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Between fears of trade wars and the desultory task of 'de-conglomeratization', the current business landscape is the opposite of the positive vision of a global economy that has been promoted for decades.

Now, What Do You See?

July 8, 2018
The vision of a global economy has been fulfilled. What’s left to see, or believe?

If you look across the current business landscape in one direction, there is anxiety about the prospect of a global trade war, with raw material shortages, price spikes, broken contracts and every other nightmare scenario that follows. It’s the dark alternative to the sunny and positive vision of a global economy that has grown and prospered for several decades, a vision that endured because to some degree everyone could share that vision —manufacturers, marketers and traders, financiers, regulators, and consumers.

If you look in still another direction, you will have a view of rapid deconstruction of global organizations. General Electric, Rolls-Royce, Siemens, and other recognizable names are rushing to sell off huge parts of their conglomerates, “cashing out” in the common but unflattering parlance of global investment.

Both views are proof that the sun is setting on the promise of globalization. From one direction, the global order is being attacked rhetorically as unfair and unrewarding; this argument typically comes from raw-materials suppliers and manufacturers, and wage-earners, who feel the revenues they derive from a global market are insufficient to the effort and resources the put into the enterprise. The argument also comes, of course, from the government officials and regulators who represent those people. And much of this is unsurprising: almost everyone thinks he deserves more, but how many are willing to risk shortages, price increases, loss of opportunity, etc. in order to have that argument?

The undermining of the global vision that is being done by the corporate side of the global market — the capital investment, product development, and corporate finance side — is more surprising, and more telling. It’s surprising because multinational businesses are high-visibility emblems of the ideas that propel the global-market vision in the first place: they represent innovation as well as stability, opportunity as well as security. Critics of globalization frequently depict malignant characters in boardrooms making devious plans, but most people think of GE and Rolls-Royce and other global organizations as guarantors of human progress and prosperity. In fact, they have been that.

The creation of such businesses over the past 70 years has been parallel to the development of the global vision itself. Businesses that succeed in manufacturing some products want to have a bigger stage on which to do it, and so they defined a market for themselves. The concept of a global market, and the greater opportunities that always lay ahead of us, gave cover to risk-taking in design, in manufacturing, in finance, and eventually in corporate and government policymaking. So long as the global economy seemed to be that development just about to happen – it was a believable promise, one worth some delayed reward. The assets in our control seemed valuable if we all agreed they would continue to increase in value because of an expanding global market.

This guided the strategic thinking in wide swathes of the corporate world, in the financial sectors, and in government policymaking. It drove many manufacturing companies to become conglomerates — organizations for which manufacturing alone was just too slow and labor-intensive for their revenue-generating needs. Plus, manufacturing carries the risk of competition, and always being in competition means always being drawn into the death spiral of commoditization. If a manufactured product becomes a commodity, the profit margins shrink, the customer base becomes fickle, and the investors become more difficult to satisfy.

The businesses that were consigned into commodity status are the ones making the argument for trade wars now. They believe they have little at risk in such a development. What vision they have for the aftermath, we do not know. But we should want to know that.

And, what about the businesses that spent decades shaping enterprises to thrive in a global market, but now are selling off what they can to keep investors from revolting? What do they see now when they look at the global market? What is their vision? We should want to know that, too.