more ED cases. Here are some to start us thinking: Economic Development Institute (EDI) at the University of Oklahoma, International Economic Development Council (IEDC), the ED associations in other countries, such as EDAC in Canada, regional associations like the Midamerica Economic Development Council and the Southern Economic Development Council, and the state ED associations. Also, I think groups like The Competitiveness Institute, which tracks industry cluster initiatives worldwide, could be helpful resources. ED consultants and university researchers could provide a hand with their existing knowledge of EDO's. Everyone's help is needed.

I see the need for two distinct types of case studies:

1. "How to" cases that describe how a community, region or state created, implemented, evaluated, rejuvenated an organization, policy, strategy, program or project. The case focuses on how you did something.

2. "Lessons learned" cases that describe the good, bad and ugly of putting an organization, program or project into motion. This type of case focuses on what you learned by doing something. Transferable lessons to other organizations are most helpful.

How do you prepare an effective case study? Most of us need to learn a few simple skills to accomplish this job. Here are a few starting questions you will need to ask yourself:

1. What is the case study about? Is it about your organization, your community, an investment project, or some other issue of interest?

2. Why am I writing this case study? How will it help me? How could it help others? Who is the primary audience?

3. What type of case study should I write? Is this a "how to" or a "lessons learned" case?

4. Do I know enough to write an effective and useful case study? What information do I have now? What research is needed?

5. Should I write the case myself, collaborate with others, or hire a professional writer to do the job?

6. How do I write a factual case study that goes beyond just my opinions and views? Should I incorporate others' viewpoints in the case?

7. How will I use the case study and how can it be made available to others?

8. How long should the case be? My suggestion is think in the 3-10 page range.

9. Now, tell me again why I'm doing this? Because it will help to communicate the "value" that exists in economic development.

10. Where can I go for help? Try the Society for Case Research for starters.

Equipped with good answers to these questions, you are now ready to begin.

By the way, this is a subject that I have a deep interest in. Give me a call. I am happy to help.

Is the Luck of the Irish Running Dry?

Ireland's economy grew very favorably during the 1990's. It was a stellar example of an economic turnaround. According to recent reports however, the situation is changing as Ireland struggles with the ripple effects of the global economic recession and increased competition for business investment. Growth has slowed and investment deals are down to a trickle.

Ireland's economy doubled in size in the last decade. Scores of technology companies from the U.S., Japan, and other European nations, rushed to Ireland to set up new quarters.

Ireland is truly a major economic development success story, even with its recent setbacks. IDA, or the Irish Investment and Development Agency, has been very aggressive in the global business investment marketplace. IDA is one of the best worldwide.

Where has IDA been focusing its attention? The following industries have received considerable attention in recent years: electronics manufacturing, software, healthcare, call centers, engineering, financial services, e-business and other sectors.

What kind of business investment projects has Ireland been landing? The deals fall into the sectors listed above, along with manufacturing, research and other industry sectors. Want to know more? Go here for more information about projects landed over the past 4-5 years.

It's probably not fair to say that the luck of the Irish is running dry, but clearly poor economic performance around the globe, coupled with rising business costs in Ireland and more competition from Eastern and Central Europe, are making it harder for Ireland to continue its foreign direct investment feeding frenzy of the 1990's.

For the latest economic word on Ireland, go here.

NYC Economic Blues

Recent reports indicate that New York City is getting hit by more than the latest blizzard. The City's economy is showing significant signs of distress. That's the word in this morning's New York Times: "New York City has lost almost 176,000 jobs in two years — more than the population of many cities. The unemployment rate, which in the spring of 2001 had fallen to 5.3 percent, has been climbing steadily and jumped to 8.4 percent in December."

New York City has gone through boom and bust before, says Christine M. Cumming, director of research for the Federal Reserve Bank of New York. She recalls the economic slump that shook the City and surrounding region during the 1989-1992 period. That downturn hit most of New York State, Connecticut, and New Jersey. This one is different. Only New York City has been clobbered this time around. The unemployment rates of New Jersey and Connecticut remain below the national average--at least for now.

What's the reason? Can't blame this one on economic over-concentration. The City's economic base is more diversified today than it was 20 years ago. The most likely cause seen at this point is that NY City is still feeling the aftermath of 9/11 and subsequent concerns about terrorist attack.

Go here to read more.

Foreign Direct Investment in South Korea

Not too long ago, the Economist Magazine released its assessment of foreign direct investment (FDI) prospects for South Korea. The report's title, Magnet or Morass, says it all. The outlook for FDI in Korea will remain unclear--at best--until the North Korean situation has been resolved.

Despite its current problems, Korea performed well in attracting almost $32 billion in FDI during the 1997-2001 period, which matched Japan's FDI results during the same period. About 22 percent of Korea's total FDI comes from U.S. companies. Another 11.5 percent is by Japanese companies.

FDI dropped off to $4.65 billion in 2001, compared to $9.3 billion in 2001. Who is Korea's chief FDI competition in the Asian Basin? You guessed it--China, which put on a show for everyone last year by not only besting its Asian neighbors, but also attracting more FDI than the U.S. in 2002.

Everybody always asks this question: "What is the average hourly labor rate in Korea?" Answer: $7.53, which compares very favorably to Japan's $19.52 rate. Korea's labor rate is just slightly lower than that of Australia and New Zealand at this point. China, by comparison, is about $.50 per hour.

Want to know more? Go here.

Nano Korea

Because all eyes have been focused on North Korea, you may not have heard that the South Korean government is launching a plan to make Korea a contender in the hot nanotechnology race. The South Korean Ministry of Commerce, Industry and Energy has announced a 200 billion won (about U.S.$167,000,000) investment through 2007 to create a nanotechnology cluster comprising a technology center, college and businesses.

South Korea invested 203 billion won (about U.S.$150 million) in nanotechnology last year, according to a report by Nanoelectronicsplanet.com. This was a 98% increase over the previous year. Korea has a 10-year plan to become a strong international nanotechnology competitor.

Investor Optimism: Drilling Down
to the States

Nationally, investor optimism is low and for the time being is not getting any better, but according to recent Gallup poll results, there may be some variation at the state level. Gallup just released its first batch of state breakdowns of its investor optimism poll.

According to the report, "Although investor optimism varied widely among these states in 2002, it is clear that investors in each of the four states were significantly less optimistic at the end of the fourth quarter than they were a year ago." The first four states examined were: CA; IL; MI; and OH.

To read more, go here.

To me, the results point to a lack of optimism everywhere. While there is variation in the economic performance of the states over the past three years, all states have been seriously impacted by the recession, terrorism and the looming war threat. Investor confidence has slipped just about everywhere.

It might be interesting to see what the Gallup results look like if arrayed by age, race, income level, and other demographic variables. Maybe Gallup and other pollsters need to ask some new questions. I think the opinion pollsters continue to ask the same questions just so they can conduct longitudinal analysis of their poll results. It might be interesting if Gallup asked some "what if" questions that gauged how the public, including investors, would react to a series of future national security and economic scenarios. Now, that would be interesting. What if the Bush Administration called a global summit on nuclear and biological disarmament, and the majority of world nations showed up? How would that impact public confidence?

Japanese Higher Education Industry Restructures

According to a recent Chronicle of Higher Education article, "At least 35 of Japan's 99 national universities are planning mergers within the next three years, according to an education-ministry report issued last month." Why such drastic changes? In a nutshell, it's long term demographic changes coupled with Japan's lingering economic troubles that just won't go away.

This is a major development with widespread implications, not only for Japan, but many other nations with ties to Japanese universities. As the global knowledge industry race heats up, higher education capacity will be even more important in determining how nations fare economically. If the Japanese higher education system restructuring is aimed at improving the country's economic position, then this is a good thing. If it is simply an accountant's approach to cost-reduction, then this could be a prescription for disaster.

I don't doubt that Japan's higher education system is over-capacity; at least as gauged in relation to Japan's slowing population growth rate and other demographic factors. What if the U.S. and other national higher education systems were to look at the situation as a basis for new international knowledge partnerships? More options, beyond cost-cutting, may surface under this approach. As I see the future, the world will need more, not fewer, smart people. Maybe we should start talking about the global education market--that appears to me to be where we are headed.

Here are two useful Japanese higher education and science and technology links: Japanese Ministry of Education; and Japanese Science and Technology Bureau of the Education Ministry.

National Academy of Engineering
Brain Trust Grows

Think preeminence in science and engineering and the National Academies of Science and Engineering come to mind. The Engineering Academy recently expanded its brain trust by adding 77 new members and 9 foreign associates.

A couple Ohioans were added.

Robert E. Fenton, Professor Emeritus, Department of Electrical Engineering at Ohio State University made the list for pioneering systems research and engineering on the design and operation of automated highway systems.

Yoram Rudy, Professor of Biomedical Engineering, Physiology, Biophysics, and Medicine at Case Western Reserve University was added for his leadership in the engineering sciences of cardiac excitation at the genetic and molecular levels and for introducing new methods in clinical diagnosis and therapy.

Was anyone from your area added, check the list here.

New Economy Lingo

Need a crutch on the "new" economy? Here is one place you might seek some help. Click here to go to Wired Magazine's Encyclopedia of the New Economy.

For example, what is the "new" economic theory of growth that is shaping national, state, and local economic development policies and strategies on a daily basis. Here is what the Wired Encyclopedia has to say: "Knowledge creates economic growth, which spurs knowledge, which begets growth.Traditional economists view growth as a product of people and objects: An increasing population boosts growth by providing more labor; an expanding machinery base makes labor more efficient. New growth theory, built on work done in the 1950s by Nobel laureate Robert Solow and currently championed by Stanford University's Paul Romer, points out that knowledge - particularly of technology - is crucial to the process. Though it might seem obvious, this insight turns a generation of economic theory on its head."

Chinese Silicon Cities Closing the Gap

China is making very good headway in creating a knowledge-based economy. A recent news article had this to say about China's ascent as a technology and knowledge leader: "China's marriage of high-tech and low-cost labor undercuts competitors in California's Silicon Valley and Oregon's Sunset Corridor. Its quick success also contradicts the conventional wisdom that developing countries gradually climb the technology ladder while advanced nations such as the United States preserve top-rung jobs."

Last month we reported on China's rapid economic growth and its success in attracting foreign direct investment. China is the country to watch this year on the economic front. It is just about the only national economy that is growing at this point. The only possible threat to the Chinese miracle are the possible political and economic ripple effects of the major military conflicts brewing in the Middle East; and there will be some for every world nation.

Clusters in Brisbane

Brisbane, Queensland, Australia sees industry clusters based upon "creativity" as one way to build a stronger and more vital city.

Which clusters are Brisbane officials giving attention to?

-Aviation.
-Backpacking.
-E-learning.
-Electronic games.
-Fiction writers.
-Film cluster.
-Food industry.
-Industrial design.
-International education and training.
-Jewelry.
-Multimedia.
-Recycled organics.
-Super yachts.
-Tourism.

The 2003 Asia Pacific Cities Summit will be held in Brisbane on April 13.16. Go here for more details.

For more information about the clusters initiative or the Summit, send an email to John Dean.

Sustainability, the Real Bottom Line
By Joseph R. Simonetta
Senior Editor, World Business Academy
Guest Author

The term “sustainability” continues to grow more common in our vocabulary. What accounts for this development? What does sustainability mean? Why is it so essential to us all?

Sustainability is about survival. It is the understanding that we must leave this planet as we found it or improve it so those who follow us will have the same opportunities we have had. This is an awesome challenge given the economic, social and environmental impact of our human population that now exceeds 6.2 billion and is growing fast. It also means that we must find replacements for finite resources that we consume.

We live on a planet soaring through space. We call this spacecraft Earth. We are a product of this tiny orb that is our world. Over billions of years, we have evolved in concert with other species of plants and animals. We, like all living things, are subject to the natural laws that enable everything to exist. Every physical thing we require and enjoy is derived from our world. Everything. Now much of life, including our own, is threatened. Life-support systems are being polluted and decimated, resources plundered, and species driven to extinction.

The severity of our impact on this planet is a recent phenomenon. With the advent of the Industrial Age in the late seventeen hundreds, our population growth accelerated. As recently as the year 1900, our population was only 1.6 billion. Something extraordinary that will never again occur happened in the twentieth century. In one hundred years, our population grew from 1.6 billion (which took millions of years to reach) to 6 billion. At our present rate of growth, we add nearly 80 million people each year. Each week we have approximately 1,538,000 more people that we must feed, clothe, house, educate, employ, transport, govern, protect, and keep healthy.

Consumption, the hallmark of our era has evolved into a pattern of overconsumption never dreamed of a mere century ago. As a consequence, the rate and range of global environmental deterioration is unprecedented. It is driven by the relentless needs of a global population growing out of control. Parasitic-like and swarming, we are destroying our environment. With astonishing speed, we are attacking our ecosystems like businesses in liquidation. In a few short centuries, we have upset an extraordinary array of life that took billions of years and endless experiments to produce. This unprecedented onslaught of consumption, this reckless pursuit of material acquisitions and pleasure, while inequitably delivering unsustainable comfort to a small minority, has resulted in a threat to all of humanity.

Environmental problems cross the boundaries of nation states, political and cultural ideologies, academic disciplines, business interests, and religious theologies. They affect the affluent and the impoverished, developed and developing nations, individuals and whole societies. These problems are far more than just more items on a list of major concerns. They are at the core of our existence. These issues bear upon not only the quality of our lives but to the question of whether we will live or die.

The total impact of our activity on this small planet is not only enormous, but is unsustainable at our current rate of consumption and related resource depletion. This reality is seeping into our awareness. It has resulted in a re-evaluation of how we run our organizations and live our lives. All of this is extraordinarily meaningful for how we conduct our vast business enterprises. This awareness has established a new bottom line for business that incorporates not only ‘profit’ but also concern for people and ecological systems.

What does this mean specifically for the world of business? It means that the equation has changed forever for all stakeholders. It is true that traditional ‘profit’ still remains essential to sustain and drive business. If a business is not profitable, it will cease to exist. Today, however, given the known constraints of our physical reality, if a business exists only to make a profit, it and we may no longer continue to exist. What is the good of profit if we destroy the conditions that sustain life?

The distinction is between short-term gain with little concern for, or ignorance of, human and environmental costs and consequences, and long-term sustainable gain with full knowledge and respect for the complete complement of costs and consequences. As Aldo Leopold wrote, “A thing is right when it tends to preserve the integrity, stability, and beauty of the biotic community. It is wrong when it tends otherwise.” Similarly, Lester Brown noted that, “The economy operates within the boundaries of a global ecosystem with finite capacities to produce fresh water, form new topsoil, and absorb pollution. As a subset of the biosphere, the economy cannot outgrow its physical limits and still remain intact.”

Just as no individual exists independently neither does any business. There is individuality but not independence. This applies to both people and organizations. To think differently is to delude ourselves. We are dependent upon each other at every turn. The integrity of each of us affects the integrity of the whole. We are each, individuals and businesses, part of a system of relationships that embrace our families, friends, neighbors, business associates, organizations, communities, nations, and family of nations. No single entity exists independently. Within this pattern of existence, destructive conduct, clearly nonsensical, returns to haunt and torment us in one form or another over time.

We have developed an integrated and complex social, technical, and economic system so powerful we can dominate and destroy each other and the rest of the natural world. It is a global culture that is driven and dominated by commerce. With vast resources at its command, business sets the tone for behavior and consumption. The consciousness of business becomes the consciousness of our planet. It is important to remember that businesses are nothing more than organizations. Organizations are nothing more that a body of people organized for some end. If we are to succeed, individually and collectively, we will do so because individual people make the right decisions and implement sustainable policies. If we are to fail, we will have done so because individual people have made the wrong decisions and implemented the wrong policies.

Sustainability is not a complicated issue. It is simply about understanding and honoring the reality in which we exist. If we honor within that reality that which sustains the web of human and environmental relationships, we will prosper. If we violate that which sustains these relationships, we will suffer unnecessarily. If we continue doing so, we will terminate or, at a minimum, severely degrade our civilization. It has happened before. Civilizations have come and gone.

We are a young species not unlike a child finding its way. If we make the right choices based on the vast amount of knowledge we now possess and continually enhance, we will succeed and advance our civilization. If we ignore what we know and insist upon violating the reality that enables us to live, we will suffer grave consequences. Sustainability is like an orchard. Those who understand and respect the non-negotiable rules of life enjoy the fruit and nurture the trees. Those who don’t understand or ignore the rules of life destroy the trees one by one until there is no more orchard and no more fruit.

Joseph R. Simonetta Email: jrsimonetta@comcast.net
Joe Simonetta's Web site
World Business Academy Web site

Russian Economic Update

Considerable attention has been given to stimulating regional economic development in Russia. A number of my ED friends have been members of U.S. Government-sponsored consultative teams advising national, state and local Russian officials on the creation of an appropriate local economic development system in Russia. Most come home with the impression that some progress is being made, but the process will take years to really take hold and produce tangible results.

How is Russia doing in attracting foreign direct investment? The answer is not too well. According to a recent Center for Strategic and International Studies (CSIS) report, foreign direct investment (FDI) in Russia has remained low. The totals for 1997–2000 were $4.9 billion, $2.8 billion, $4.3 billion, and $4.4 billion respectively.

While the CSIS report offers a macro perspective of developments, it is nevertheless useful in sizing up whether the overall economic and political environments are improving enough to encourage greater regional economic development. Click here to read the full CSIS report.

More on Job Exporting

Globalization. Free trade. Fair trade. International division of labor. Rising unemployment rate in the U.S. Connect the dots. Ok, so it is not that easy, especially in a complex world environment like we have today.

According to a recent report by Monster.com, U.S. businesses are doing a very effective job of "exporting jobs" to other countries, and they are not all low-skilled routine jobs. Many are knowledge jobs.

While both sides of the argument are represented in the Monster.com article, I would say that the protectionists were given the upper hand in this debate. Read it for yourself and tell me what you think. Go here.

Insights on a Changing European Community

If you are looking for fresh new insights into where Europe is headed, please read this Business Week article. It provides some good clues into what the economic development environment might look like in “Mega-Europe” in the next couple years.

Latest on Job Globalization

The international division of labor matters to local economic development in every country on all continents worldwide. This division is constantly changing as a recent Business Week article reminds us. The message is that the next round of globalization is sending upscale jobs offshore. They include basic research, chip design, engineering--even financial analysis.

If you thought your knowledge jobs were safe, think again. Watch the developments taking place in India, Singapore, China and the rest of the developing world. The buzz there is all about creating the knowledge economy. Stay tuned for more.