Opinion

Business as war

June 18, 2018

Quite a few MBA courses recommend students read Sun Tzu’s “The Art of War” written two thousand years ago in China. Among the many other business books crowding bookshop shelves which frequently travel in the luggage of ambitious executives is one that absolutely insists “Business is War”. Rivals have to be beaten, driven to the wall and if there is anything left worth acquiring, taken over.

Such ruthlessness may seem fair enough if it means consumers are going to get a better deal. But of course the rarely spoken dream of every top executive is a monopoly, or something sufficiently close to complete market dominance where they can name their prices. What generally stops them are regulations overseen by governments. Though World Trade Organization rules target ever-freer markets, governments have a responsibility to protect jobs and intellectual property, particularly in defense and information and communications technology. If jobs go abroad, so too do the personal and corporate taxes once paid to the home treasury. President Donald Trump has said his assault on the globalization vision driving the Davos liberal business elite is about protecting American workers. But he is too much of a businessman himself to overlook the fiscal consequences of exported jobs.

Given that some of the largest multinationals have a net worth and earnings that dwarf the income of many economies, their power to wage war extends also to national governments. Politicians will go the extra mile, and then some, to persuade a big international manufacturer to build a new plant locally. But their relationship is by no means always sweetness and light. When Kraft foods bought the very British chocolate maker Cadbury, it gave London a solemn promise it would not close down the UK factories. It then did precisely that, with the los of thousands of local jobs, to the impotent fury of the British government.

But the French do things differently. When in 2014 the US industrial giant GEC took over the energy business of leading French engineering company Alstom, it pledged to create a thousand new jobs by the end of this year. By this April it had managed just 323 and was indicating that because of a changed business climate and a new corporate strategy, it was not going to achieve the one thousand-job target. Its French executive told Paris that it was “out of reach”.

This has infuriated French Labor Minister Muriel Penicaud who has threatened to fine GEC at the end of the year $58,000 for every one of the promised jobs it has failed to create. The $40 million this would cost GEC is relatively trifling. And it also seems French President Emmanuel Macron is uncomfortable with the proposed penalty since it runs counter to his drive to present his country as open to international business, especially since, with Brexit, he is busy wooing international producers and financiers to relocate from the UK to France.

Nevertheless, it is hard not to sympathize with the labor minister’s plan. Just over three years ago, highly-paid GEC executives should have known enough about their business’ prospects not to make the promise they did unless they were sure they could keep it. The war analogy can apply equally well to multinationals that feel they can cynically dishonor solemn pledges they have made to governments.


June 18, 2018
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