20 December 2008
Commerce and Globalization
The American century has come to an end. The dominance of the American economy and its technological leadership since the end of WWII has been met with competition from other parts of the world that have benefited from the widespread availability of information. America, ironically, made information technology the cornerstone of its international business strategy.
The U.S. Department of Commerce can be shaped to create a world that is more in keeping with America’s Weltanschauung. When it comes to the Middle East, for example, American business leaders should be encouraged to change their approach to the region into an invitation to join them as partners rather than a game of one-upmanship. They should enlist into that effort industry leaders in other Western nations, too.
Isn’t that what has happened in China? The wealth of that country takes the form of a surplus of intelligent labor. The strength of the Middle East is plentiful energy. Both cultures have non-material centers—Islam and Confucianism/Buddhism, with some overlap. In China, a way was found to combine the “separate but equal” approach of the West with the East’s universal sublimation of material gain to ineffable communal advancement. If a similar innovation were developed in the Middle East, its civilizational clash and energy rivalry with the West might also be resolved.
The ideologies that dominate Western and Eastern cultures result in contrasting balances of personal and societal values. It is all right in the East for a person to disregard the welfare of individual foreign competitors as long as he and his community benefit. In the West commercial standards constitute the mirror image: There, one can maximize his own individual welfare at the expense of an entire foreign community as long as he treats his personal competitor “fairly.”
One way out of this dilemma is for individual business leaders on both sides to enlist the active participation of their cultural communities in achieving their commercial goals. In addition to offering an equitable return to individual cross-border business partners, each side would devote a significant portion of the return on its investments in the other culture’s economy to serving that community’s common welfare. Consequently, each cultural community would have a stake in promoting responsible behavior by its members.
One illustrative feature of this approach would be to reduce the importance of tax avoidance in Western commercial practice. This ritual is enshrined in the definition of business cash flow as EBITDA (earnings before interest, taxes, depreciation and amortization), which makes taxes one of the principle costs of doing business that corporations are expected to minimize. This change in behavior would result, formally, in reduced net corporate revenues. However, equalizing between East and West the tendency to share a portion of business income with the community at large will help globalize corporate citizenship, leveling the playing field, as it were.
In reality, overall profits from business enterprise in the West will not change. Here’s why: During the 2008 financial crisis, the U.S. government has been forced to take an ownership position in several large private corporations in order to stabilize international markets. As a result, the public shares an equity interest with stockholders in the recovery and profitability of those enterprises. It is not much of a stretch to include taxes in the ROI of all private companies. This accounting rule change would bring shareholder dividends and corporate tax payments to the society as a whole into equivalence. If the political process achieves fair and progressive government fiscal policy, shareholders would also benefit paripassu from those tax payments.
The role of the Department of Commerce in the globalizing business world should be as much to raise the “transcultural” awareness of U.S. entrepreneurs as to help them compete on their own terms. The traditional division between domestic and international business has long lost its relevance. When it comes to the health and resilience even of local industry, the resources and policies of alternative producers around the world are important factors in creating viable business plans. The ability of American companies to profit from investment, exports and sales of technology or intellectual property depends not on making the rest of the world carbon copies of our culture, but on creating a union of objectives that transcends the different directions the cultures of the world carry us all in. The Commerce Department, under the leadership of its Secretary-designate, Bill Richardson, should focus a great deal of its energy on making U.S. business and industry a motive force behind the globalization tide, not its flotsam.
The American century has come to an end. The dominance of the American economy and its technological leadership since the end of WWII has been met with competition from other parts of the world that have benefited from the widespread availability of information. America, ironically, made information technology the cornerstone of its international business strategy.
The U.S. Department of Commerce can be shaped to create a world that is more in keeping with America’s Weltanschauung. When it comes to the Middle East, for example, American business leaders should be encouraged to change their approach to the region into an invitation to join them as partners rather than a game of one-upmanship. They should enlist into that effort industry leaders in other Western nations, too.
Isn’t that what has happened in China? The wealth of that country takes the form of a surplus of intelligent labor. The strength of the Middle East is plentiful energy. Both cultures have non-material centers—Islam and Confucianism/Buddhism, with some overlap. In China, a way was found to combine the “separate but equal” approach of the West with the East’s universal sublimation of material gain to ineffable communal advancement. If a similar innovation were developed in the Middle East, its civilizational clash and energy rivalry with the West might also be resolved.
The ideologies that dominate Western and Eastern cultures result in contrasting balances of personal and societal values. It is all right in the East for a person to disregard the welfare of individual foreign competitors as long as he and his community benefit. In the West commercial standards constitute the mirror image: There, one can maximize his own individual welfare at the expense of an entire foreign community as long as he treats his personal competitor “fairly.”
One way out of this dilemma is for individual business leaders on both sides to enlist the active participation of their cultural communities in achieving their commercial goals. In addition to offering an equitable return to individual cross-border business partners, each side would devote a significant portion of the return on its investments in the other culture’s economy to serving that community’s common welfare. Consequently, each cultural community would have a stake in promoting responsible behavior by its members.
One illustrative feature of this approach would be to reduce the importance of tax avoidance in Western commercial practice. This ritual is enshrined in the definition of business cash flow as EBITDA (earnings before interest, taxes, depreciation and amortization), which makes taxes one of the principle costs of doing business that corporations are expected to minimize. This change in behavior would result, formally, in reduced net corporate revenues. However, equalizing between East and West the tendency to share a portion of business income with the community at large will help globalize corporate citizenship, leveling the playing field, as it were.
In reality, overall profits from business enterprise in the West will not change. Here’s why: During the 2008 financial crisis, the U.S. government has been forced to take an ownership position in several large private corporations in order to stabilize international markets. As a result, the public shares an equity interest with stockholders in the recovery and profitability of those enterprises. It is not much of a stretch to include taxes in the ROI of all private companies. This accounting rule change would bring shareholder dividends and corporate tax payments to the society as a whole into equivalence. If the political process achieves fair and progressive government fiscal policy, shareholders would also benefit paripassu from those tax payments.
The role of the Department of Commerce in the globalizing business world should be as much to raise the “transcultural” awareness of U.S. entrepreneurs as to help them compete on their own terms. The traditional division between domestic and international business has long lost its relevance. When it comes to the health and resilience even of local industry, the resources and policies of alternative producers around the world are important factors in creating viable business plans. The ability of American companies to profit from investment, exports and sales of technology or intellectual property depends not on making the rest of the world carbon copies of our culture, but on creating a union of objectives that transcends the different directions the cultures of the world carry us all in. The Commerce Department, under the leadership of its Secretary-designate, Bill Richardson, should focus a great deal of its energy on making U.S. business and industry a motive force behind the globalization tide, not its flotsam.
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