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Interview with Matthew Slaughter: Globalization and Enterprise Administration


Interview with Matthew Slaughter: Globalization and Enterprise Administration


Michael Chui from McKinsey Global Institute acted as a discussion partner in “Forward Thinking on globalization and the evolving role of corporate Leadership in the 21st Century with Matthew Slaughter (December 15, 2021, podcast and edited transcript available).

Here are a few comments that caught my eye.

On the entry of China and India into the world markets:

When I go back to when I wasn’t gray haired, graduated from MIT and came to Dartmouth, much of the research on globalization and labor markets has focused on NAFTA, the North American Free Trade Agreement, Mexico’s accession to the Canadian-American Free trade agreement that sparked so much political activity in the 1992 presidential election. Ross Perot ran for president and won 19.2 percent of the vote, not least because he announced that if NAFTA were to be signed there would be this “huge shit” of losing manufacturing capital and jobs from the United States in Mexico.

Well, no disrespect to the good people in Mexico, but the Mexican economy and workforce is a rounding error when trying to measure the workforce of China, or China plus India, or what happened in the next 30, 40 years from NAFTA in Relation to the extent of the shocks for the world economy after the fall of the Berlin Wall, billions of people who want to join the global economic system worldwide, and the associated flows of capital and people and ideas. I think that was a big lesson and I don’t think we fully understand it in this country.

About Infosys, an India-based company that employs 13,000 Americans at its Indianapolis base and other locations in the United States:

Infosys was one of those Indian multinationals that really grew out of India to provide these outsourcing services to many western multinationals. Yet, like many global multinationals, their competitive advantage has evolved over time. They realized as more competitors emerged and realized that they could add more value to their customers by actually offering a wider range of services that offered more talent and that better complemented what these companies were already doing. …

It is multinational corporations based abroad that are developing and expanding their business activities here. And they have recognized customer proximity in the USA. They realized that the risk appetite, talent pools, dynamism of the US economy, some of the great sources of competitive advantage for the United States, they wanted more access.

On global supply chains during the pandemic:

We know that global supply chains produce great efficiencies, but those efficiencies of lower prices and costs, greater diversity have enabled many companies to have what is often referred to as a just-in-time production and inventory system. That was a finely optimized system. … What we have seen on both the demand and supply sides amid the pandemic are these disruptions to the original system that have produced wildly non-linear results.

On the demand side, I think not everyone expected that when the pandemic broke out and this supply shock was bound to set in, households would cut back much of the production of services, non-tradable services, either from their own account balance or with the unprecedented fiscal ones Support would dramatically change and increase the demand for goods. This surge in demand for goods was unexpected. And then we continue to see supply-side shocks in global supply chains. … You see port closings at key hubs in global supply chains that have been unprecedented due to public health requirements. In certain sovereign countries where one or two COVID cases will close ports for 48 or 96 hours – and in the United States and other countries I believe we have recognized – the fragile optimization of some of the domestic supply chain connections …

You give me demand shocks, you give me supply shocks in a very finely tuned global system, and you see bottlenecks, you see prices soaring in ways that are often difficult to predict. But if you turn back to academic research, we knew it could be. We just haven’t had this clash of demand and supply shocks that the pandemic tragically brought upon us.

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