Bruce Greenwald (photo: Dana Maxson)

Yes, we live in a “flat” world, but other trends are just as relevant to understanding the current state of the global economy, a leading financial expert said Feb. 19 in a talk sponsored by Fordham.
“It’s not just about globalization. There are other trends that are as or more important,” said Bruce Greenwald, Ph.D., professor of finance and asset management at Columbia Business School and director of research and senior advisor at First Eagle Funds. Among the trends are “extraordinary improvements in manufacturing productivity” and more demand for services, he said.
He gave a talk at the Harmonie Club in Manhattan that was sponsored by the Fordham Wall Street Council and Fordham’s Schools of Business. Throughout the talk he referred to Thomas Friedman’s book, The World Is Flat: A Brief History of the Twenty First Century (Farrar, Straus & Giroux 2005), saying certain of its predictions never came to pass.
He noted that innovations in information technology had been expected to fuel “relentless low-wage, high-quality competition from places like China and India,” imperiling U.S. companies. In fact, he said, American companies have thrived because technology fueled the breakup of markets into smaller niches—either geographic areas or types of products and services—that are easier to dominate.
For instance, he said, “if you look at the history of the personal computer industry, the people who make all the money are not the Apples and the IBMs, who try to do everything, or the Japanese chip makers who try to do everything. It is the people who specialize—Google in search, Oracle in databases, Intel only in CPU chips.”
Also protecting companies from globalization’s effects is the trend toward services, which are “predominantly local markets” and therefore easier to dominate, he said. An example is John Deere’s success in its tractor servicing business, he said: “In servicing tractors, you can dominate local geographies by having the best sales and service organization in that geography.”
“The technology changes, coupled with these changes in the degree of competition in (the) service-oriented economy, seem to have created an environment where, a), globalization is irrelevant, and b), these firms have the freedom and autonomy from competition to actually institute aggressive and successful cost reduction, or productivity improvement, projects.”
The real problem today is international trade imbalances that make it very hard to sustain economic growth over the long term, he said. Trade imbalances—long a feature of the global economy—are being driven by countries that are trying to keep their manufacturing sectors alive, which fuels the production of goods that have to be exported because there’s not enough domestic demand for them, he said.
Chris Gosier