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What's Ahead in the Economy

Proceedings — Session: E-1
2011 ISM Diversity Summits
February 9-11, 2011
Boca Raton, Florida

Presenter: John Price, managing director, business intelligence, Kroll-InfoAmericas

John Price, managing director of business intelligence at Kroll-InfoAmericas, is a native of Canada and has spent most of his life outside the United States. As such, he offers a unique, "outside-looking-in" perspective on the American economy which has served him well, professionally — and, he suspects the same will be true for emerging procurement professionals in the near future. "One day," he said, "I predict that all supply management students will have the opportunity to study [global] markets as I have."

So began Price's session, "What's Ahead in the Economy?" He used no slides or handouts, opting instead to simply talk to summit attendees about what he sees coming down the international economic pipeline, as well as the factors that shaped his predictions. Price prepared his session using a 20-year retrospective because, as he pointed out, attendees were either planning long-term strategies for their organizations or launching supply management careers.

As a starting point, Price zeroed in on November 1989, when the Berlin Wall came down. Whereas it was "business as usual" in the United States, he said, military dictators were in leadership in Latin America prior to the wall coming down and the subsequent end of the Cold War.

"Washington and Moscow would no longer prop up ineffective governments," Price explained. "So, instead of lobbying for money in those places, [Latin America] went to Wall Street." As a result, today — with rare exception — Latin American leaders are elected officials. "In fact, most are Ivy League graduates," Price pointed out. "All this translates to enviable fiscal prudence and balanced budgets in those countries."

Today, then, the money that goes into Latin America pretty much stays there. As Price explained, this means consumers there can now access credit. "They're starting to buy like Americans," he said. "In other words, [they're buying] high-dollar goods."

In the grand scheme of things, Price believes the Cold War created a new global commerce climate: "The world is now competing for dollars, regardless of what they call their regimes of leadership."

As examples of this evolution, Price cited India — now regarded as a pillar of financial growth — and China, which has one of the highest savings ratings in the world at 34 percent (compared with 4 percent in the United States.). Moreover, China will have the largest number of English speakers in the world within the next four years.

"All this is critical because China has the most people per capita of any other country in the world," Price explained. "And, since the 2000s, half the world's workforce — in India and China — has really come online."

Price then shifted gears to discuss the economic impact of retiring baby boomers.

Here in the U.S., baby boomers "transformed this country, both politically and economically," he said — and not just here in the U.S. "Baby boomers are a global economic indicator," he told attendees. "Soldiers were basically 'making up for lost time' across the world." [laughs]

Now, baby boomers are approaching retirement en masse. "As they do, that's when they're most creditworthy," Price explained. Why is this important? Because banks tend to be disproportionate in their lending practices.

"The U.S. hasn't even begun to feel the impact of its overindebtedness," Price said. "The good news is that the world seems hell-bent on continuing to lend the nation money, so it can push that debt out a lot longer. The bad news is that a global crisis or event could be crippling to the U.S. because it carries so much debt as a nation."

All is not gloom-and-doom, however: Price offered a few proposals to offset this financial burden, beginning with more forward-thinking pension fund investing. Whereas large institutional investors currently put 2.5 percent of funds into emerging markets, Price feels they could double their money if they'd double their investment in these regions.

Whereas the United States represents just 5 percent of the worldwide population, it has traditionally represented far more than 5 percent of the global economy. Over the next five years, Price predicts emerging markets will represent 80 percent of the world's growth.

China, for instance, is poised for 9.6 percent growth in 2011 alone, he added. And, its domestic consumption has been larger than the United States' for the past five years.

Other growth drivers in China include its one-child policy. Men and women have fewer mouths to feed, and many are enjoying the buying power inherent to dual household incomes. Whereas this demographic curve might spell trouble in 30 years, Price predicts Chinese residents will enjoy more expendable income than most other nations in the meantime.

Hitting Home

Meanwhile, here in the United States, Price pinpointed some factors that will keep the country competitive, even in an ever-more-global economy. Chief among these is an entrepreneurial spirit. "The U.S. is still the most innovative producers in the world," he explained.

On the other hand, he contended, the education focus in the United States is "off." As an example, he cited the "outdated Ellis Island notion" of immigration.

"What we need now is talent, not labor," he explained. "The best and brightest come to the U.S. to study, and then we give them 12 months to leave. On the other hand, we say, 'But, we'll help you build your family, even if you entered the country illegally."

Europe, in contrast, makes a clear distinction — early on — between those who want to pursue technical versus intellectual career paths. "At 15, it's a choice you make; then, you just go," he explained. "[This educational model] fills that void with people who actually move an economy forward."

Additionally, Price contends that European students understand Chinese, German and other major economic cultures better than U.S. students because they're more imbedded.

Tying It All Back to Supply

So, what does all this mean for supply management professionals in particular? In the tactical sense, Price predicted the price of ocean shipping will remain flat as the global economy rebounds. Air cargo, too, looks promising.

"Lots of laid-up ships that were built back in 2005 and 2006 are now coming online," he explained. "Additionally, as Asians and Latin Americans have more access to credit, the movement of high-dollar items is poised to grow the fastest of any goods."

In the career sense, Price broke it down simply: "If you're starting a career in this profession, consider working overseas. Consider a logistics career that embraces international trade."

Questions and Answers

A brief question-and-answer session followed Price's presentation.

Q: What's the growth outlook for India and China, respectively?

Price: India is much smaller than Chain — about one-quarter the size. And, a dictatorship in China means infrastructure improvements are government projects; no one will argue against them.

Contrast this with India, where a dysfunctional democracy makes it tougher to get projects like those done. However, in India, people are excellent English speakers. And, their infrastructure growth will be privatized.

Q: You recommend that supply management graduates consider an international career. But, what would you suggest for those of us who are more advanced in our profession?

Price: True, as time passes, there are lots more things tying you to the United States — children, a mortgage and so on. Although your employer probably won't send you to China to work, your company's local competitors overseas will pay well to pick your brain. There's a certain cache, for their competitiveness, to have a "token Gringo" they can parade around. [laughs]

Q: What is the role of small and diverse businesses in this increasingly global economy?

Price: The great thing about a recession is that it forces companies to look at their suppliers. You often get mediocre service and inflated prices when dealing with large suppliers. With a small supplier, however, it's all about serving the heck out of a few clients.

As a small business operator, you might also consider hitching yourself to a U.S. company that's looking to do business in a global market. It's a pretty daunting prospect to try and learn to do business in China on your own.

— Reporting by RaeAnn Slaybaugh

About ISM Diversity Summits

Every year since 2009, ISM's Black Executive Supply Management Summit (BESMS), Hispanic Supply Management Summit (HSMS) and Women Executive Supply Management Summit (WESMS) have been co-located. Collectively, these events represent the annual ISM Diversity Summits experience hosted by Tempe, Arizona-based Institute for Supply Management™.

All three summits were developed as forums for diverse executives in supply management to come together and share their unique perspectives. Summit attendees learn from thought-leaders and change agents within their fields and representing leading organizations.