The New Geopolitics of Global Business – Foreign Journals

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The Economist magazine published an article dealing with the dominance of China and the United States on new startups and the absence of competition from other countries, especially European… We present the following.
Twenty years ago this week, the Amazon startup’s stock price fell 71% over 12 months. Amazon’s approach to collapse was part of the collapse of Internet companies (or the so-called dotcom bubble) that exposed the arrogance of Silicon Valley, with the US energy company Enron defrauding $ 14 billion and declaring bankruptcy in 2001, which shook confidence in American business. . At the same time, China was privatizing troubled companies, and there was no indication that it could create an entrepreneurial culture. The hope was in Europe, which issued its single currency, stimulating the creation of a giant integrated market.
Talking about constructive demolition – industrializing the revolution by constantly changing the economic structure from within, destroying the old structure and creating a new one – might make talking about the future seem silly. But the post-pandemic business world may differ significantly from what was expected twenty years ago. Technology companies make up a quarter of the global stock market, China and the United States are on the rise and own 76 of the more than 100 most valuable companies in the world. Europe’s revenue has fallen from 41 companies in 2000 to 15 today.
This imbalance reflects American and Chinese skill, and a lack of interest in Europe and elsewhere in the world. This raises two important questions: Why did this happen? Can it continue?
Big companies are no better than small companies. Japan Inc’s status rose in the 1980s and then collapsed. Big companies can be a sign of success and they can be a sign of laziness. Saudi Aramco, the world’s second most valuable company, is not so much a symbol of success as a symbol of the kingdom’s dangerous dependence on oil. However, this may be a sign of a healthy business environment, where large, efficient companies are emerging and constantly swept away by competition.
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One way to understand the dominance of America and China is to compare their share of global output with their share of trade. By this measure, America accounts for 24% of global GDP, but it accounts for 48% of trade activity. China accounts for 18% of GDP and 20% of trade activity. Other countries, which comprise 77% of the world’s population, weigh less than their share.
This hegemony may also explain Europe’s missed opportunities and faltering economic integration during the debt crisis of 1010-2012. European companies failed to anticipate the shift towards an intangible economy. There are no European startups that can compete with Amazon or Google. Other countries also suffered. Brazil, India and Mexico had tried, before a decade, to create a group of global companies, but they were able to create only a few.
Only America and China were able to achieve constructive demolition. Of the nineteen companies created in the past 25 years that are now worth more than $100 billion, nine are American and eight are Chinese. Although tech giants such as Apple and Alibaba are seeking to assert their dominance, new tech companies such as Snap, Paypool, Mituan and Pindudu are gaining noticeably in weight. The Corona epidemic has increased the power of American and Chinese companies, which have come to dominate new technologies in financial technology and electric cars.
The magic recipe contains a lot of ingredients. The wide domestic market helps companies to increase their size quickly. Strong capital markets, networks of venture capitalists, and top universities support start-ups. Culture glorifies entrepreneurship; China’s top businessmen flaunt their “996” work ethic: 9 a.m. to 9 p.m., six days a week. Elon Musk sleeps on the floor of the Tesla factory. Above all, politics supports constructive demolition. America has endured much turmoil compared to Europe. After 2000, China unleashed entrepreneurship and laid off eight million workers in state-owned enterprises.
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This political consensus in both countries is deteriorating, which may be a reason for the unsustainability of this hegemony. Americans are worried about this decline, as well as about low wages and monopolies. The Economist supports the Biden administration’s goal of boosting competition and expanding the social safety net to protect workers affected by the unrest. But the danger is that America continues to drift toward protectionism and capital taxation, which weakens its commercial activity.
In China, President Xi Jinping sees large private companies as a threat to the power of the Communist Party. The business intimidation began last year with Jack Ma, co-founder of Alibaba, and has since spread to include the heads of three other big tech companies. As the party seeks to “guide” existing private companies to achieve policy goals, such as national self-sufficiency in certain technologies, it will also likely protect them from competitors.
The more America and China get involved, the more the rest of the world becomes concerned about the lopsided geography of global business. In theory, the nationality of for-profit companies doesn’t matter as long as they sell competitive products and create jobs, who cares? But if companies are influenced by their governments at home, the calculus changes.
Disputes have already erupted over where multinational companies should operate to produce vaccines, set digital rules, and pay taxes. European hopes of becoming a regulatory superpower may become a cover for protectionism. Others may create barriers to assert their policies; For example, India has banned Chinese social media and obstructed US e-commerce companies. This is the worst that can happen, when local consumers are deprived of global innovation, and local businesses are put in the way of growing.
It would be a tragedy if only two countries in the world prove that they can sustain the process of constructive demolition on a large scale. But it would be worse if they walked away from it, and the other nations admitted defeat and put up a bar. The best measure of success will be whether the list of the largest companies in the world in the next 20 years is different from the list of companies today.
Prepared by: Ibtihal Ahmed Abdelghani
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