The Ascension of DFW

How to Keep a Good Thing Going

2009 Annual Report O’Neil Center for Global Markets and Freedom SMU Cox School of Business

TABLE OF CONTENTS

Letter from the Dean...... 1

The Ascencion of DFW How to Keep a Good Thing Going...... 2

Railroads: A Catalyst for Economic Change...4

Economic Freedom...... 6

World of Opportunity...... 10

Selling Our Services...... 15

How to Keep It Going...... 17

Seven Rules for Exporting Services...... 18

2009: The Year in Review...... 20

The O’Neil Center for Global Markets and Freedom was established at SMU in 2008 by William J. “Bill” O’Neil (BBA, ‘55) and his wife Fay C. O’Neil to study the impact of competitive market forces on freedom and prosperity in the global economy.

The center offers education and training for today’s forward-looking individuals who recognize the importance of globalization in changing the business environment in which we are all operating.

Southern Methodist University will not discriminate on the basis of race, color, religion, national origin, sex, age, disability, or veteran status. SMU’s commit- ment to equal opportunity includes nondiscrimination O’Neil Center 2009 Annual Report on the basis of sexual orientation. A Message from the Dean

The ebbs and flows of regional essay in the first annual report from the by taxes and regulations are looking for economies have intrigued me for as O’Neil Center for Global Markets and a better place to do business. It should long as I can remember. It may go Freedom. They portray the Dallas-Fort also be read by DFW business leaders— back to my childhood in New England, Worth area as today’s better place to do not so they can gloat but so they can where I saw boarded up factories in business, benefitting from Texas’ low recognize what they must do to keep a once-thriving Massachusetts cities, taxes and limited government. good thing going. such as New Bedford, Lowell and Fall The textile and apparel industry that As dean of the SMU Cox School of River. The textile and apparel industry, left New England for the South a few Business, I can’t overemphasize this once the region’s bread and butter, had generations ago has now moved off essay’s value for our students—those moved to the Southern states. shore, evidence that the great forces already on campus and those who will Years later, my dissertation and a book determining regional fortunes are now enroll in the future. Choosing to study I wrote explored the industry’s post- global rather than national in scope. Cox at SMU puts them at the heart of a World War II southward migration, and Alm recognize globalization’s vital vibrant, globalizing regional economy identifying the decisive factors as lower role in DFW’s prosperity. They identify that will offer untold opportunity in the taxes and wages and cheaper energy DFW companies that are prospering decades ahead. and land. In short, textile and apparel in the global marketplace and make a companies went looking for a better strong case for the region emerging as a place to do business—and they found it. leader in services exports. W. Michael Cox and Richard Alm This essay is important work. It should tell a 21st Century version of the same generate great interest in California and Albert W. Niemi, Jr. story in “The Ascension of DFW,” the other places, where companies burdened Dean, Cox School of Business

O’Neil Center 2009 Annual Report 1 The Ascension of DFW

How to Keep a Good Thing Going

By W. Michael Cox and Richard Alm

The Dallas-Fort Worth metropolitan The city might have remained Prairie area rises out of North Texas’ pancake- backwater if not for the railroads. The flat prairies as a concrete, steel and glass Houston and Texas Central came up monument to sheer determination and from the south in 1872. A year later, Economic freedom, entrepreneurial drive. More than 6.3 the Texas and Pacific steamed into town million people sprawl across almost with an east-west route, making Dallas globalization and 9,300 square miles, among them 3 a commercial crossroads and giving it exportable services million workers who produce $400 an edge over other North Texas cities billion a year in output. (see box, page 4). give a lift to the Looking at today’s DFW, the Rail connections made Dallas a nation’s fourth-largest urban economy, shipping and supply center for North DFW economy. it’s easy to forget that just 140 years Texas, stimulating the city’s first boom, a ago Dallas was an isolated hamlet of growth spurt that increased the popula- 2,967 hardy souls, clinging precari- tion 50-fold in five decades. With nearly ously to the banks of the Trinity River. 160,000 people, Dallas ranked as the Atop Texas’ population ranking in nation’s 42nd largest city in 1920. 1870 were Galveston at 13,818, San Even as Dallas grew in the first half Antonio at 12,256, Brenham at 9,716 of the 20th century, its livelihood and Houston at 9,382. Dallas was far depended on the land. In a Texas down the list at No. 17. economy fueled by cotton, cattle and oil, the Dallas area didn’t grow it, raise it or pump it. The city profited through financing, marketing, trading and merchandising what the land produced. By 1960, Dallas’ population had risen to 680,000, ranking 16th in the nation. At the top of the heap were the great manufacturing centers in the East and Midwest, which had grown up around water transport and railroad hubs. New York, Buffalo, Boston, Chicago, Cleveland, Detroit, Pittsburgh and St. Louis dominated the U.S. economy from the late 19th century to the mid-20th century. They had become the nation’s chief producers of household

2 O’Neil Center 2009 Annual Report appliances, automobiles, consumer Rising Toward the Top goods, machinery and steel. EXHIBIT In the second half of the 20th century, Dallas’ strong post-Industrial Age economy has been the American manufacturing began its slow 1 key factor in its climb in the population ranking of U.S. cities. and inexorable decline as the nation’s Once-dominant Rust Belt cities have fallen in the rankings. economic base shifted to services. New York, Chicago, Boston and a few other 1810 1830 1850 1870 1890 1910 1930 1950 1970 1990 2008 0 big cities adapted to the new economic Dallas reality by replacing factory jobs with 10 Detroit services work. Other industrial cities lost their 20 manufacturing jobs and went into 30 long-term decline. Cleveland, St. Louis,

Pittsburgh and Buffalo, all once among RANK 40 the 10 largest U.S. cities, have now Cleveland fallen out of the Top 40. Along with 50 St. Louis Detroit, they have become sad symbols of urban decline and neglect, struggling 60 Pittsburgh with falling property values, crime and 70 Buffalo unemployment. Tied to agriculture, ranching and oil, Dallas and its surrounding cities didn’t play a large role in America’s Industrial From 1998 to 2008, DFW added an Age. DFW emerged as an economic average of 150,000 new residents powerhouse only in the second half a year, an annual gain that rose to DFW’s population growth of the 20th Century—after air-condi- 165,000 in the past three years. At this tioning eased the misery of North rate, DFW adds nearly 1 million people is on pace to add almost Texas’ hot summers. every six years. 1 million new residents Building a vibrant economy based The main attraction has been jobs. on white-collar employment, Dallas Over the past 15 years, a period that every six years. rocketed up the ranks of U.S. cities, includes two recessions, DFW employ- bypassing the fading urban centers of ment has climbed from 2.3 million to yesteryear. By the late 1960s, it had 2.9 million, ranking second only to the become one of America’s 10 largest New York area in net job creation. DFW cities (Exhibit 1). is one of just seven Top 20 cities to add And growth has been accelerating. jobs since 2004.

O’Neil Center 2009 Annual Report 3 Railroads: A Catalyst for Economic Change After the Civil War, America laid railroad tracks at a furious pace. Total mileage increased from 52,922 in 1870 to 166,703 in 1890 as the railroads pushed west and south.

Early in this period, locomotives started chugging into North Texas, creating a transportation revolution that reordered the fortunes of the region’s cities. Before the railroad arrived in Texas, passengers and goods moved overland to the nearest river or seaport in wagons pulled by horses, mules or oxen. Epic cattle drives took beef on the hoof to railheads in Kansas.

Texas’ Biggest Cities, 1870 Down on the Gulf Coast, Galveston was Texas’ biggest city in 1870. In the northern part of the 1. Galveston 13,818 state, Jefferson rose to prominence because of 2. San Antonio 12,256 its location on the banks of Big Cypress Bayou, 3. Brenham 9,716 then a navigable branch of the Red River. 4. Houston 9,382 Steamboats docked in Jefferson, bringing new 5. Sherman 6,348 residents to Texas and taking the state’s farm products 6. Brownsville 4,905 to market—especially cotton. The city boomed. It was 7. Jefferson 4,190 the first in Texas to install natural gas for lighting 8. Austin 3,907 and manufacture ice for commercial sale.

Between 1867 and 1870, Jefferson’s trade jumped from $3 million to $8 million, putting it behind only Galveston as a commercial center. A few years later, the bottom fell out. In 1873, the Corps of Engineers blew up a log raft on the Red River near Shreveport, La., lowering the water level in Big Cypress Bayou and impeding steamboat traffic. At about the same time, the railroads came to North Texas, arriving in Dallas before Jefferson.

Dallas began its rise, Jefferson its decline.

More than six decades later, economist Joseph Schumpeter seized on railroads as a prime example of the kind of world-shaking technological change that would send great waves of progress through a capitalist economy. He put it this way:

“A railroad through new country, i.e., country not yet served by railroads, as soon as it gets into working order upsets all conditions of location, all cost calculations, all production functions within its radius of influence; and hardly any “ways of doing things” which have been optimal before remain so afterward.”

4 O’Neil Center 2009 Annual Report Like the rest of the country, DFW exceeding $100 million. It has more lost jobs in the severe downturn. corporate headquarters than any other However, it remained relatively healthy U.S. metropolitan area, including 24 in hard times. During 2009, the only companies in the Fortune 500. large metropolitan area with a lower These advantages often show up in unemployment rate was Washington, business climate surveys, but they don’t DFW has more D.C., where the economy relies largely completely explain DFW’s economic on public spending. success. The ascension of DFW—and corporate headquarters DFW owes its economic success the region’s prospects for the future— to a variety of factors. The area offers owes even more to three fundamental than any other U.S. a skilled labor force, modern infra- factors that the studies often overlook. metropolitan area. structure, relatively low costs of doing First, DFW benefits from its location business and a central location tied to in Texas, a state that maintains one of air, rail and road networks. the world’s freest economies. Second, DFW’s diverse economy is home DFW has embraced globalization, to major players—some home grown, emerging as a leader in profiting from some transplants—in communications, opportunities outside the United States. consumer products, chemicals, energy, Third, DFW brings together businesses entertainment, financial services, infor- and workers well-suited for success in mation processing, high technology, the up-and–coming services economy, health care, home building, retailing both at home and overseas. For DFW, and transportation. nurturing these advantages is the best In 2008, the area had 116 public and way to keep a good thing going. 63 private companies with revenues

Thousands of DFW companies are engaged in global business—among them GameStop, Kimberly-Clark and Cinemark.

O’Neil Center 2009 Annual Report Economic Freedom few tenths of a percentage point out of the bottom third. Among states with no Adam Smith and Milton Friedman individual income taxes, only Alaska has taught us the path to prosperity lies in a lower ratio of sales taxes to GSP. economic freedom. Empirical proof for When it comes to the size of state their eloquent arguments comes from government, Texas fares quite well. It’s the Fraser Institute, which finds that the near the bottom in spending as a share nations with top scores on its Economic of GSP. Government transfers as a share Freedom of the World measures have of state economic activity are low, too. the highest per capita incomes. Texas finds itself in the middle of the Fraser ranks the U.S. economy as pack in the government’s share of the one of the freest in the world. A related state workforce. Fraser study ranks Texas the second Texas’ labor market is relatively free freest state, behind only Delaware of impediments that discourage job (Exhibit 2). Other large states are far creation. Partly because its right-to- down the rankings—Florida at No. work laws forbid forcing workers to 22, California at No. 29 and New join unions, Texas ranks low in union York at No. 41. membership—at 6.2 percent of private What is Texas doing right? The sector workers, well below New York’s answer lies in the metrics that gauge 27.5 percent and California’s 17.8 economic freedom at the state level percent. The gap widens considerably (Exhibit 3). For starters, Texas keeps among government workers. Texas’ taxes low. It’s one of seven states with public sector unionization rate is 14 Texas is one of the few no individual income tax and one of percent, compared with New York’s 73 five states with no corporate income percent and California’s 58 percent. states with no individual tax. Texas levies a general business Unlike California and 13 other states, income tax and no tax—but at a relatively light effective Texas doesn’t mandate a minimum marginal rate of less than 1 percent. wage above the federal standard. corporate income tax. Other states penalize work and enter- Texas’ minimum wage is relatively prise more heavily—for example, the low compared with the average wage, highest marginal tax rates are 12 percent suggesting that employers and workers on individual income in Massachusetts freely negotiate a relatively large share and 12 percent on corporate profits in of the state’s wage contracts. Iowa. California’s top rates are 10.6 Texas’ high degree of economic percent for wages and 10.8 percent for freedom gives home-grown businesses corporate profits. room to grow. It also acts like a With no income taxes, Texas relies magnet for newcomers—job seekers primarily on sales taxes to finance and companies from other states and its government operations. But that countries. Texas ranks third among doesn’t mean the state socks it to states in “insourced” jobs, or employ- consumers. Texas lies back in the pack ment generated by foreign investment. at 19th in sales tax collections as a share The result is a private-sector dynamism of gross state product (GSP), tied with that put five Texas metropolitan areas California, a state that puts a heavy among the top 12 on Inc. magazine’s income tax burden on its workers and Top Cities for Doing Business. Chief companies. However, Texas is only a Executive magazine named Texas the

6 O’Neil Center 2009 Annual Report Texas Stands Tall in Economic Freedom EXHIBIT The Fraser Institute uses a range of data to determine how 2 states compare in policies favorable to free enterprise.

Delaware 8.5 South Carolina 6.8

Texas 7.8 Pennsylvania 6.8

North Carolina 7.6 Michigan 6.8

Georgia 7.6 California 6.8

Colorado 7.6 Oregon 6.7

New Hampshire 7.5 Oklahoma 6.7

Nevada 7.5 Ohio 6.7

Utah 7.4 New Jersey 6.7

Tennessee 7.4 Kentucky 6.7

Indiana 7.4 Idaho 6.7

South Dakota 7.3 Arkansas 6.6

Nebraska 7.3 Washington 6.5

Virginia 7.2 North Dakota 6.5

Minnesota 7.2 Maryland 6.5

Massachusetts 7.2 Alabama 6.5

Louisiana 7.2 New York 6.4

Iowa 7.1 Alaska 6.4

Illinois 7.1 Vermont 6.3

Wyoming 7.0 Rhode Island 6.2

Missouri 7.0 Hawaii 6.1

Kansas 7.0 New Mexico 6.0

Florida 7.0 Montana 6.0

Connecticut 7.0 Mississippi 5.8

Arizona 7.0 Maine 5.8

Wisconsin 6.8 West Virginia 5.3

0 2 4 6 8 10 0 2 4 6 8 10

Low Freedom Score High Low Freedom Score High

O’Neil Center 2009 Annual Report 7 Texas’ Economic Freedom: A Closer Look EXHIBIT Various measures show how Texas ranks relative to other states in tax burden 3 and other factors that contribute to a market economy’s success.

Individual Income Tax Rates Corporate Income Tax Rates Massachussetts 12.0 Kentucky 6.0 Iowa 12.0 Arizona 7.0 Oregon 11.0 Georgia 6.0 California 10.8 North Carolina 6.9 Hawaii 11.0 Ohio 5.9 Pennsylvania 10.0 Montana 6.8 New Jersey 10.8 Virginia 5.8 Minnesota 9.8 Tennessee 6.5 California 10.6 Oklahoma 5.5 Massachusetts 9.5 North Dakota 6.5 Rhode Island 9.9 Utah 5.0 Alaska 9.4 Arkansas 6.5 Vermont 9.4 New Hampshire 5.0 Rhode Island 9.0 Alabama 6.5 Iowa 9.0 Mississippi 5.0 New Jersey 9.0 Hawaii 6.4 New York 9.0 Connecticut 5.0 Maine 8.9 Missouri 6.3 Maine 8.5 Alabama 5.0 Delaware 8.7 Virginia 6.0 Minnesota 7.9 New Mexico 4.9 West Virginia 8.5 Oklahoma 6.0 Wisconsin 7.8 North Dakota 4.9 Vermont 8.5 Kentucky 6.0 Idaho 7.8 Colorado 4.6 New Hampshire 8.5 Georgia 6.0 North Carolina 7.8 Arizona 4.5 Indiana 8.5 Florida 5.5 South Carolina 7.0 Michigan 4.4 Maryland 8.3 Utah 5.0 Arkansas 7.0 Indiana 3.4 Louisiana 8.0 South Carolina 5.0 Delaware 7.0 Pennsylvania 3.1 Wisconsin 7.9 Mississippi 5.0 Montana 6.9 Illinois 3.0 Oregon 7.9 Michigan 5.0 Nebraska 6.8 Wyoming Nebraska 7.8 Colorado 4.6 West Virginia 6.5 Washington New Mexico 7.6 Ohio 0.3 Kansas 6.5 Texas Idaho 7.6 Wyoming Maryland 6.3 South Dakota Connecticut 7.5 Washington Tennessee 6.0 Nevada Illinois 7.3 Texas Missouri 6.0 Florida New York 7.1 South Dakota Louisiana 6.0 Alaska Kansas 7.1 Nevada 0 2 4 6 8 10 12% 0 2 4 6 8 10 12% 0 2 4 6 8 10 12% 0 2 4 6 8 10 12%

Sales Taxes as Share of GSP Government Consumption / GSP Wahsington 4.3 Wisconsin 2.4 New Mexico 32.6 Wyoming 21.4 Hawaii 4.1 Nebraska 2.4 Mississippi 31.0 Utah 21.4 Louisiana 3.9 Rhode Island 2.4 Maryland 30.5 Kansas 21.3 Arkansas 3.9 Iowa 2.3 Alaska 30.4 New York 21.2 Mississippi 3.8 North Dakota 2.3 Virginia 29.5 California 21.2 New Mexico 3.6 South Carolina 2.3 West Virginia 28.8 Ohio 21.2 Arizona 3.6 New York 2.3 Maine 28.2 Washington 20.8 Tennessee 3.3 Ohio 2.2 Alabama 28.2 Massachusetts 20.4 Florida 3.2 Kentucky 2.2 Hawaii 27.5 Connecticut 20.3 Wyoming 3.1 Minnesota 2.2 Montana 25.7 Wisconsin 19.9 Oklahoma 3.0 Indiana 2.1 Vermont 25.1 Indiana 19.6 Nevada 3.0 Connecticut 2.1 South Carolina 24.9 Oregon 19.4 Utah 2.9 Pennsylvania 2.0 North Dakota 24.5 Iowa 19.3 Kansas 2.9 North Carolina 1.9 Kentucky 24.3 South Dakota 19.2 South Dakota 2.8 New Jersey 1.9 Oklahoma 24.0 Georgia 19.1 Alabama 2.8 Illinois 1.8 Rhode Island 23.2 North Carolina 18.9 Maine 2.7 Maryland 1.6 Pennsylvania 23.1 Nebraska 18.8 Georgia 2.7 Massachusetts 1.5 Idaho 23.0 New Jersey 18.6 Texas 2.6 Vermont 1.5 Missouri 22.8 Colorado 18.5 Michigan 2.6 Virginia 1.4 Arkansas 22.7 Texas 18.3 California 2.6 Alaska 0.8 Arizona 22.4 New Hampshire 17.9 Missouri 2.5 New Hampshire 0.4 Louisiana 22.3 Illionois 17.9 West Virginia 2.4 Montana 0.3 Michigan 22.0 Minnesota 17.8 Idaho 2.4 Oregon 0.3 Tennessee 21.9 Nevada 15.5 Colorado 2.4 Delaware 0.2 Florida 21.5 Deleware 13.0 0 1 2 3 4 5% 0 1 2 3 4 5% 0 5 10 15 20 25 30 35% 0 5 10 15 20 25 30 35%

8 O’Neil Center 2009 Annual Report Government Transfers / GSP Government Share of Labor Force North Dakota 10.7 Massachusetts 4.9 Alaska 24.3 Texas 15.6 Alaska 10.1 Pennsylvania 4.9 New Mexico 23.3 Oregon 15.5 Montana 9.2 Hawaii 4.8 Wyoming 23.2 Missouri 15.4 New Mexico 8.3 Ohio 4.7 North Dakota 20.2 Maine 15.4 West Virgina 8.3 North Carolina 4.5 Mississippi 20.0 Colorado 15.1 Mississippi 8.2 Oregon 4.5 Hawaii 19.4 Vermont 15.1 South Dakota 8.1 Maryland 4.4 Oklahoma 19.1 Georgia 15.1 Vermont 7.3 Washington 4.3 Louisiana 18.9 Tennessee 15.0 Wyoming 7.3 California 4.3 West Virginia 18.8 New Jersey 14.8 Maine 7.3 Utah 4.3 Kansas 18.5 Arizona 14.6 Arkansas 7.3 Michigan 4.3 Montana 18.2 Connecticut 14.6 Rhode Island 6.3 Wisconsin 4.2 Virginia 18.1 Ohio 14.5 Alabama 6.2 Georgia 4.2 Alabama 17.7 California 14.5 New York 6.2 Minnesota 4.2 South Dakota 17.5 Delaware 14.4 Kentucky 6.1 New Hampshire 4.0 Maryland 17.1 Wisconsin 14.1 Louisiana 5.8 Indiana 3.9 South Carolina 17.1 Michigan 14.1 South Carolina 5.7 Illinois 3.9 Washington 16.9 Minnesota 14.0 Idaho 5.6 Florida 3.8 Utah 16.7 Illinois 13.8 Oklahoma 5.6 Texas 3.7 Nebraska 16.7 Indiana 13.8 Iowa 5.4 Connecticut 3.4 Idaho 16.5 Massachusetts 13.0 Nebraska 5.4 Colorado 3.3 North Carolina 16.4 Pennsylvania 13.0 Tennessee 5.4 New Jersey 3.1 Kentucky 16.3 Florida 12.8 Missouri 5.2 Virginia 3.0 New York 16.1 Rhode Island 12.6 Kansas 5.0 Deleware 2.7 Arkansas 15.8 New Hampshire 12.5 Arizona 4.9 Nevada 2.6 Iowa 15.7 Nevada 12.1 0 2 4 6 8 10 12% 0 2 4 6 8 10 12% 0 5 10 15 20 25% 0 5 10 15 20 25%

Union Membership Rate Minimum/Average Wage New York 27.5 Montana 12.2 Vermont 39.3 Massachusetts 28.2 Hawaii 26.7 Alabama 11.7 Mississippi 39.0 Kansas 28.0 Alaska 24.1 New Hampshire 11.5 Maine 39.0 Ohio 27.8 New Jersey 21.7 Kentucky 10.8 Oregon 38.7 Wisconsin 27.8 Michigan 20.4 New Mexico 10.7 West Virginia 36.6 Pennsylvania 27.3 Washington 20.4 Mississippi 9.7 Washington 35.4 Georgia 27.3 California 17.8 Wyoming 9.5 Rhode Island 34.6 North Dakota 27.3 Illinois 17.6 Nebraska 9.5 Arkansas 34.2 South Dakota 27.2 Wisconsin 17.2 Kansas 9.5 Montana 33.5 Iowa 27.0 Ohio 17.2 Colorado 9.4 Idaho 33.4 Louisiana 26.8 Connecticut 17.0 North Dakota 9.2 South Carolina 32.5 Connecticut 26.7 Rhode Island 16.8 South Dakota 8.2 Kentucky 32.2 North Carolina 26.5 Minnesota 16.4 Arizona 7.7 Alabama 32.2 Nebraska 26.1 Oregon 15.7 Louisiana 7.4 California 31.4 New Hampshire 25.9 West Virgina 15.5 Florida 7.2 Oklahoma 31.2 New York 25.1 Nevada 15.1 Tennessee 6.6 Illinois 31.1 Alaska 25.0 Pennsylvania 15.0 Oklahoma 6.4 Hawaii 30.2 Texas 24.8 Maryland 15.0 Idaho 6.3 Utah 30.2 Maryland 24.5 Massachusetts 14.9 Virgina 6.2 Arizona 30.0 Minnesota 23.7 Maine 13.6 Texas 6.2 New Mexico 29.6 Nevada 23.5 Iowa 13.5 Utah 6.1 Michigan 29.1 Colorado 23.3 Indiana 13.2 Georgia 6.0 Missouri 28.9 Virginia 23.1 Vermont 13.0 Arkansas 6.0 Florida 28.6 New Jersey 22.9 Deleware 12.9 North Carolina 3.9 Indiana 28.4 Wyoming 20.0 Missouri 12.6 South Carolina 3.3 Tennessee 28.4 Delaware 19.0 0 5 10 15 20 25 30% 0 5 10 15 20 25 30% 0 5 10 15 20 25 30 35 40% 0 5 10 15 20 25 30 35 40%

O’Neil Center 2009 Annual Report 9 Job Growth Fastest in Dallas First, hiding from globalization leads EXHIBIT to economic decline. Second, global- Fed District ization creates opportunities for many 4 Greater economic freedom has been a key factor U.S. companies and workers. in stimulating employment gains in a region that Simple math provides a rough idea includes Texas and parts of Louisiana and New Mexico. of what’s out there. With 306 million people, the U.S. makes up only a small Index of Employment 115 share of the world’s population of 6.5 billion. So 21 of 22 potential customers are beyond our borders. Just a small 110 percentage of the world’s business will add significantly to the sales and Dallas employment of companies in DFW and 105 the rest of the United States. Big overseas markets too poor to Richmond buy or hunkered down behind protec- 100 Kansas City tionist walls would mean little to U.S. Minneapolis San Francisco companies. In the past two decades, Atlanta New York however, China, India and many other 95 Philidelphia countries have freed their markets and St. Louis Boston opened their economies—joining the Cleveland 90 Chicago global capitalist system. These remark- 2001 2002 2003 2004 2005 2006 2007 2008 2009 able revolutions of ideology and policy created 3 billion new capitalists, igniting growth spurts that have lifted millions of people out of poverty. best place for job growth and business World of Opportunity Consider just China and India, with in 2009—and California the worst. a combined population of 2.5 billion. Employment growth in the 12 Globalization is a straightforward From 1998 to 2008, China’s economy Federal Reserve districts confirms concept—the breakdown of barriers to expanded an average 9.5 percent a that Texas’ economy has been doing the movement of goods, services, money, year and India’s grew by 7 percent a particularly well in the past few years. people and ideas across national bound- year (Exhibit 5). The growth means At mid-decade, with recovery from aries. Integrating the world economy workers who are eager to buy consumer the relatively mild 2001 recession increases competition for workers and goods and companies that are ready to under way, the Dallas Fed’s area was companies, and it unleashes forces that purchase intermediate inputs. among the top three districts in job forge more efficient international We hear about these Asian giants’ growth. Since then, it has rocketed to distribution of production. Low-wage huge exports, but economic revival has the top, faring better even after the nations gain routine manufacturing and also whetted these nations’ appetites for nation fell into a deep recession at the services, and high-wage nations specialize the world’s goods and services. China end of 2007 (Exhibit 4). in more sophisticated economic activity. exports 35 percent of its GDP—but it Legally speaking, Texas’ economic Globalization’s competition and imports 28 percent. India exports 24 freedom doesn’t extend beyond the efficiency often come at the cost of percent and imports 30 percent. state borders. As a practical matter, wrenching changes in the labor market, Globalized countries, regions, indus- however, the state’s companies can and many Americans want to retreat tries and companies stand the best take advantage of that freedom to in vain hopes of maintaining the status chance of profiting from the growing prosper nationally and even globally. quo. That’s a mistake for two reasons. demand from China, India and other

10 O’Neil Center 2009 Annual Report countries. When we look at DFW, we up from 61 percent six years earlier. see a corporate makeup and talent pool Kimberly-Clark, an Irving-based maker tailor made for the global marketplace. of Kleenex tissues, Huggies diapers and Measuring globalization isn’t easy for other paper products, saw its foreign nations. It’s even trickier for states and sales rise from 40 percent of revenues in cities, whose international connections 1998 to 48 percent in 2008. When we look at DFW, aren’t always well documented. For At Fluor, an engineering and North Texas, signs of increased global- construction firm based in Irving, the we see a corporate ization include an expanding roster overseas share of revenues went from of foreign-owned companies, more 38 percent to 49 percent over the makeup and talent pool foreign-born residents and healthy decade. The 10-year increase in share of tailor made for the international traffic at DFW Interna- overseas sales for Ensco, a Dallas-based tional Airport. provider of offshore drilling services, global marketplace. Evidence of DFW’s globalization is was 45 percent to 79 percent. Commer- particularly strong at the company level. cial Metals, an Irving-based company that Many local firms have made strides in manufactures, recycles and markets steel foreign markets, with international and other metals, went from 14 percent operations accounting for a greater share to 41 percent. of their overall revenues (Exhibit 6). Some companies are relative Dallas-based Texas Instruments newcomers to the global market. has had an eye on global markets for Grapevine-based GameStop, the decades. The company opened its first world’s largest video game retailer, had foreign plant in 1957 and expanded overseas operations as it became one Big Overseas Markets Growing Rapidly of the world’s leading suppliers of EXHIBIT DFW companies can find export opportunities inemerging semiconductors for cell phones and 5 economies that are growing rapidly. When combined, other products. China and India make up a market eight times larger than By 1998, TI was well-established the United States, growing three times as fast. globally, earning two-thirds of its revenues outside the United States. Average Annual Percent Growth (1998-2008) Foreign sales fluctuated over the next 10 decade but hit 88 percent of total 9 9.6 revenues in 2008. Meanwhile, domestic 8 sales shrank—both in relative and 7 absolute terms. 7.1 Like TI, Fort Worth-based American 6 5.9 Airlines has a decades-long heritage of 5 4.9 doing business internationally. From 4 4.4 1998 to 2008, its foreign operations 3.8 3 grew from 30 percent to 41 percent 2.7 2 of revenues, providing the only source 2.1 of growth in a tough decade for the 1 1.0 airline industry. 0 China India Russia Pakistan Africa Korea U.S. Europe Japan Farmers Branch-based Celanese, a 1,336 1,178 142 169 1,000 50 309 831 127 major chemical producer, logged 75 Population in millions percent of its sales overseas in 2008,

O’Neil Center 2009 Annual Report 11 DFW Companies Venture Abroad EXHIBIT Taking advantage of globalization, many North Texas-based companies 6 are finding that foreign countries offer the best prospects for sales growth.

16,000 25,000 $ Million Sales $ Million Sales

20,000 12,000

87.6% 15,000 47.8% 8,000 Foreign Sales Foreign Sales 67.7% 10,000 40.2% 4,000 5,000

Domestic Sales Domestic Sales 0 0 1998 2000 2002 2004 2006 2008 1998 2000 2002 2004 2006 2008

25,000 25,000 $ Million Sales $ Million Sales

20,000 40.5% 20,000

29.5% Foreign Sales 15,000 15,000 49.0% 10,000 10,000 38.4% Foreign Sales

5,000 5,000

Domestic Sales Domestic Sales 0 0 1998 2000 2002 2004 2006 2008 1998 2000 2002 2004 2006 2008

8,000 3,000 $ Million Sales $ Million Sales

2,500 6,000 2,000

74.8% 4,000 1,500 Foreign Sales 79.2% 60.9% 1,000 Foreign Sales 2,000 45.3% 500 Domestic Sales Domestic Sales 0 0 2002 2004 2006 2008 1998 2000 2002 2004 2006 2008

12 O’Neil Center 2009 Annual Report 12,000 7,000 $ Million Sales $ Million Sales 10,000 5,000 32.1% 8,000 Foreign Sales 41.3% 20.6% 6,000 Foreign Sales 3,000 4,000 14.1% 2,000 1,000 Domestic Sales Domestic Sales 0 0 1998 2000 2002 2004 2006 2008 1998 2000 2002 2004 2006 2008

10,000 5,000 $ Million Sales $ Million Sales

8,000 4,000 26.6% Foreign Sales 6,000 3,000 65.4% 20.6% 4,000 2,000 Foreign Sales

2,000 1,000 41.9% 14.1% Domestic Sales Domestic Sales 0 0 2000 2002 2004 2006 2008 1998 2000 2002 2004 2006 2008

2,500 $ Million Sales $ Million Sales 400,000 2,000 39.6% Foreign Sales 300,000 1,500 75.7%

200,000 Foreign Sales 1,000

14.4% 100,000 500 92.0% Domestic Sales Domestic Sales 0 0 1998 2000 2002 2004 2006 2008 1998 2000 2002 2004 2006 2008

O’Neil Center 2009 Annual Report 13 no overseas sales until 2005; since then, and watchmaker Fossil (Exhibit 7). As izing. For example, Mary Kay sells the company has spread to 16 countries Southwestern Bell, AT&T was once cosmetics in 35 countries. Hunt Oil and its foreign operations rose to 27 the local phone company; now, it earns operates in Canada, Yemen, Peru and percent of revenues in 2008. more than a quarter of its revenues from other countries. Beck Group, a Dallas- Alliance Data Systems, a Dallas-based global operations. based construction firm, has established company that sells data and electronic In addition, internationally successful a foothold in Mexico City. marketing services, expanded its overseas companies based elsewhere have major For nearly two decades, SMU’s business from 14 percent to 40 percent operations in DFW—for example, Caruth Institute for Entrepreneurship of revenues. Dallas’ Blockbuster, the Hewlett-Packard added to its North has identified DFW’s fastest-growing movie and video rental company, rose Texas presence in buying EDS, a Plano- emerging companies. More than half from 21 percent to 32 percent. based information processing company, the Dallas 100’s class of 2009 already Foreign customers accounted for in 2008. PepsiCo operates its global had ties to foreign markets, suggesting nearly two-thirds of revenues at snack-food division from Frito-Lay’s the up-and-coming generation of Flowserve Corp., an Irving-based Plano headquarters. business leaders is focused on globaliza- industrial pump and valve supplier for Yum! Brands has been going global tion’s opportunities. energy, power, chemical and water. For with KFC fried chicken, Pizza Hut and International business runs two Irving-based ExxonMobil, the foreign Taco Bell, and its Dallas-based subsidiary ways—imports as well as exports. DFW share has slipped over the past decade, Yum! Restaurants International oversees companies selling abroad are joined by but the oil giant’s overseas revenues more than 13,000 restaurants in 110 others with business models that rely have risen sharply and still account for countries. DFW also hosts significant on international supply chains. Plano- three-quarters of the total. operations for building systems and auto based J.C. Penney and Michaels Stores, Many other DFW Fortune 1000 parts maker Johnson Controls, computer an Irving-based national arts and crafts companies are doing well in the services icon IBM and consumer products chain, stock their shelves with foreign- global marketplace—among them, giant Procter & Gamble. made goods—so they can hold down semiconductor manufacturer Diodes, Among privately held companies, costs and survive in the highly competi- chemical-maker Kronos Worldwide. many DFW stalwarts have been global- tive U.S. retail sector.

Globalizing North Texas EXHIBIT In addition to the companies featured in Exhibit 6, DFW’s 7 international reach extends to other locally significant Fortune 2000 firms (foreign revenues as shares of total).

DFW Based Pct. DFW Operations Pct. Diodes 80.0 Hewlett Packard 68.8 Kronos Worldwide 62.1 Johnson Controls 64.9 Fossil 56.4 IBM 64.6 AT&T 27.0 Procter & Gamble 60.5 Pfsweb 22.1 Yum! Brands (photo) 54.6 Cinemark Holdings 21.9 General Motors 49.4 Lennox International 18.6 Pepsico 48.0 Sally Beauty Holdings 18.0 Microsoft 40.5 Zales 15.2 FedEx 28.1 Perot Systems 12.8 Raytheon 19.8

14 O’Neil Center 2009 Annual Report Among the DFW companies selling services abroad is Laguarda.Low, an architectural firm whose project include the Avenida 8 shopping center in Sao Joao da Madiera, Portugal.

Selling Our Services potential for making business contacts. services across international borders. In the 21st century, the Internet is The United States has been a big winner, For millennia, coastal cities have been to services what the train was to goods ranking No. 1 in services exports by a at the forefront of globalization—not in the 19th century—a revolutionary wide margin. U.S. companies sold $526 surprising because they were the portals delivery vehicle. The Internet breaks billion in services abroad in 2008, a gain through which people and goods down the physical obstacles that once of 84 percent since 2000, surpassing the entered and left most countries. Cities stifled international trade in services. 66 percent growth rate for goods. like DFW could only connect to the The result is a fusion of national services U.S. trade deficits in goods have been world through these seaports. Now, markets into global ones. Companies massive; meanwhile, the country runs a information and communications can now court far-flung customers and large and growing surplus in services. technologies are eroding coastal cities’ deliver services nearly anywhere in the The United States ran a services surplus edge and giving hinterland cities direct world cheaply and quickly. of $144 billion in 2008, up from $75 access to the global markets. The impossible becomes possible, billion in 2000 and $58 billion in 1992. These advances are familiar by then routine. Bandwidth is wide For U.S. companies, winning in the now—computers, cell phones, sophisti- enough to manipulate tiny comput- global services marketplace owes to cated software, fiber-optic transmission erized surgical tools at vast distances, the excellence of their products, not lines and, most important, the Internet. allowing doctors to operate on subsidies or protectionism. In the past decade or so, this global patients in other counties. Using Digging down into Commerce communications network has reached TutorVista.com, American students Department data shows the United critical mass in two key areas. First, data- can sit at their home computers and States has been a top-notch competitor transmission capacity has become large tap into on-line tutoring from PhD.s in many of the high-value-added services enough to move vast amounts of infor- in India and other far-off places. that support well-paying jobs. In 2008, mation at trivial cost. Second, connec- New technologies, combined with a our exports exceeded imports by nearly tivity has reached nearly every corner worldwide lowering of trade barriers, nine to one in operational leasing, a of the world, greatly expanding the have fueled a global surge in selling segment of the industry that handles

O’Neil Center 2009 Annual Report 15 short-term deals on airplanes, vehicles risk through global reinsurance markets. industries accounted for 83.2 percent and other equipment (Exhibit 8). Dallas’ services prowess has deep of the metropolitan area’s private-sector Our edge was six to one in distrib- historical roots. Becoming a railroad employment, up from 76.8 percent uting movies and television shows and crossroads in the 19th Century created at the decade’s start. Meanwhile, the nearly four to one in mining and archi- wealth and a thriving services economy– share of workers in goods-producing tectural, construction and engineering with Dallas as a broker for Texas’ industries has been declining steadily. services. Royalties and license fees, one cotton and a financier for the state’s oil Most U.S. cities have seen similar of the largest categories in dollar terms, industry. Over the decades, the skills employment-base shifts, but DFW has came out better than three to one, as and infrastructure that served local also been rapidly enhancing its capacity did law, education, finance, medicine industries grew to meet the needs of as a global services provider. It has and advertising. national customers. Now, DFW services built up its workforce in information, All told, the U.S. did well in 21 of companies are taking the next step—the finance, and professional and business 22 services trade categories. It recorded global arena. services­—the categories most likely to striking surpluses in 12 of them. We held Data aren’t available to directly reach customers outside the metro- our own in nine others, where exports measure major cities’ services trade. politan area. By contrast, education, and imports were fairly well balanced. However, employment counts show health care, leisure and hospitality are Only in insurance did the United States that services make up a large and services that cater largely to local and run a significant deficit, an outcome that growing share of DFW’s economy. At regional markets. reflects a rich country’s need to spread the end of 2009, service-producing The three highly tradable services A U.S. Success Story: Services Trade EXHIBIT Comparing exports and imports shows that U.S. companies are 8 competitive in an overwhelming majority of services categories.

Leasing 8.3 Film, TV 6.6 Mining 4.2 Architecture, Construction, Engineering 4.0 Legal 3.8 Royalties 3.4 Education 3.4 Medical 3.3 Financial 3.1 Advertising 3.1 Industrial Engineering 2.4 Other 2.0 Equipment 2.0 Travel 1.4 Telecom 1.3 Management, Consulting 1.3 R&D, Testing 1.2 -1.0 Fares -1.2 Freight and Port -1.3 Computer and Database -1.6 Accounting -4.0 Insurance -6 -4 -2 -0 2 4 6 8 10 Imports Exceed Exports Ratio Exports Exceed Imports

16 O’Neil Center 2009 Annual Report Primed for Globalization EXHIBIT The Dallas area has an edge in the share of 9 private-sector employment in the three types of services that are easily exported—information, finance, and professional and business services. Percent Now, DFW services 30 companies are taking 29 29.5 1990 2009 28 the next step—the 27 27.2 global arena. 26

25 25.1 24 24.4 24.5 23 23.2 22

21

20 Houston San Antonio Dallas industries highlight a key differ- side cities have the necessary skills to How to Keep It Going ence among DFW, Houston and San exploit the boom in services trade. Antonio. In 1990, the three cities The same strengths don’t show up on The Dallas-Fort Worth area doesn’t all had slightly less than a quarter of the Fort Worth–Arlington side of the face the daunting burdens of a St. Louis their private employment in informa- Metroplex. or a Cleveland. Those cities’ challenge tion, finance, and professional and DFW companies are finding their lies in reversing long-term economic business services. Since then, DFW has niche in global services—for example, declines. Now at the top of its game, added 5 percentage points, well above American Airlines, Alliance Data and DFW needs to make sure it retains— San Antonio’s gain of 2.8 points and Blockbuster among the big companies. and, if possible, enhances—the advan- Houston’s 1.9 points (Exhibit 9). Law firms have stretched overseas with tages that attract new residents, new What’s more, the Dallas side of the their clients, opening offices in Dubai, jobs and new employers. metropolitan area, which includes Moscow and dozens of other cities. We already know how to keep a good Plano and Irving, exceeds the national Smaller DFW companies are also thing going. It starts with embracing norm in employment in a half-dozen going global. In the last 10 years economic freedom. Keep taxes low and key service industries. According to Laguarda.Low, a Dallas firm, has government small. Shun unions. Let location quotients calculated by the worked on more than 300 projects in new jobs and industries rise to replace Dallas Fed, Dallas’ concentration of 25 countries, ranging from Portugal those heading into decline. jobs is 60 percent higher than the U.S. and Poland to India and China. Key elements of economic freedom in both information and finance and Six-person Burada Inc. is a top-ranked lie beyond DFW’s direct control. Tax, insurance. The area also shows strength software developer with projects labor and trade policies are decided in in professional and business services. in Spain and the United Kingdom, Austin and Washington, D.C. These By and large, these match the kinds employing workers in Russia and policies have a direct bearing on of services that show up in national Canada—all run out of a home office economic freedom, and it’s incumbent export statistics, suggesting the Dallas- in Wiley, just east of Plano. on DFW business and political leaders

O’Neil Center 2009 Annual Report 17

Seven Rules for Exporting Services Many companies in DFW and elsewhere are already doing well selling services overseas. What makes them so successful? They didn’t assume their services couldn’t be exported. Today’s technologies allow us to do things 1 that were unthinkable just a decade ago. They looked for foreign growth. China and India have been America’s fastest growing services markets. 2 Their economies have been expanding rapidly in this decade, even during recession in America. They didn’t buy into the myth of anti-Americanism. Foreign consumers are fascinated by 3 U.S.products and consumerism. The United States took eight of the top 10 spots in the Interbrand survey of best global brands in 2009. Look at the 10 biggest budget Hollywood movies: Foreign box office receipts nearly doubled domestic revenues.

U.S. Movies Cash in Overseas Movie Budget US Gross Foreign Gross 1 Pirates of the Caribbean: At World’s End (2007) $300,000,000 $309,420,425 $651,576,067 2 Spider-Man 3 (2007) $258,000,000 $336,530,303 $554,341,323 3 Harry Potter and the Half-Blood Prince (2009) $250,000,000 $301,959,197 $635,540,708 4 Avatar (2009) $237,000,000 $742,844,322 $1,950,000,000 5 Superman Returns (2006) $232,000,000 $200,120,000 $191,000,000 6 Quantum of Solace (2008) $230,000,000 $169,368,427 $407,000,000 7 Pirates of the Caribbean: Dead Man’s Chest (2006) $225,000,000 $423,315,812 $642,344,000 8 The Chronicles of Narnia: Prince Caspian (2008) $225,000,000 $141,621,490 $277,868,796 9 Transformers: Revenge of the Fallen (2009) $210,000,000 $402,111,870 $434,185,358 10 King Kong (2005) $207,000,000 $218,080,025 $332,437,332 Total $3,245,371,871 $6,076,293,584

They adapted services to the local market. Delivering Americana can only go so far. Every country 4 has its own customs and tastes, and successful services exporters get to know what the customers want. Yum Brands! took localization to its ultimate—selling Chinese food to the Chinese. They developed multinational labor resources. Local workers and expats can both be effective, but they 5 can’t replace a cadre of true globalists, steeped in the firm’s corporate culture but flexible and worldly enough to do business in nearly any country. They entered markets that don’t yet have a home-grown infrastructure of sophisticated services. 6 Texas law firms have been negotiating global energy deals for generations, so they’re in great demand in the Middle East, ex-Soviet republics and elsewhere. They didn’t see services exports as a game only for big business. Among the Fortune 2000, 7 the percentage of sales coming from abroad shows no correlation to company size. Many small businesses are going global right out of the chute.

18 O’Neil Center 2009 Annual Report to fight against bad policies in the state 21st century’s engine of growth will be Embracing economic freedom, and national arenas. globalization. committing to globalization and Local policies matter, too. Economic Local, in-state and national business deepening our talent pool won’t be freedom provides a great advantage may be more convenient and less risky, easy. These actions require great effort to Dallas, but we should never forget but some of the best opportunities in and unleash forces that bring competi- that we compete within the state with upcoming decades will come from the tion and constant change. But facing up Houston, Austin, San Antonio and emerging nations with a need for the kind to globalization makes us stronger and other metropolitan areas that offer the of sophisticated services DFW can offer. change revitalizes us. We mustn’t shrink same advantages. America’s edge lies in the specialized from the challenge. If we get it right Keeping a good thing going also services, which create jobs for well- on economic freedom, globalization entails committing to globalization educated workers. DFW’s dynamic and services, the ascension of DFW will by actively pursuing foreign business economy has attracted brainpower continue for many generations. (see box, page 18). from the rest of the state, the nation W. Michael Cox is director of the Back in the 1870s, Dallas got it right and other parts of the world. However, William J. O’Neil Center for Global by hopping aboard the era’s growth North Texas could do more to develop Markets and Freedom. Richard Alm engine—the railroads. With each genera- home-grown talent, the graduates of is writer in residence at the Center. tion, DFW business leaders and workers North Texas colleges and universities [email protected] have chased opportunity wherever going to work in offices just a short [email protected] it arose. This is no time to stop. The drive from their campuses.

Notes and Data Sources average per capita income of $34,461 federalreserve.gov/otherfrb.htm. in 2007, compared to $15,416 for the EXHIBIT 5 EXHIBIT 1 second quartile, $7,205 for the third World Bank, World Development U.S. Census Bureau, various publica- quartile and $4,039 for the bottom Indicators and United Nations tions, notably Table 1. Rank by Population quartile. The United States ranks sixth in Department of Economic and Social of the 100 Largest Urban Places, Listed economic freedom. Its per capita income Affairs, World Population Prospects, Alphabetically by State: 1790-1990. was well above the top-quintile average Table A.1. BOX, PAGE 3 at $45,592. EXHIBITS 6 and 7 Ninth Census of the United States, June EXHIBIT 3 Thomson One Banker and company 1, 1870, Volume 1, Table 3: Population Highest marginal income tax rate and annual reports. The logos are of Civil Divisions Less Than Counties, highest corporate income tax rate: The registered trademarks of the pages 270-75. Tax Foundation. Sales tax collected as companies and used by permission. PAGE 6 a percent of gross state product (GSP), EXHIBIT 8 For more on Texas’ business tax, see government consumption as a percentage U.S. Department of Commerce, Jason L. Saving, “Will New Business Tax of GSP, transfers and subsidies as a per- Bureau of Economic Analysis. Dull Texas’ Competitive Edge,” Federal cent of GSP, government employment Reserve Bank of Dallas, Southwest as a percent of total employment, EXHIBIT 9 Economy, March/April 2008. union membership rate, and minimum U.S. Department of Labor, Bureau of Labor Statistics. EXHIBIT 2 relative to average wage: The Fraser The Fraser Institute. Economic Freedom Institute. Economic Freedom of North BOX, PAGE 18 of North America 2008 Annual Report, America 2008 Annual Report. Nash Information Services, by Amela Karabegovic and Fred EXHIBIT 4 www.the-numbers.com, movie McMahon. The Fraser report documents Federal Reserve Bank of Dallas. budget records. the link between the economic freedom For the boundaries in each Federal 2009 O’Neil Center Annual Report and higher incomes. Countries in the Reserve District, see the Federal design by wiswallmclaindesign top 25 percent of the rankings had an Reserve System map at http://www.

O’Neil Center 2009 Annual Report 19 2009: The Year in Review

The O’Neil Center made significant and national economic conditions, the Need to Succeed in Today’s Competitive strides in just its second year. W. Michael car industry under duress, the Dallas Global Economy?” Cox became full-time director in May Cowboys’ business empire and health- Cox presented his research on Dallas- after ending a 25-year career at the Federal care issues. Fort Worth’s global opportunities, Reserve Bank of Dallas. Cox joined four For the Intercollegiate Review, Lee expanded into the essay in this annual holdovers on the center’s faculty—SMU wrote about how capitalism’s benefits are report. Here are highlights from other Cox dean Albert W. Niemi Jr., Michael often miscast as problems in “Nothing presentations: Davis, Dwight R. Lee and Maria Minniti. Fails Like the Success of Private Enter- Richard Fisher, president and CEO, Collectively, they taught more prise and Freedom.” He presented a The Federal Reserve Bank of Dallas. than 700 students in 21 classes. They paper titled “Solving Problems in the Recent decades have been marked by published more than 20 articles and gave Information Age by Destroying Vital rapid integration of the world economy, more than 50 speeches, seminars and Information” at the Association for but some analysts see the sharp trade outside presentations. The news media Private Enterprise Education meeting in contraction in 2008 and 2009 as a turned to O’Neil faculty members’ Guatemala City, Guatemala. signal of globalization’s reversal. Fisher expertise on at least 110 occasions. Minniti held a PhD workshop refuted this deglobalization thesis. Cox wrote “From Teflon to Tarzan, on entrepreneurship research that According to Fisher, there’s no the ‘30s Proved Capitalism Never attracted 25 participants from 15 evidence of reversal in globalization’s Sleeps” for Investor’s Business Daily,” countries. She and a co-author analyzed signature feature—the whittling away arguing that capitalism generates data from 16 countries and published of gaps between home-market and progress even in the worst of times. their findings in an Economic Letters world prices. He concluded that trade’s In a Federal Reserve Bank of Dallas article titled “Unemployment Benefits decline came not from deglobalization Economic Letter titled “Labor Market Crowd Out Nascent Entrepreneurial but from plunging consumer demand, Globalization in the Recession and Activity.” Minniti received an award exacerbated by the drying up of trade Beyond,” he and two co-authors for Outstanding Teaching in the MBA credit in the wake of financial market found that virtual immigration held Program at SMU’s Cox School of turmoil. up better than physical immigration Business. Thomas J. Falk, chairman and CEO in the recent recession. In October, the Center hosted its first of Irving-based Kimberly-Clark, Television, radio and print reporters conference. More than 300 executives joined by two of the company’s global called on Davis for commentary on a and students gathered at SMU’s Collins executives— Stephen Shao, who runs range of topics—among them, DFW Center to explore “What Do Businesses the China operations, and Gustavo

W. Michael Cox, Director, Albert W. Niemi Jr., Dean, Michael Davis, SMU Cox Dwight R. Lee, William J. Maria Minniti, Professor William J. O’Neil Center for SMU Cox School of Business School of Business O’Neil Endowed Chair in and Bobby B. Lyle Chair Global Markets and Freedom Global Markets and Freedom in Entrepreneurship

20 O’Neil Center 2009 Annual Report Calvo Paz, the top manager in Russia in 1970, Microsoft in 1989, America expertise. Some companies want to and Eastern Europe: The Irving-based Online in 1994, Qualcomm in 1999 and bring international experience into paper and consumer products producer Google in 2004. O’Neil said it’s just as their U.S. headquarters and others operates more than 100 manufacturing important to watch for early warnings seek to beef up their capacity for rapid facilities in 45 countries. Recruiting of distress—as with Enron in 2001. expansion overseas. talented people remains one of the Robert A. Lawson, co-author of Richard K. Templeton, chairman, key challenges for global businesses— the Economic Freedom of the World president and CEO of Texas Instru- especially in fast-growing markets like report: The Auburn University ments Inc.: The electronics company’s China and Russia, Falk said. professor reviewed the latest results top executive ended the confer- Shao, a Chinese-born MIT graduate, from the Fraser Institute’s annual ence with a succinct message for said that offering opportunities was report that tracks economic freedom companies, workers, cities, states and the best way to recruit China’s young, in 141 countries around the world. even universities: “The winners in the ambitious college graduates. Calvo Paz, The United States ranked sixth in the world will be those who embrace the a native of Argentina, said the challenge world in economic freedom, trailing global marketplace as an opportunity in Russia was finding entrepreneurial Hong Kong, Singapore, New Zealand, not as a threat.” gems among a population used to being Switzerland and Chile. TI serves as a model of the global told what to do. Lawson said U.S. economic freedom company—88 percent of its revenue “The consumer is at the center of rose for two decades but ebbed since from foreign sales, 60 percent of its everything we do,” Falk said. In Russia, 2000. Two factors are at work— 25,000 employees overseas, manufac- mothers tend to be young and fashion- growing government spending and turing and sales in 30 countries. As a able, snapping up blue jean-themed weakening protection for property global company, TI benefits from being Huggies diapers, Calvo Paz said. In rights. He expects the country’s scores able to hire the best and brightest no China, mothers are older and willing to slip further when data for the past matter their nationality and seize oppor- to spend to buy the best for their one two years become available. tunities almost anywhere. child, Shao said. Scott Smith, vice president of Being close to customers pays off, William J. O’Neil, publisher staffing, AT&T Corp.; talent coach Templeton said. In the 1980s, TI’s of Investor’s Business Daily: The Tina Sivinski, founder, Viveza; and operation in Nice, France, helped an legendary investor and author said executive recruiter Nancy Keene, obscure lumber company from Norway young companies drive American director, Stanton Chase: According to develop a digital signal processor. capitalism. Every one of the 27 cycles Scott, AT&T hires 25,000 to 30,000 Working with Nokia, TI got a start in a since 1880 was led by entrepreneurs workers a year. Over the next few years, business where it now has 50 percent of or innovators who created something he said, the biggest challenge will be the global market. newer, faster, better or cheaper. filling the ranks of the “knowledge A decade ago, TI Japan took on the In this competitive society, O’Neil workers,” loosely defined as college challenge of putting the power of a Sony said, the new will rise to eclipse the graduates. In 2012, the number of jobs Playstation into a cell phone, creating old, so investors can’t merely buy that require a degree will exceed supply a toehold in the smart-phone market. and hold. They will do much better by 25 million. Now, TI engineers are working on looking for innovative companies Sivinski described talent as “the single battery powered bicycles in Taiwan and about to break out. biggest competitive advantage that we solar-powered LED lighting in India. O’Neil verified this proposition have”—a statement true for firms as “When you’re global, you get access to through a dozen or so historical well as individuals. She urged business the best ideas,” Templeton concluded. examples, starting with Richmond & leaders to adopt programs to identify Danville railroad in 1885. He pointed and develop it. To view conference videos or find more to General Motors in 1915, IBM in In helping companies find the talent information about the O’Neil Center, 1926, RCA in 1927, Texas Instru- they need to prosper, Keene has seen go to: www.oneilcenter.org. ments and Xerox in 1958, McDonald’s a growing need for international

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