Every Nation for Itself by Ian Bremmer

Author:Ian Bremmer
Language: eng
Format: epub
Publisher: Portfolio
Published: 2012-04-15T16:00:00+00:00

COMPANIES AND THE COMPETITIVE EDGE

The G-Zero will provide many different kinds of companies and institutions with important advantages. First, well-managed and well-positioned state-owned enterprises, politically loyal national champions, favored banks, and sovereign wealth funds will continue to profit from the competitive boost their governments can provide them. Stories of Chinese and Russian policymakers finding creative ways to tip the commercial playing field to favor their favorites, both at home and abroad, have become well known, but we’re also seeing this trend in emerging-market democracies. Brazil’s government has passed a series of laws that make state-owned oil company Petrobras the lead operator for new exploration and production activity involving the country’s massive offshore oil deposits. The legislation is also designed to develop a local oil service industry by requiring that set percentages of equipment and services used to produce all that new oil come from Brazilian suppliers.17

Given the scale and complexity involved in drawing so much oil from so deep beneath the seabed, and the fact that Petrobras already has its hands full with existing projects, it’s possible that the company will be asked to do more than it’s capable of. Perhaps these rigid rules will make for a bigger, less efficient national oil company, and the arrival of major new oil supplies on the market, which could help lower prices, will be needlessly delayed. But it’s also possible that commercial relationships with select foreign companies, including Chinese and other state-owned firms, will give Petrobras a good opportunity to broaden its capabilities while learning from the expertise and experience of others. That’s a winning formula.

Adapters

Among multinational companies, it’s the adapters that will be most successful—those that understand the changing competitive landscape and are agile enough to exploit the advantages it provides. As Charles Darwin once noted, it isn’t the strongest or the smartest who survive; it’s the ones most capable of change. Some companies can respond to a world with fewer enforceable rules by exploiting arbitrage opportunities to minimize tax and regulatory burdens. When German taxpayers were asked to bankroll a rescue package for Ireland and its failing banks in 2010, German lawmakers griped that the Irish government should raise corporate taxes to bring them into line with the rates demanded in Germany. On the surface, that’s an entirely reasonable demand. Arguably, Ireland’s government might not have found itself strapped for cash had it not tried to attract business and investment by offering foreign companies advantages that Germany did not. But Ireland knows that if it doesn’t offer these incentives, some multinationals operating within its borders will simply relocate, perhaps to countries outside the European Union, in search of lower taxes. Just as many American companies have shifted jobs overseas to take advantage of lower-cost labor in developing countries, so a growing number of Chinese firms have moved operations to take advantage of cheap labor in Southeast Asia. In short, companies adaptable enough to move toward the best deal will profit most. More banks, hedge funds, and private equity funds will shift their operations toward emerging-market states to avoid global and Western regulatory reforms.

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