Page 142 - Culture Society and Economy

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‘LOCALIZATION’ EXPLORED

This is a fundamental misconception of the modern economy and the
role of small and medium-sized firms in it. In a country such as Britain,
for example, the inputs for most small and medium-sized business are
obtained from all over Europe. and the world. Some machinery is
obtained from Italy (for example, in high grade ceramic tile manufactur-
ing), others from Sweden (ball bearings), much from France and Spain, a
vast quantity from Japan and an increasing quantity from China, Malaya,
Brazil and from all over the world. In turn, these small and medium-sized
firms export their products all over the world, especially back to a number
of countries in Europe. In the case of Germany, the technical strength of
the German export economy is often said to rely on the Mittelstand, that
mass of medium-sized community-level firms who, for example, controlled
the world market in precision machine tools, until Japanese transnational
competitors relieved them of it.
In other words, successful small and medium-sized firms in Europe are
major importers and exporters themselves. This is so because many of
these small and medium-sized enterprises, if they do not import and export
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directly, are sub-contractors to transnational corporations that do. They
are also sub-contractors to the sub-contractors and so on down the line.
The most efficient and profitable ones are also very specialized and have
a high technical level in employees as well as equipment. Indeed, with the
increasing tendency to just-in-time production, quality management, flex-
ible specialization and management information systems – including inte-
grated electronic warehousing and management systems, and enterprise
management systems – ‘network management’ of what are in effect very
complex and sophisticated enterprise zones has proliferated. All these
systems have grown enormously in the world economy in recent decades,
especially in the developed world. Millions of products and services
are involved daily in the extremely complex exchanges involving these
relatively small firms.
Although transnational corporations have the lion’s share of interna-
tional trade by far, it is a misconception to think that the leading small
and ‘human-scale’ firms that currently exist are operating mainly within
local markets. This is far from being the case. In fact, through an
extremely complex commodity chain, they are just as much involved in
‘long-distance trade’ as any transnational corporation. Moreover, given
the proliferation of the networks described above, how would one sepa-
rate small, medium and large firms from transnational corporations?
Contrary to what Hines and the IFG write, these practices spring not
from theories of comparative advantage. They derive rather from the
much more flexible doctrine of ‘competitive advantage’ and regional

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