GLOBAL ECONOMIES

During the last fi ve decades, the world has witnessed an unprecedented expansion of business into global markets (World Bank, 2003, 2004, 2005). These gains build upon the economic spiral set forth by the agricultural and industrial revolutions (Beniger, 1986). Although some developing countries moved directly from agriculture-based to IT-based economies (e.g., Jordan and Panama), most have

2 In the U. S., the information society emerged in the mid-1950s, when more than 50% of the workforce was engaged in information and service-related activities. The information society is also

known, among other terms, as the post-industrial society (Bell, 1973), knowledge economy (Drucker, 1969), wired society (Martin, 1978), or the credential society (Collins, 1979).

190 Shayo et al.

followed the traditional growth path in the creation of national income, that is, from agriculture to manufacturing, and then from manufacturing to services (World Bank, 2003). The world domestic product (GDP) was estimated at $52 trillion in 2003—an increase of more than 140% since the end of the Second World War.

The ascendance of economic liberalism in the last decade, characterized by deregulation, the end of the Cold War, privatization, free markets, outsourcing, lower tariffs, and the move toward more democratic and egalitarian systems in industrializing nations, has opened new opportunities for trade and investment. Taxes on international trade declined between 1995 and 2005. Trade in low- and middle-income economies continued to register unprecedented growth. Within this period, East and South Asian countries registered an average economic growth of more than 7.5% per year, with China and India leading the way. At the same time, high and upper middle-income economies grow at the modest rates of between 2.0% and 3.5% (World Bank, 2005).

According to David (1997), the trend toward reduction of income inequali- ties among nations has increased effective demand for goods and services and made it benefi cial for transnational and multinational corporations to increase direct pri- vate foreign investment in developing and industrializing countries. Most of this money was invested in telecommunications, insurance, fi nance, energy, computers, and travel services. Indeed, whereas direct investment infl ows among developing countries declined by 14% in 2004 relative to 2003, the global fl ow of direct investment to developing countries surged by 40% to $233 billion (UNCTAD, 2005). At the same time, the global trade and investment in low- and middle-income nations increased from 33.4% to 51.8% of their GDP, as opposed to only a 5.3% increase in high-income countries. There are signs that developing countries are gradu- ally eroding the dominance of the developed countries in real income per capita (Krugman, 2000). According to World Bank projections, the world’s GDP could grow to more than 65 trillion in the next 20 years (World Bank, 2004).

Outsourcing business activities on a global scale has become an important emerging trend for businesses and governments. Some fi rms have a signifi cant amount of their value creation activities throughout the world. Firms are appreciat- ing the need to think globally as they move to tap markets beyond their domestic boundaries. Local and global competition is forcing fi rms to identify opportunities for growth and increased market share for their products and services. The cliché is now “Think globally, but act locally!” Firms routinely move an important piece of work, such as a proposal or design idea, across time zones and countries so they can work on them literally around the clock. Others are outsourcing the functions of complete business units offshore. Borders are becoming transparent for work and trade as global money becomes more of a reality, and regional trading blocs such as North American Free Trade Agreement (NAFTA), the European Union (E.U.) and the Association of South East Asian Nations (ASEAN) move forward.

Moreover, new investment in IT infrastructure by national governments and multinational corporations has enabled businesses with diverse business models and

8 The Virtual Society 191

forms of organizational control to operate in multiple countries seamlessly. For example, reliable and robust IT infrastructures within the NAFTA, ASEAN, and E.U. trading blocs have reduced coordination and transportation costs dramatically. Most countries are working on improving their IT infrastructures as well. Global businesses can now link directly to their customers, suppliers, and partners around the world more cost effectively than ever before. For example, Nike Inc. has distrib- uted most of its other business value-creating activities to a network of suppliers and business partners all over the world, while focusing in the United States on product design, marketing, and sales service. Product designers in the U. S. are linked with contractors in Asia and elsewhere through sophisticated IT networks and Computer Integrated Manufacturing (CIM) systems. Computerized control and coordination systems monitor each value-creating activity. This capability makes it possible to set prices, balance supply and demand, and control the physical distribution of sneak- ers through designated retail outlets all over the world. Other organizations, such as General Motors, Toyota, and Kodak, have similar global arrangements.

The Industrial Development Corporation (IDC) estimates that the average spending for online buyers will be $800 per person by 2008 (IDC, 2004–2008 Report). In the U. S. alone, Internet total retail purchases, that is, Business to Customer (B2C) sales, will be well over $130 billion. On the Business to Business (B2B) side, Gartner Consulting estimates that B2B purchases via Internet EDI, e-marketplaces, extranets, and other sell-side initiatives, will increase from $919 billion in 2001 to more than $8.5 trillion in 2005 (Gartner Consulting, Press Release, 2001).

The global efforts to standardize economic operations by enhancing free trade policies, creating robust telecommunications infrastructures, changing the nature of payment and money, upgrading global monetary standards and policies, and adopting a common language for conducting business, are moving us to the virtual workplace and, eventually, a virtual society.

GLOBAL ECONOMIES