5 years ago

Fluctuating geographical fulcrum

Chinese Vice Premier Wang Yang delivers a keynote speech at the opening ceremony of the 2017 Fortune Global Forum in Guangzhou, south China's Guangdong Province, December 06, 2017.	 —Photo: Xinhua
Chinese Vice Premier Wang Yang delivers a keynote speech at the opening ceremony of the 2017 Fortune Global Forum in Guangzhou, south China's Guangdong Province, December 06, 2017. —Photo: Xinhua

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This series has thus far shown the market anchor shifting from manufacturing to services, and within the services sector, from finance towards information technology (IT). Given its badly mauled fate, how the financial sector survived the 2008-11 Great Recession informs us of some other salient features hitherto overlooked within the business world.

Fortune Global 500 helps extract light on that issue, particularly through a comparative study of business market conditions on the eve of that 2008-11 contraction. Though roughly the same countries remain the big drivers, one enormously significant distributional change among those countries may say it all. Of the 500 corporations listed in 2007, the largest cluster was of US origin, just as it was in 2017, with the big difference being in how many companies (or proportion of 500) fall under the microscope: in 2007 there were 162 (32 per cent), but in 2017 only 134 (26.8 per cent), all in the United States. This 24 shortfall may not seem significant until we make a similar measurement of the one country that comes to every observer's mind as posing the greatest US challenge: China.

Before the Great Recession, China had 24 on the list (4.8 per cent), in 2017 that more than quadrupled to 103 (20.6 per cent). That 79 increase not only accounts for the 24 US shortfall, but also points fingers to other countries being given a run-for-the-money. The second-slot in 2007 went to Japan, with 67 (13.4 per cent); but this plunged by 15 to 52 (10.4 per cent) in 2017. It could not have alone been the Chinese victim. The 3rd, 4th, and 5th-ranked countries then were France (with 38: 7.6 per cent), Germany (37: 7.4 per cent); and the United Kingdom (33: 6.6 per cent). In 2017, we find them speaking only for 29 (5.8 per cent), 28 (5.6 per cent), and 25 (5.0 per cent), respectively. So, if we add up the numbers, the 24 US loss, 15 for Japan, and the 25 from the three European countries, we see they alone account for 64 of the 79 slots captured by China. Canada would lose 5 companies too, to symbolise the North Atlantic zone loss streak, with the only country to gain in that arena being Switzerland. South Korea would gain 1 too, while the Netherlands would lose 2, but the big message still remains of the Asian ascendancy against the western retreat.

One should not push the point since the competition did not play out under perfect market conditions. There was more direct and indirect governmental intervention in the three Asian countries ranked in the top-ten than in the 7 European or American (Canadian and US) corporations, although even here governmental intervention past or present is not exactly unknown. We were well aware of Japanese keiretsus (holding companies, of which 4 dominated: Mitsubishi, Mitsui, Sumitomo, and Yasuda) and Korean chaebols (family-owned conglomerates, like Hyundai, LG, Lotte, SK, Samsung), reflecting a private-public partnership from before that the world gradually adjusted to only from the 1950s. Equally, American and European governmental intervention was also well known, if not as much with the corporations listed here, then clearly in agriculture, and if not in collaborative production, then as facilitators.

What now appear to be gate-crashing the list are wholly-owned government agencies, almost all Chinese. Not only that, but when we look at the actual companies involved, especially at the tip, we will notice the scale and strength behind the Chinese cases.

Although Fortune Global 500 companies have traditionally been led by Atlantic countries (Canada, France, Germany, the Netherlands, Switzerland, the United Kingdom, and the United States), with Japan leading the small but growing Asian representatives, by 2018, China was not only more than knee-deep in this company, it actually dominated the top-five: with State Grid, Sinopec Group, and PetroChina ranking as 2nd, 3rd, and 4th largest; when one adds Japan as the 5th ranked (through Toyota), Asian ascendance was more than chimerical; and if one takes 6th and 7th ranked Volkswagen and Royal Dutch Shell, respectively, the United States actually becomes a minority top-ten layer against Asia and Europe. With 4 companies, the United States still has more on that list than any other country, even though other nuances matter more now.

Clearly capturing attention is not just China, but the state-dominated companies it hurls into lists such as Fortune Global 500. Given the massive trade surpluses China has wrought up for the last 2-3 decades, how the Chinese government distributes this amount through infrastructural investments globally foreshadows a far more government-centric future Fortune Global 500 list than ever before.

It will have its consequences ripple right across the non-Atlantic business world. First, it will encourage and uplift other African, Asian, and Latin governments to flaunt their own pet flagship corporations. We already see Saudi Arabia slowly relinquishing state controls over Aramco, the grand-daddy business enterprise of them all today, valued at least twice as much more than Apple's trillion-dollar market-value (but not floated in the stock market), yet still only one-quarter in value of the Dutch East India Company of four centuries ago. Since it is unlikely to ever go fully private, we will soon see powerful governments finding business presence and eminence.

Second, many national trademarks that owe their salience to borrowings from China (for example, to facilitate the Belt-Road-Initiative), may fuel the growth of governmental coalitions within the Fortune Global 500, a feature virtually unheard-of in private-business history. Third, since a portion of these borrowings will be channelled through the Chinese-built Asian Infrastructural Investment Bank (AIIB), the World Bank clientele cluster is likely to be affected in one way or another, further weakening the edifices of Atlantic-centred post-World War II establishment, much to the detriment of its anchor-country, the United States. This acknowledges the caveat that a number of West European countries also remain AIIB subscribers, even as staunch World Bank supporters: one future tussle, between these two banks, may shed interesting light on global business in the not-too-distant future.

Finally, just to keep abreast of this non-Atlantic competition, even established Atlantic trademark corporations may also seek increasing governmental supports, in essence undoing all that the private sector represented. Indeed, in spite of this being the peak of the neo-liberal era, highlighting supposedly 'full-fledged' private enterprise, how it revolves upon a growing public-private nexus remains the paradox of our time.

Whether these are far-fetched scenarios or just routine unfolding events that can be easily absorbed into routine businesses, we have to wait and see. Yet, to ignore these changes, especially the windows they open and opportunities they carry, would spell the actual death-knell of private-sector businesses. That, no party is willing to permit today, whether around the Atlantic seaboard, or Pacific, Indian, or Antarctica: the private and public have become so intertwined that precisely has spawned today a cottage industry in itself.

Dr. Imtiaz A. Hussain is Professor & Head of the newly-built Department of Global Studies & Governance at Independent University, Bangladesh.

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