4th National Entrepreneurship Conference

Consul General Deborah K. Jones' Speech on Globalization and Entrepreneurship at
4^th National Entrepreneurship Conference

Istanbul, May 3, 2006
Bursa Chamber of Commerce and Industry

President Sonmez, Distinguished members of the Bursa Chamber of Industry and Commerce,

It is a great pleasure to be here with you today at this Fourth National Congress on Entrepreneurship, and I am especially honored by the opportunity to join with my distinguished business and academic colleagues here in considering the topic of globalization.   Not least, I am grateful that your invitation has given me the opportunity make my first trip to Bursa, and to visit your impressive facilities.  Over the years the Bursa Chamber of Commerce and the U.S. Mission in Turkey have worked closely together, a relationship symbolized by the American Corner that is located upstairs, and I thank you for your support for those efforts.

Our topic today is one that has been very much at the center of world discussion and debate in recent years, and particularly in recent months.  On International Womens’ Day I was asked to address a group in Istanbul on “Globalization’s Impact on Women,” a topic which last week’s TIKAD Conference also examined in some detail.

Today though our topic is both broader and more specific— “world competition and entrepreneurship”—that is how the forces of globalization reshape companies, presenting them both with new opportunities and new challenges.  The topic is very interesting, since by its very nature globalization creates a competitive struggle out of which the strongest and most innovative firms prosper and thrive, while those less agile fall behind.

This process is not easy, of course.  I am very aware that globalization is a word that for many Turks, as for many Americans, evokes anxiety and troubling images and fears, even as for others it represents opportunities and new horizons.  In the United States some worry that economic globalization will threaten their livelihoods, and that jobs will be exported to other countries.  Globalization, some critics argue, creates a “race to the bottom” which leads countries to abandon protections for consumers, workers, and the environment.  Culturally, some are concerned that globalization will impose conformity and sameness, and that their familiar, personal neighborhood coffeehouses and cafes will be replaced by impersonal global chains.  And sometimes we fear that our security may be threatened.  Most recently we witnessed a huge outcry in reaction to the notion of a foreign owned company managing our U.S. seaports.  In my short time in Turkey, I’ve seen similar debates over whether assets like Erdemir Steel Works or different financial institutions should be permitted to fall into foreign hands.

These are valid questions.   What I would like to try to do in my short remarks this morning is explain why my country—through governments of both parties—has strongly supported the process of globalization, and why we believe the benefits it provides far exceed its costs.  As our Treasury Secretary, Paul O’Neill, said in 2002, “when globalization means spreading the production system for goods and services around the world, it is a force for good, giving millions of people new opportunities to learn, to participate, and to prosper.”  Similarly, his predecessor, Lawrence Summers, in 1999 reminded us that “trade promotes prosperity and by promoting prosperity, promotes peace.”  He noted that the fundamental challenge of our time was to integrate the 5 billion people of the developing world into the world economy, and argued that “by supporting liberalization in these countries we invest in our future security and we invest in the spread of …core values” we all share.

Admittedly, part of the reason for the recent intensification of the debate about globalization in recent years and months is the fact that the process itself has intensified.  China and India are much more a part of the world economy than they were even a decade ago, and the impact of that process is plain for all to see, whether in increased world demand for energy, or in the flood of imports that have given some countries—the United States and Turkey included—serious imbalances in their current accounts.

The anecdotal evidence of our increasing interconnectedness—the elements of global culture that seem to spread faster than our ability to keep up— can be demonstrated quantitatively as well.  Consider for instance, these dramatic facts—

• Since 1987 exports have jumped from 16 to 27 percent of the world economy.
• Foreign direct investment has tripled since 1990 and cross-border portfolio investment has risen five times as a percentage of world output.

Consider too how easy it is to remain in touch even when you are traveling or living far from your home base.  Whether cell phones, internet connections, or other telecommunications links, all have exploded over the past decade.

There can be no question that globalization, as the ultimate stage of capitalism, is playing a critical role in shaping the economic environment in which we all live.  It is unavoidable and a natural outcome of human endeavor.   At base, it does not allow any of us to sit still, and instead continuously revolutionizes economic structures, destroying the old ones and creating new ones.  By upsetting all conditions of location, of cost calculation, and of production functions, it essentially means that the old ways of doing things no longer suffice, and we need instead to find new and more optimal ways to organize our production.

This process of creative destruction is admittedly unsettling.  It means that whereas an American, or a Turk, forty years ago could envision entering the labor market, securing a job with an established company, and spending his entire career there, such a trajectory is no longer likely.  Instead, the average American will probably switch jobs 8 or more times in the course of his career, and must constantly remain attuned to trends in the labor market, to ensure that he is learning the skills that will enable him or her to compete successfully with his peers.

This means too that a company cannot rest on its laurels, even when it is at the top of the figurative heap.  Consider that young American who went to work for General Motors forty years ago, at a time when it was the largest company in the world, with the largest share of the American automobile market.  That world is gone forever-- the competitive environment has changed, and General Motors finds itself in a much different predicament today.

I would argue though, that what this competition does is “sharpen the wits and improve the muscle tone” of world companies, and give added scope to those innovative entrepreneurs who either develop a new and different product, or who find a new and better way to deliver an existing product.  We all gain from this, for we get access to a greater variety of goods at lower prices.  A trip to any supermarket or discount store gives testimony to these benefits of globalization—of bananas from Ecuador, which my local staff reminds me were not available in  Turkey until President Ozal opened the economy in the 1980s—of low priced toys from China, coffee from Africa or Vietnam, and software from Estonia or elsewhere.

My country has greatly benefited from globalization.  Secretary O’Neill, in his speech in 2002, I think correctly credited the initial wave of globalization in the 1970s and 1980s with transforming our economy from a “sluggish and inefficient” one to one that was “world-leading.”  That process has occurred in other countries as well—in Mexico, through the North American Free Trade Agreement, and in Turkey too, through the opening to the world that President Ozal initiated in the 1980s.

A recent study by our Federal Reserve Bank in Dallas highlighted the gains globalization can provide.   The most globalized nations, it showed, lead their less open rivals in such measures as living standards, growth and job creation.  Indeed, if you look at the world’s poorest countries, you will find that usually they have fewest ties to the world economy.   Those that pursue the global market and globalization instead develop world class companies that are able to compete internationally—such as Turkey’s standard-bearers, whether Koc, Sabanci, or Turkcell.

Of course none of this is new for you here in Bursa.  With your status as one of Turkey’s key export centers, you’ve been exposed to the economic winds of change for decades, if not longer.  Indeed, in reviewing the evolution of Bursa’s exports over the last decade, I was struck by how your own experience illustrates the very themes I’ve touched on.   With the emergence of China and India as full-fledged players in the international economy, traditional textile industries and others are under pressure, but at the same time new higher tech exports like automobiles have taken up the slack, as have increased agricultural exports.   Similarly, your openness to the global economy is reflected not just in your exports, but in the presence of international companies here, including Cargill, whose contribution to the local economy goes far beyond the dollar value of its investment to include the jobs it creates, the local suppliers it has developed relationships with, and the renewal projects it has launched.

In closing, I’d like to note another benefit of globalization that the Dallas report highlighted.  It found that globalization contributes not just to the private sector, but to the public sector as well, in encouraging the sort of economic policies that help nations compete in the world economy.  Lowering barriers essentially loosens the hold nations have on the capital, labor, and business know-how that creates wealth.  When these factors of production are mobile, they shun the bureaucratic restrictions that lock them into outmoded methods or that restrict their ability to innovate, and instead seek out greener pastures.  The more freely these factors can move, the greater governments’ incentive to pursue policies that will attract and retain them.  Thus, in a globalizing world, countries that institute better macro and micro economic policies will move ahead.  Those that overburden their economies with taxes, regulations, trade barriers, and policy instability will not.   Not least of these effects, the Dallas study’s authors argued, is that of encouraging control of inflation.  Resources will not generally flow to countries where inflation eats away at their value, so globalization encourages better monetary and fiscal discipline—and by spurring productivity growth—itself also contributes to more stable prices.

Other key policy needs authors identified include open trade policies, supportive investment policies, and realistic regulatory and tax policies, as well as supportive innovation policies, political stability, accountability, strong anticorruption policies, property rights, and the rule of law.

The summary above is virtually identical to the ambitious economic reforms Turkey has embarked on over the last five years, and which we have strongly supported.  Indeed, I think a strong case can be made that building on the opening from the 1980s, Turkey’s latest reform efforts, in partnership with the IMF, have laid the groundwork for it to take its place among the world’s leading economies, and for its companies to compete ever more effectively with their international peers.

The work is not complete, of course, but it is well under way, and I am pleased that the world is increasingly taking notice, as is evidenced by the increasing flood of foreign investment that is coming into Turkey.