Last week, I posed the question that serves as subtitle for my book: who wins the war between states and corporations?
The answer is pretty simple. A corporation that finds itself at war with a state these days is in big trouble. We've had one such conflict so far this year, and it's China 1, Google 0. More of these confrontations are coming.
It's happened before. Decades ago, a multinational oil company could cut a quick deal with a dictator, stick a straw in the ground, suck out the oil, and reap the lion's share of profits. Then states went into the energy business with the construction of national oil companies. "Big Oil," at odds with state governments, had few choices. Fight, flight, or adaptation. If you fight, you're going to lose. If you flee, you may miss potentially lucrative opportunities--though in some cases, an exit strategy is the only real option. Then there's the option of embracing change.
This is happening now. As increasingly capable state-owned oil companies and privately owned firms with financial and political support from their governments threaten to crowd out more of the multinationals, the latter know they can either close up shop or find new ways to make themselves indispensable for oil production. In some cases, that means partnerships with state-owned rivals. In others it means investing more heavily in parts of the business where they still outperform the state-owned competition--deep water exploration, management of complex projects, etc.
But this familiar story is playing out in new ways as states now move into telecoms, power generation, shipping, aviation, arms production, and other sectors. There are plenty of industries where privately owned companies are still state of the art, but the list of industries where state domination brings political rewards for governments is growing. Here, the old way of doing business won't work.
During her recent visit to China, Secretary of State Hillary Clinton told her Chinese interlocutors that it was in their interest to create and maintain a level commercial playing field within China on which Chinese and foreign companies can compete. Good luck making that sale. Foreign companies hoping to thrive in China will have to recognize the new threat from government-backed local competition (they're often slow on that) and then adapt to exploit their advantages (here they're usually faster and stronger).
During World War II, the US Navy used small, agile PT boats to frustrate the progress of enormous Japanese destroyers. It's the same principle here. Companies move faster than governments. Some will survive. Others will get crushed. Many will learn valuable lessons in the power of adaptability.
Speaking of Google, one sector, in particular, faces an unprecedented challenge. Information technology companies have grown enormously over the past several years as the cross-border flows of ideas and information opened access to customers, capital, and labor all over the world. Borders seemed to matter less than ever. But as cyber-security surges to the top of the list of 21st century national security concerns, borders are back with a vengeance, and governments are involving themselves as never before any many aspects of the IT business. Nowhere is the need for adaptability greater than for those entrepreneurs looking to make their money in the information-sharing business.
It's a good thing corporations adapt more quickly than governments do. They'll have to.
Ian Bremmer is president of Eurasia Group and author of The End of the Free Market: Who Wins the War Between States & Corporations? (Portfolio, 2010)
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It was the Best of times, it was the Worst of times.
Problem is, relations between people and countries and industry can go sour. Familiarity breeds contempt, and things that have been around for a while end up getting the old public scrutiny, especially by people that might not have realized any apparent direct benefit from those relations, and questions start getting asked about government, about business strategy, about philosophy, attitudes, policies, ethics, that kind of thing. When the fat guy drives by in the limo, and you're getting the old gun barrel up the nose, hate and discontent will fester, so to speak.
It's a big, big world, with lots of complex relationships, but as long as people keep the focus on partnership, and cooperation, and generally working to achieve the common good, all's well. But, when elites form, and the politics start, money gets tight, and the public gets incensed, rough seas ahead...
When free market conservatives retreat from lies and disasters, the retreat is always tactical. When the stones in their stonewalling stances crumble, they give us head feints toward other problems. They hold out a bag of beans and remind us of Jack and his long range beanstalk success. There’s nary a word on the many problems initiated and/or exacerbated on their watch. And, in fact, many of the gaping wounds in this country and the world, not the least being global warming, clear cutting forests, and the desecration of the world’s oceans can be traced to the greed and rapaciousness of free enterprise competitive practices. Yet the bean bag boys still tout the so-called free market as their all purpose panacea.
Like complex investment scheems and work arounds on regulations and endless legal battles over fines that finally get reduced to pennies on the dollar?
I don't think it is always such a good thing.
And I happen to like the fact that I can still mail a letter across this country for under $0.50 whereas the For Profit companies will charge me $9 to do virtually the same thing.
What is a free market? You mean free of regulation or worker rights? We have financial snake oil salesmen that were bundling bad home loans into CDO's and then selling them as AAA rated investments. That is innovative and they certainly did it for a long time before the government caught on and there is still no regulation about this.
Corporations become multi-national so they can pay a business unit in a foreign land a usage fee so they show less profit in the states and therefore pay less in US taxes, yet the business unit in the foreign land might be an office with 3 workers in it. Quite innovative.
Big Business can afford to spend Millions on Lobbyists so they can bend the rules to make them more profitable and at the same time less responsible to the damage they do. They have adapted quite well, it is just you and I have to pay so corporations continue to make money while leaving their garbage for us to live in.
Just as I used Txt_Aloudmp3's Firefox plug-in to read your reply to me.
The Kindle version is, however, an ebook, delivered electronically, and shouldn't cost more than print versions, which this book does.
Not discussed with this guy's post is the notion that corporations and governments are increasingly indistinguishable from one another. We truly live in the age of the corporate nation-state; and with it comes the great evils Mussolini himself held forth on decades ago.
And nobody seems to mind.
Scary.
No, just the end of us ordinary folks.