Small town values and “standing firm” may be at the heart of doing business in Snowflake and other Mountain towns. But understanding the impact of financial and monetary decisions half a world away from Arizona is increasingly important, too. The ongoing debt crisis in Europe and the ripple effects of a strong currency in Switzerland, for example, may determine just how many jobs Pinetop’s Small Business of the Year will create and retain in 2012 and whether Show Low will actually fulfill its city’s mission: “to promote business success.”
One result of globalization is that world markets are more closely integrated than they were before. It has brought many benefits to the United States and other world economies. Local entrepreneurs can sell their products worldwide and many products are more readily available at lower costs. That has contributed to the success of savvy business owners here at home. On the downside, though, it means that volatility in one country or too strong a currency in another can send prices skyrocketing one day and plummeting the next. In the current climate where one financial upset seems to follow closely on the heels of another, there is added reason for looking far beyond our borders.
Robert Smith, of the radio program Planet Money, calls the present global economy “messed up.” Charles Wyplosz, professor of international economics at the Geneva Institute for Graduate Studies, is quoted in the same article. “There is a huge storm in the world,” he said referring to global financial woes. The problem, according to Wyplosz and other experts, is the lack of basic understanding about markets, finance, and capital – not only by regular people like us, but by policy experts as well. Sociologist Sylvia Walby, author of Globalization and Inequalities: Complexity and Contested Modernities, spoke at a recent conference in Switzerland. “Do not reduce finance to the economy,” she cautioned and suggested as well that we stop mistaking “capital” for “markets.” Capital is the money used to invest or to grow a business, while the market is the system where capital is exchanged for goods. It’s a problem of mistaking ends for means. Though finance and economics are related, the terms are also not interchangeable. Finance has to do with management of funds, whereas economics deals with optimizing scarce resources. When we misunderstand these terms, we risk confusing the issues that most require our attention if we are to succeed in the economy and weather the forces of global markets.
What do current financial trends in Europe mean for small towns in Arizona? On a recent trip to Geneva, Switzerland, this reporter sought an answer.
David is a Nigerian student at the Geneva School of Diplomacy and International Relations in Switzerland. Despite a generous scholarship, he has trouble making ends meet. “It’s expensive here,” he said during a bus ride from the city center to Ferny Voltaire, a small French city just across the border. “I live in France because it doesn’t cost so much.” In September, the Swiss franc out valued both the euro and the U.S. dollar by big margins. In the past year, the franc rose 30 percent compared to the U.S. dollar and 16 percent compared to the euro. “If you’re Swiss, you can make it,” David said, “but if you’re not, forget it.”
David’s situation may inspire sympathy, but what does it have to do with the price of a mesquite grilled burger at Charlie Clark’s or your annual exam at Aspen Dental? A strong Swiss currency means that the things we import from Switzerland will cost more than they used to – not just chocolate and cheese, but many other everyday items too: clocks, watches, dental equipment, jewelry, parts for electric appliances, and industrial goods like chemicals, machine tools, cement, and many others that make up the more than $12.5 billion worth of imports from Switzerland in 2011 alone. The Swiss economy, like those in many other nations, is strongly dependent upon exports. The high price of Swiss goods means that fewer people will buy them. Swiss business owners lose out, but many American businesses do too if they are dependent on those goods.
“Either the world economy gets better, or the Swiss economy gets worse,” said Wyplosz, considering possible outcomes. A third scenario – that everything stays the same – is the one none of us, no matter where we live, looks forward to.
Editor’s Note: FBN Reporter, Constance DeVereaux, attended the annual meetings of the European Sociological Association held in Geneva, Switzerland in September, 2011.