For two millennia, before most people were even fully convinced the earth was round, the economy has been a global one. From salt to spices, cod to barley, timber to iron ore, supply in one part of the world affected demand and prices in another.
Europe sent wool and handcrafts to the Far East. Asia sent silk and the Black Plague back toward Europe (one of the first signals that a global economy might have its drawbacks).
The Pittsburgh region has been a player in this global economy since its early days, first as a key inland port, then as a world leader in glass manufacturing, selling glassware in Central and South American markets. By the mid-1800s, Pittsburgh's plentiful coal meant that it could mass-produce iron and, later, steel, just as robustly as the traditional manufacturing powerhouses, Great Britain and Germany.
Today, we no longer make the same quantities of glass and metals -- in fact, manufacturing of all kinds makes up less than 8 percent of the Pittsburgh region's employment base, the lowest such figure since we began keeping track.
But the city, like all major cities, still plays on a global field:
Clothes designed by the South Side's American Eagle Outfitters are produced in Vietnam and India and sold in Dubai and Russia. Pittsburgh's Heinz ketchup -- now produced around the world, but not in Pittsburgh -- is selling well in places like Poland and China, and foreign sales make up more than half of all Heinz sales. And, yes, we still have some heavy industry -- U.S. Steel's Mon Valley Works is still cranking out coke and steel for worldwide buyers.
Those are just the big goods producers. Much of what we trade globally these days isn't physical, but intellectual -- software code, education, health care, legal expertise, robotics technologies, nuclear energy know-how and much more.
"We're becoming a growing economy, and more connected internationally," said James H. Cassing, professor of economics at the University of Pittsburgh.
A lot of the trends that afflicted Pittsburgh post-WWII and through the 1980s -- such as low transportation costs worldwide and increased fragmentation of manufacturing -- are now working in the region's favor.
A carved-up production process means that Pittsburgh can still be a player in specialty metals. Lower transport costs means it's easier to export the smaller pieces of our economy and also easier for foreigners to come here to take advantage of our service economy, higher ed institutions and hospitals.
"It's really been quite quantitatively important to our economy. It's one of the reasons we're dynamic," Mr. Cassing said.
The biggest difference between today's global economy and the one from the 1800s, or even the 1300s, is the lightning speed with which developments in one part of the world can affect business in another. A drought in Russia causes an instant spike in grain prices in America. Morning concerns over Greek debt can cause U.S. stock prices to fluctuate by the afternoon (if not sooner). A tsunami in Japan means instantly improved auto sales for Detroit. A positive construction report in the U.S. can cause copper futures to spike in Europe.
"The world really is a smaller place," Mr. Cassing said.
The quick shifts in market conditions (not to mention shifting political winds) means, to many thinkers, today's global economy is more unstable than it used to be. As world powers scramble to contain the effects of the recent recession, "Emerging countries will push for greater accommodation on the part of a global economy that is still over-dominated by the advanced economies ... All this translates into an unusually fluid global economy -- and a world in which many established parameters will instead become variables," writes Mohamed El-Erian, CEO of investment firm Pimco, in Foreign Policy magazine.
Those "established parameters" -- the economic bulwarks we've grown accustomed to for the last several decades -- include the stability of Europe and the supremacy of the American credit rating. Today, though, the eurozone's credit rating is on par with Pakistan, and Standard & Poor's downgraded the United States' AAA rating to AA+ last summer.
"The plate tectonics of an interconnected world, where the different parts of the planet are moving at different speeds and where the rules of the game aren't really properly defined, [are] in flux," said Jeffrey Sachs, economist and the author of "The Price of Civilization," in a February interview with a business magazine.
A rising tide lifts all ships, but when economies are more centralized, one big storm can knock them all over: This is the price of an economy without borders. Our financial systems and "distinct" economic sectors are more connected than ever, for good or for ill, via various transnational groups such as the International Monetary Fund and the World Bank.
Critics say that linking the planet's economies together is, in today's modern world, a zero-sum game -- the insatiable, and ultimately unfulfillable, need for growth created by globalization gives us more losers than winners, wiping out ecosystems, fueling violence, and leaving localized economic disaster zones along the way.
But on balance, according to many studies on the issue, globalization has been good, at least for the United States, even given the last few decades of Japanese cars, outsourced IT workers and Russian steel undercutting the bargaining power of U.S. workers and pushing down their salary curves. One study suggests that America's standard of living is more than 10 percent higher as a result of globalization's benefits: The McKinsey Global Institute says that for every dollar "outsourced," the economic gain to Americans is $1.12 to $1.14, thanks largely to cheaper goods.
And the cheap goods consumed here but manufactured abroad have lifted millions of third-world workers out of poverty (though working overtime to assemble iPhones in a cramped Chinese warehouse may not represent much of an upgrade in living standards, at least in our eyes).
Despite Apple's recent, Nike-like sweatshop moment, globalization "has a decidedly better track record than its alternative. Countries that receive lots of multinational investment have grown faster. They report less poverty and less use of child labor," writes author and economics reporter Eduardo Porter. "China is an example of globalization's benefits -- foreign investment has surged over the last 20 years, driving spectacular economic growth."
And in the long view, growth over there can, in turn, lead to new investments back here.
Being a player in the global economy works both ways -- Pittsburgh sends goods, services, knowledge and investment dollars overseas, but we also can reap the same. Direct foreign investment in the region has been growing over the last few years, driven by a wan U.S. dollar, new construction projects and some unique energy opportunities.
The Allegheny Conference on Community Development, in a report issued in mid-2011, estimated that "foreign direct investment in the region grew in 2010, up 87 percent, with new operations by foreign-owned companies increasing to 22 with 1,118 associated jobs, the highest of such numbers on record."
Much of that direct investment, and foreign-domestic joint ventures, has been related to Marcellus Shale natural gas drilling and exploration. Calgary-based Talisman Energy controls lots of drilling acreage here, for example. And in May 2010, Royal Dutch Shell PLC, Europe's largest oil company, paid $4.7 billion for East Resources, a Marshall-based energy producer.
But for every foreign firm buying a local one, the reverse happens: In four of the past five years, excluding 2011, "Regional companies made more foreign acquisitions than foreign companies made regional acquisitions," by a 63 to 46 count, the Conference report said.
Being a player in the global economy means striking a balance between promoting our own exports abroad (Pennsylvania says the state had $41 billion in exports last year) and urging foreign companies to invest capital here, according to the state's International Business Development Office, part of the Department of Community and Economic Development.
That office necessarily has a statewide focus, but it often partners with local agencies. Recently, it teamed with the Pittsburgh Technology Council to obtain a federal grant aimed at helping the region to increase its technology exports, said Wilfred Muskens, deputy secretary for the state office. The PTC, in fact, hired someone just this month to be its new international trade point person.
Technology and life sciences, in addition to more conventional exports like specialty metals, chemical products, and coal products, are now a big part of Western Pennsylvania's export portfolio, something Gov. Tom Corbett is now promoting during his week-long trade mission to France and Germany.
Though the governor has received some barbs about the privately funded trip from Democrats, Mr. Muskens said that being the state's top trade ambassador is part of the governor's job description.
"He should be doing this," Mr. Muskens said. "It helps the [business development] program, and it helps the state."
While the governor is in Europe, he'll also be telling companies and investors that "if you're in the energy sector, [Pennsylvania] is a state you need to have on your short list," Mr. Muskens said.
But much of the investment Pittsburgh now receives has nothing to do with energy or big foreign banks. Individual investors -- despite Pittsburgh's well-chronicled shortage of foreign-born minorities -- are sinking millions into local projects, through programs such as the U.S. Immigrant Investor Program, which rewards the investors with a green card.
The Investor Program has steered $70 million in foreign money, most of it Chinese, to the UPMC East hospital construction project and $30 million to the Bakery Square retail and office complex. Local projects now seeking investors include the Schenley Place Development Fund (an Oakland office building) and the Village at Cranberry Woods (a hotel and office complex in Butler County, near the new Westinghouse campus).
Investors get to live in the U.S. and get a chance to make some money (typically, interest on the loan) on the projects; the builders get access to money that may not have been readily available through domestic backers or through traditional bank or bond financing.
"When we try to solicit those investors, we try to sell Pittsburgh," said Lily Liqi Pietryka, managing director of Pittsburgh Regional Investment Center, which finds foreign investors for Pittsburgh-related projects. The investors -- who have to put up at least $500,000 in exchange for their green card -- can invest in any U.S. project that they want to.
With hundreds of centers across the U.S. similar to the Pittsburgh Regional Investment Center, each of them trying to recruit investment dollars to their respective regions, there is competition for the money, Ms. Pietryka said. "They could have selected proposals elsewhere."
She and Idea Foundry CEO Michael M. Matesic (the Investment Center is an offshoot of Idea Foundry), will be heading back to China in April to try to line up new investors for the Pittsburgh projects.
Bill Toland: email@example.com or 412-263-2625. First Published March 20, 2012 4:00 AM