Introduction, Overview

Moral Innovator perspectives on globalization and you

We have a lot more flexibility on deciding where we live today than 50 years ago. The more languages, skills, and cultures we acquire, the more options we have around the world in the next 50 years.

The pace for globalization accelerated when companies sought lower cost manufacturing in places like China after 1978. In fact the first wave started after World War II when Japan did not have to spend billions of US dollars for defense each year because USA committed to defend Japan if attacked. This was a form of subsidy that drove Japan to pursue consumer electronics like radios, cameras, televisions music players; followed by automobiles and industrial products like ships and aircraft. Japan is starting to export (again with USA help) in new industries that include licensed production of military equipment. This is very dangerous for a country like Japan that has not sincerely atoned for the atrocities committed during World War II and convicted war criminals are memorialized after leading soldiers that killed millions of civilians such as killing 300,000 people (and raping 20,000 women) in 40 days during the Nanjing Massacre; 1 million Chinese subjected to human experimentation of chemical and biological weapons (that are still being excavated in China today) mostly with Japanese Unit 731 stationed in China; and at least 1.5 million forced laborers, including at least 400,000 innocent Asian ladies captured in over 400 “comfort stations” that were sexually raped multiple times daily by Japanese soldiers for years. It is a lot easier to forgive after the Japanese learn to sincerely atone like the Germans have for the Nazis.

After the war, Americans like Edward Deming helped Japan with continuous improvements by focusing on total quality and now lean manufacturing that currently captures a good chunk of US market. Toyota, for example, established a Research and Development center in Detroit to sustain innovations.

Without USA subsidies, the four Asian Tigers (South Korea, Taiwan, Hong Kong and Singapore) focused on certain industries and achieved high per capita income (i.e. industrialized) alongside Japan.

China became the mother-ship that facilitated globalization since the open door policy started in 1978. Today, China is again the largest economy on earth on PPP basis, as Vietnam, Philippines, and other countries are sustaining this first wave of globalization.

The second wave of globalization started with corporate inversion, when companies located in higher tax countries relocate to lower tax countries to save billions of dollars of corporate taxes. Among the earlier inversion companies was Tyco, the company that was partially responsible for the fraudulent business practices that drove the internal controls requirements which led to Sarbanes Oxley Act and higher cost of compliance. The aggregate cost of compliance with laws like Sarbanes Oxley; taxation on global income; and higher USA personnel costs translated into billions of dollars of savings just to move corporate headquarters to a lower tax location. The beneficiaries are the corporate shareholders and executives who understand the risks and complexity associated with inversion.

The third wave of globalization started with individuals who are not bound by localities, or individuals who have the option to become dual- or multi- country citizens. There are more than 200,000 French citizens in England partly because the top individual tax rate in France is 75% compared to England’s 45%. Similarly, Chinese citizens subject to 45% maximum individual tax rate are motivated to move to Hong Kong where the maximum individual tax rate is 15%. This assumes we have preferences to be close to native cultures (e.g. France and England are nearby Christian nations and Hong Kong is part of China). While USA taxes citizens and residents on global income, there are plenty of people who moved to Maldives or Bermuda partly because these places have no personal income taxes. This is the global version of choosing to live in Nevada or Washington where there is no State Income Tax, or Delaware where there is no Sales Tax.

We will have more and more flexibility to decide where we choose to live as we understand our major parameters (e.g. family, education, language, job opportunities; climate; health care; safety; different forms of tax – property, income, sales, etc; cultural affinity – Christians, Muslims, Indians and Chinese; and convenience – passport requirements for travel, comfort of living, etc). The more languages, skills and cultures that we feel comfortable, the more options we have to choose where we want to be around the world. In the longer run, national boundaries will become less and less relevant.

Remember Moral Innovators’ motto: Thrive with knowledge of your place in the world. Do the right things and make it better.