Professor Langdana and Executive MBA alumnus team up on new book to explain complex forces driving global economy

Monday, September 30, 2013

The dynamics at play in the world economy can be head-spinning.

Tariffs, exchange rates, intra-industry trade are all factors that company executives have to weigh in a business world that is increasingly global and complex.

Rutgers Professor Farrokh Langdana and Peter Murphy, an alumnus of the Rutgers EMBA program and chief executive officer of DC Safety in New York, have produced a textbook intended to help fill what they describe in the book’s introduction as a void of MBA-level teaching material on international trade and global macroeconomic policy.

Professor Farrokh Langdana

International Trade and Global Macropolicy, which was published by Springer in July, is designed to prepare current and future company executives with a practical understanding of the theories driving international trade and global macroeconomics in the modern business world.    

The book covers a lot of territory: It explores the origins of international trade theory, trade barriers and protectionism, outsourcing, offshoring and inshoring. It also explains such areas as global macroeconomics policy, capital flows and the global monetary system.

Professor Langdana recently answered a short series of questions about the book:

Q: Why did you and Peter want to write this book?

A: "At the executive level when we discuss international trade and global macroeconomic policy, there really wasn’t a book out there that captured these two subject areas in a real world and practical manner. International trade is pretty much taught at the Ph.D level with a separate textbook of its own and global macro, similarly, is a whole separate textbook of its own. Both of these books generally have been very technical so there’s no one book that covered this in-between ground that was practical and real-world and covered less-known elements of trade and less-known elements of global macro at the executive level or the MBA level. A book like this was conspicuously missing.”

Q. Did events around the economic crisis expose the void that existed?

A: "Back in the day, which was seven to 10 years ago, international trade, which is basically outsourcing, tariffs, quotas, that sort of thing and global macroeconomics, which is really exchange rates and capital flows, those things were really electives. But then over the years, we noticed that we don’t have the luxury of adding them as electives anymore. Now it’s part of mainstream macroeconomics. It’s part of mainstream strategy not just for smaller countries but for our country. You can’t discuss macroeconomic policy without discussing exchange rates and capital flows. You can’t discuss economic growth without discussing out-shoring and in-shoring and trade restrictions , the effect of wages on trade and jobs on trade and vice versa. Those things are now imperatives. They have to be included in the main stream and not just added on as supplemental topics of discussion.”

Q: When did it become so much more important for executives to understand these theories of international trade and global macropolicy?

A: "Netscape Browser happened and the world changed. I know I’m grossly simplifying this, but essentially it is true. The Internet exploded and suddenly jobs that were not outsourced or off-shored were now done so by the Internet. The nature of things changed. Jobs that were safe were not safe anymore. And the world changed. Not just that, but capital started flowing out of this country and into this country at volumes that are and remain unimaginable. The amount of money that China is putting into our real estate just a few months ago boggles the mind.

"Now, just a simple strategy decision, you know, should you do spend more on R&D, for example, used to be a decision that we translated as should we spend more on R&D here in some lab in Florham Park, New Jersey. Ten years ago, that was the end of the story. Now, that same question can be answered, well, should we now spend it on a scientist in Shanghai working on aspect X of a medicine or should we spend more R&D money outside Bombay where they’re working on aspect Y of the same medicine or should we buy a spectrometer or whatever new device from Germany which has come up with a new version of it. Suddenly, every decision has a global factor because that’s the nature of things now.

"When you think about it, most of global trade isn’t the old trade anymore. The old trade was we would send aircraft engines to Malaysia and Malaysia would send us bananas or something like that. Now, most trade on the plant is intra-industry trade. More than 30 percent of the Boeing Dreamliner is outsourced.  Ditto for the iPad, the iPod, automobiles. Gone are the days when we made Product A and they made Product B and we swapped them and traded them. Virtually every product involves a large number of countries today.”

TAGS: Alumni Business Insights Economics Executive MBA Farrokh Langdana