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Multinational Corporations Aren’t About To Give Up on Global Business | The Red Pen | GZERO Media - YouTube
Channel: GZERO Media
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HI, everbody.
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Ian Bremmer here with your latest edition
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of The Red Pen.
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Today we are talking about the impact
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that increasing geopolitical tensions could have
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on big, multinational coorporations.
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In a recent op-ed for the Financial Times,
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Elisabeth Braw of the American Enterprise Institute, AEI,
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argues that we could be entering a distinctly
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new chapter in global business,
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one in which where a company comes from
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matters much more.
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In other words, a move away
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from borderless companies and toward nationalism.
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She cites CEOs like Ramon Laguarta of Pepsi
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and Satya Nadella of Microsoft,
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both foreign-born executives
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leading American companies,
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as a positive trend of globalization
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that may come to an end
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in the current political reality.
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It’s an extremely interesting and provocative piece.
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You should definitely read it.
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We are not convinced.
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Let’s get out the Red Pen.
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First, Braw writes that
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“the era of borderless enterprise may be past”
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and argues that
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“suddenly companies’, and executives’,
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nationalities matter again.”
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So question, when did nationalities stop mattering?
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Governments have long supported
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their national champions.
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In the wake of the 2008-09 financial crisis,
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the German government spent 1.5 billion euros
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to bail out their auto industry.
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BMW, for one, might have had non-German higher ups,
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but when the rubber met the road,
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what mattered the most was that BMW
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was a German company.
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The era of the globalization never meant an
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end to national pride or responsibility
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when things got tough.
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Secondly, the number of foreign CEOs
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of Global Fortune 500 companies has remained
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pretty constant since the 2008 financial crisis.
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I’d also point out that as of 2019,
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the last date we could find good numbers for,
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45% of the companies on that list
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were founded by immigrants or the children of immigrants.
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No real change.
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Next, Braw suggests that Western corporate titans
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may now conclude that the companies they run
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“should be loyal not just to their
shareholders
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but to the company’s home country
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if it provides democracy, rule of law
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and a safe business environment.”
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I’m not ready to bet on that.
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Western companies have long done business
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in nondemocratic countries,
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and some major US businesses
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haven’t blinked twice in recent years
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even on issues like Uighur forced labor.
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In fact, China overtook the United States last year
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as the top recipient of new foreign direct investment.
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Goldman Sachs just announced an expansion
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of its staff there by 2024.
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Amazon, Apple, Nike, Gap …
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the list goes on.
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Still doing business and expecting growth in China.
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Finally, Braw writes that
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“executives may consider themselves
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citizens of nowhere,
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but a business can be harmed
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because of where it is based.”
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That’s true.
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But is that risk new?
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There were boycotts of German companies
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in the 1930s, of course,
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and the same in South Africa during Apartheid in the 1960s.
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Yes, Apple and Google are
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enthusiastic citizens of nowhere.
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But not so much for Microsoft and Amazon,
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which are increasingly US national champions.
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In conclusion, do rising tensions between, say,
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the United States and China
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mean that a new era of business
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with borders is on the horizon?
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A Standard Chartered report,
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just from a couple of months ago, back in March,
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found that of multinational corporations
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based in the United States, the United Kingdom,
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France, and Germany,
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42% “see their best growth opportunities
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outside of their home market.”
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That’s actually “5% higher than six months ago.”
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So, no.
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That’s your latest edition of The Red Pen.
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Thanks for watching, everyone.
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Stay safe and avoid fewer people.
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Talk to you soon.
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