Summary Of Porter's Diamond

America has been leading the world in the cotton industry for over 200 years (Rivoli 7). This is surprising for many reasons. America is competing with the world’s poorest, least developed countries. These countries have some of the lowest labor costs in the world whereas America’s labor costs are among the world’s highest (Rivoli 5). Another surprising factor is that cotton itself seems like a doubtful contestant for economic success. Despite these factors, America has continued to remain the most successful in the cotton industry. In the book, The Travels of a T-Shirt in Global Economy, Pietra Rivoli explores America’s success in the cotton industry. Rivoli touches on all of the elements of Porter’s Diamond and how they contribute to America’s long term success in the cotton industry. Porter’s Diamond illustrates the components that help a nation succeed in a particular industry for so long. The components of Porter’s Diamond are factor endowments, demand conditions, supporting industries, and firm strategy. These elements include the support of the government through subsidies, the American farmer’s adaptability and entrepreneurship, the everlasting demand for cotton, and the American cotton grower’s success in minimalizing the impact of common free market risks (Rivoli 8). Components of America’s Success Developed nations usually compete with other developed nations to help their economy grow. However, in this situation, American cotton growers compete with underdeveloped countries due to the strict climate criteria. Despite the fact that America's labor costs are significantly higher than most countries, the U.S. still remains on top in the cotton industry. Cotton has been a product of the U.S almost as long as the U.S became a country, and to remain a top competitor in the cotton industry for that long is remarkable. Rivoli explains in her book how “Dominance in such an industry can only be fleeting and stressful: The lack of product differentiation, the intense price competition, and the low barriers to entry make it scarcely worth the trouble” (Rivoli 7). Yet America’s cotton industry has remained successful even with all these obstacles. This raises the question of how America manages to stay the number one competitor. One of the reasons U.S farmers have an advantage is because they have subsidies. The underdeveloped countries claimed that “The U.S was blocking their route out of poverty, and that it was impossible to compete with Uncle Sam’s largesse to U.S cotton farmers” (Rivoli 6). Because of this, the World Trade Organization declared that U.S subsidies violated global trade rules, unfairly shifting the playing field towards American producers (Rivoli 6). Although it is clear that subsides contribute to America’s success in the cotton industry, it is obvious that it is not the sole reason for America’s success. Subsidies are a clear advantage; however, they do not explain America’s continued dominance in the cotton industry. America was a leading competitor in cotton over a century before subsidies were introduced (Rivoli 7). America’s long-term success is due to the American farmer’s creativity and ability to adapt. …show more content…
American cotton producers “…have adapted their production methods, their marketing, their technology, and their organizational forms to respond to shifts in supply and demand in the global marketplace” (Rivoli 7). American farmers have created new techniques to adapt to all of the changes in order to continue selling cotton. Countries that compete with the U.S are not as innovative so they are unable to keep up with this market. Lack of innovation and inability to adapt to the changing market makes these undeveloped countries fall further behind America in the race to the top of the cotton industry. Poorer countries may be successful one year and struggle the next, but the American farmers’ ability to keep up with change will lead to their continual dominance of the cotton market. Since the United States is far ahead in terms of economics, it would take a long time for the underdeveloped nations to bridge that gap and come close to our economic status. Our advances in technology have allowed us to secure a spot as the top cotton producer for several years to come. In addition to technology, another reason America is so prosperous in producing cotton is because of our ability to manage