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Recent global business events are a bit like an Escher drawing they can be seen simultaneously in different ways.



Recent global business events are a bit like an Escher drawing — they can be seen simultaneously in different ways. Consider last week's US calls for the Chinese tech firm Kunlun to divest itself of the American social network Grindr — on the grounds that data from the gay, bi, trans and queer dating app could be used to blackmail people with security clearances, thus compromising US national interests. Then, there were the tweets from President Donald Trump about his meeting with Google chief executive, Sundar Pichai, who is apparently "totally committed to the US Military, not the Chinese Military". Good to know — I guess. This was followed by an announcement of Google's plans to roll out faster web content for Cuba, which would seem to counter Mr Trump's promises to get tough on the regime of Nicolás Maduro in Venezuela. The Cubans, you see, are understood to provide Caracas with intelligence services. It happened amid a host of tech and trade stories, including a squabble between EU member states over whether or not to side with China or America in the battle over 5G mobile telephone networks. The US wants to kneecap Chinese telecoms champion and chipmaker, Huawei, by pushing allies not to use its equipment. Meanwhile an American group, Apple, is busy undermining the US's own homegrown 5G chipmaker, Qualcomm, in a series of costly, tri-continental legal battles over patent infringement. Having trouble following it all? Me too. But there is a common thread here. Taken together, these stories reveal the conflicts inherent in America's own free-market system as it bumps up against the realities of state capitalism, and the shift from an industrial economy to a digital one. In this, I see two Escher-like dichotomies worth examining. First, America's biggest and richest companies have been at the forefront of globalisation. Despite small decreases in overseas revenues for the past couple of years, nearly half the sales of the S&P 500 come from abroad. How then, can such companies be perceived as being "totally committed" to the US, or indeed, to any particular country? That leads to other uncomfortable questions. If Chinese firms owning US apps are a security risk, then how is Google (or Amazon, Apple or Microsoft, for that matter) doing business in China not one too? You can hedge the answer by talking about whether user data is stored in servers in China, or whether companies' most cutting-edge technologies are developed there, but the core question will only become more pressing as tech companies become ever-more central to national security. It's hard to imagine a company such as Raytheon being allowed to do its defence and aerospace business in both China and the US. Companies that do the most cutting-edge research in areas such as artificial intelligence are arguably more important to the defence department than the old military industrial complex. But they still play both sides of the field. A second point of dissonance has to do with how the US's own version of capitalism is, and isn't, working. Americans often argue that the system encourages competition. But given the level of corporate concentration and the amount of money in politics, to what extent is that really the case? How is it, for example, that Google gets first dibs to wire Cuba? Because former chairman Eric Schmidt and three other executives at Google, which had tremendous pull with the administration of President Barack Obama, flew into the country in the midst of an embargo in 2014. Six months later, US policy towards Cuba changed. Now, Google may send YouTube videos to the island under Mr Trump. It is not a huge deal commercially for them — and some would argue it's better than Latin oligarchs doing it. But it also encourages the conclusion that the US is more like Latin America than many of us would like to think: a place where money and personal connections matter more than anything else. No wonder millennials see markets as being politically constructed in ways that their parents did not. While they are too young to remember the failures of communism, they see the hypocrisies of capitalism all around them. It's hard to know where the dissonance will end. How does a system that encourages multinational companies to move capital, labour and intellectual property anywhere also reward the nation states that spawned those companies in the first place? How can politicians bridge the gap between economics and politics in ways that don't lead to autocracy or oligopoly? Socialism is not the answer. Nor is copying China's command-and-control market system, which I think will ultimately prove to be too brittle to cope with a modern, digital society. Rather, we should recognise that the state has a role to play, not by picking corporate winners, but by in investing in the things that the market won't — infrastructure, education and healthcare — and then making sure companies that benefit from them pay their fair share in taxes. We should also ensure that our market system is actually free, by enforcing antitrust rules and crafting smart regulation to create a truly equal playing field. Doing so could help us better see the strengths in our own system.




Essay Question. 5) Financial Times journalist and CNN global economic analyst Rana Foroohar closes out her essay "It is time for a truly free market," with the following:


"Rather, we should recognise that the state has a role to play, not by picking corporate winners, but by in investing in the things that the market won't — infrastructure, education and healthcare — and then making sure companies that benefit from them pay their fair share in taxes. We should also ensure that our market system is actually free, by enforcing antitrust rules and crafting smart regulation to create a truly equal playing field. Doing so could help us better see the strengths in our own system" (Foroohar, 2019).


Take a position on Foroohar's comments (agree, disagree, amend it) and use authors, concepts, and/or readings from this course to support your position. You may take this in any direction you would like and can relate the issues Foroohar raises to almost any of the authors/readings/topics we have covered in this course.


Grading criteria:You should take a clear position (it doesn't matter to me what position you take), you should clearly demonstrate your understanding of the economic concept(s) and how it relates to the application in the question. Length: a maximum of two pages.

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