In the movie Mad Max Beyond Thunderdome directed by George Miller and George Ogilvie, Mad Max, played by Mel Gibson, crosses the Australian desert in a camel-drawn wagon when he is attacked by a pilot named Jedediah, stealing his wagon and belongings. Continuing on foot, Max follows their trail to the seedy community of Bartertown. Once in town, the founder and ruler of Bartertown, the ruthless Aunty Entity, offers to resupply his vehicle and equipment if he completes a task for her, and after surviving the “audition” where her guards attack him, decides he’s up to it. Aunty explains that Bartertown depends on a crude methane refinery powered by pig feces. The refinery is run by a dwarf called Master, and his giant bodyguard Blaster. “Master Blaster” holds an uneasy truce with Aunty for control of Bartertown; however, Master has begun to challenge Aunty’s leadership. Aunty instructs Max to provoke a confrontation with Blaster in Thunderdome, a gladiatorial arena where conflicts are resolved by a duel to the death.
Now it’s worth taking a moment to focus on the character of Master that is actually fulfilled only with Blaster. On one hand, Master is a brilliant mind in a weak body. On the other hand, Blaster is a powerful body with a weak mind. Together they become a perfect war machine that only Max will defeat.
I think about this character every time (and I often do) I’m using an Apple product. Or rather, every time I read on the Apple product I’m using:
Designed by Apple in California. Assembled in China.
This expression is a typical example of the globalized world in which we live today. A world where the theory of comparative advantage by David Ricardo has become an imperative for growth. Why should we produce something in our country that can be made and imported from a place where that object can be done better (and cheaper). We could focus on what we can do better than everyone else and outsource all the rest. In California the plus-value is not in assembling the iPhone but rather in thinking the idea behind it. That’s why Apple earns $ 321 (65% of the total) for each iPhone, the highest of any supplier.
This idea of globalization, a model based on a sharp division between where an object is designed and where it is produced (or even just assembled) is changing and with it the whole concept of comparative advantage.
In October 2013, the Economist magazine wrote that globalization (with the meaning it had in the last fifty years) is on standby. Nowadays governments choose which countries to trade with, which capital to accept and which not. We are moving into a gated globalization that is opposed to the liberal model, typical of the second half of the past century.
Since Deng Xiaoping, China (Apple’s Blaster) has become increasingly Western, capitalist and consumerist. In 1995, Jiang Zemin (quoting a famous slogan by Deng) used to encourage Chinese people to go out and become global players.
That’s why, those countries, which had long been called emerging economies, are now much more than emerged. Today, countries like China, India, Mexico, Brazil, Indonesia (not to mention Africa) produce (in terms of global GDP) much more than the old economies, also increasing the purchasing power and (maybe tomorrow) the standard of living.
It is Blaster’s revenge. What is happening today is a u-turn of globalization that is evolving towards a new paradigm no longer unidirectional (developed economies and big corporations set the rules of the global market) but multidirectional (just think about all the examples of reverse innovation or the concept of glocalization or even all those products designed for emerging economies and then imported into most developed economies).
In this perspective, even the idea of outsourcing is changing. Some American companies are taking back their manufacturing plants to the USA. And this could create a new frontier for the evolution of every country’s economy.
The comparative advantage is a very efficient model but it inevitably leads to an ultra-specialization. If every country keeps doing only what it can do best with no innovation but only improving its offer, it will become increasingly static and it will have no chance to adapt to market changes. It will have no way to re-invent and recur itself. And today having the ability to re-invent itself is a key factor for the economic survival of a country.
Let’s focus on Italy. Today our country has an urgent need to innovate both in terms of processes and in terms of supply. “Made in Italy” has a great reputation in the world but it can not last forever. There was a time when “Made in Italy” touched almost every field. From fashion to computers. From cars to the pharmaceutical industry. Nowadays, however, it is shrinking to fashion, food and tourism. Not surprisingly, since 2008, 82.000 companies have gone bankrupt (of which 14,000 in 2014) and million of jobs have been lost.
Unless we want to turn Italy into the new Blaster of Europe, it’s time to re-invent our business and revive our comparative advantage. And this can only be done through education and investment. Educating our (growing) reserve army of labour, our unemployed, in order to encourage them to learn new skills. And making innovation (and not only improving) in what we can do better and from which we can create added value.