Profits and World Peace

I'm not going to suggest that a company that stays in business for the long haul ever acts out of strictly altruistic motives.   As business people, if you aren't going to make a profit, what's the point.  But that doesn't mean that business does not have a positive impact on society, even if only as its unintended consequence.   This is true in spades when it comes to international business.

This post may seem like its more about international politics or political economics than international business, but let me draw the practical connection for the business person about to wade into the fray of Going Global. When your company becomes a strand in the vast web of global business, you will undoubtedly at some point come face to face with someone from the anti-globalization forces who somehow became true believers that multi-national companies are out to undermine the economy at home while trashing the world beyond.  Perhaps it will come up in the context of one of your own employees who fears that the follow up act to exporting product is exporting jobs.   Perhaps it will come up in the context of a mis-informed state legislator seeking to pass a restriction on state contracts that could adversely impact your position as an international company.  Or maybe it will just be the sorry sot at the backyard barbecue who demands to know why making things in America for Americans isn't enough.   Whatever the context, I've found it helpful to have a more thoughtful response than "get lost".

With respect to environmental impact and human living conditions, it has been my universal experience that when American companies develop plants abroad (and here I'm focusing particularly on developing countries like China or those in Latin America), they are not content to have the plant meet only the local (i.e. usually non-existent) environmental and work health and safety requirements.   Instead, it is critical that the plants meet the corporate standard -- which are much higher, conditioned by the requirements here in the U.S. as embedded in the company's corporate culture   Now again this is not for altruistic reasons.   It's because the company recognizes that operations are more cost efficient and product quality is higher and more consistent (both key ingredients of sustained profitability) if the manufacturing environment is clean and safe.  At first the local competitors may see this investment of capital in improved working conditions and environmental containment as a foolish waste of money by too wealthy Americans, but they eventually come to understand that the U.S. owned plant has higher productivity, lower total costs when one accounts for the costs of workplace injuries and absenteeism, and produces a product which is in higher demand in the market place.   As that realization begins to sink in, the locals begin to upgrade their operations to meet the American standards -- usually long before the local governments get around to policing such things.  I've seen this scenario play out time and again in numerous countries.   The fact is, there is no greater positive impact on environmental and working conditions in developing countries than when an American company acquires or opens a new plant.   

So that's nice, but the phenomenon may still be localized or restricted to the particular industry in which the economics have been altered by the U.S. company's presence.   But World Peace? -- c'mon!  Keep in mind two things -- "economic interdependence" and "cultural awareness and accommodation".

Look at the billions and billions of dollars of goods sold into foreign markets.  In 2005, the U.S. exported $42 billion of goods to China alone, and China exported $243 billion in goods to the U.S.  (See foreign trade statistics provided by the U.S. Census Bureau).  Even a sparsely populated land locked state like Colorado exported $765 million of good to China last year.  And these numbers don't include the vast array of services being exported, particularly U.S. engineering and environmental expertise.   Further, the numbers are growing at an annual clip in excess of 20%.   The fact is, China has a huge stake in the health of the U.S. economy and the U.S. has a growing stake in China.   Is it really in a country's best interests to wage war on one of its largest customers.

Volvo is a Swedish car company, except that it's owned by Ford.  Is a Chrysler Sebring an American car or a German car now that the company is owned by Daimler-Benz?   What could be more American than one of the best selling cars in America made by American workers at a plant in Georgetown, Kentucky? -- except that it's a Toyota.   Cynics (probably not unrealistically) would say that foreign policy isn't based on the espoused altruistic values of spreading democracy or protecting freedoms or spearheading the vanguard of the international worker's movement or even protecting one's borders against aggression, rather it's based on furthering our economic interests -- access to shipping lanes, supplies of natural resources and markets.   And the flatter the world becomes (to use Thomas Friedman's theme) and the more intricately intertwined the web of global commerce, the more blurred the lines become between "us" and "them".   We won't all be sitting around singing "Kumbayah" -- there will be plenty of conflict and fiercely competing interests.  But instead of conflict between governments and their militaries, hopefully it might more apt to be conflict between combustion engine based auto manufacturers and alternative fuel developers, or between Windows based systems and Linux based systems.   And as ugly as that could get, it seems very much preferable to the historical model of war among the nation states.

To further bolster all this economic interdependence, the globalization of commerce also is creating a more common cultural mutuality.  You can rue our fast food nation as a lame cultural legacy, but there is something oddly warm and fuzzy about being in a very foreign land and standing in line at a Starbucks while the locals listen to American rock music through their ubiquitous white earbuds.   And on the other side of the coin, I find it equally wonderful to be able to sit on the floor and eat authentic Moroccan food with my hand without leaving Denver, Colorado.  The phenomenom is everywhere and accelerating.   It's manifested in the clothes we wear, the food we eat, the music we listen to, the foreign words and phrases we incorporate into our own native languages (and by "we" here, I mean all of us as global citizens).

Invariably I find that when business people sit down to do business around the world, whether its putting a deal together in a conference room, grabbing a quick lunch between plant tours, wooing a potential new customer over dinner, or any other context in which we are known to gather, we find that for all our differences which need to be understood and appreciated, we're not so different.  It is this experience that gives me the greatest hope that international trade and business may well provide the common bond such that while we pursue our profits, we create a modicum of world peace while we're at it -- a peace that hopefully will endure the folly of the political rhetoric that our respective governments seem so intent on making the focus of international relations.