The purpose of the course is to provide a geopolitical insight on business decisions. The world has vastly changed in the last 30 years. The fall of communism in Europe and Deng’s “four modernizations” in China lead many to believe that western capitalism had finally triumphed, in tandem with democratic liberalism. The extraordinary success of modern globalization is a direct consequence of these two historic events. Two books, The end of history and the last man [1] and The world is flat [2], are testimonies of the widely shared beliefs of the time.
The Great Recession put an end to this narrative. First, its ideological consequences set new terms in the political debate. In the west, elites lost credibility because of their poor management of the crisis and the deeply resented rise of social inequalities. Populism has entered mainstream politics. For the global south, it was evidence of the dramatic failure of the concept of liberal democracy. It is increasingly seen there as an intellectual product of colonization and economic domination, and as such undesirable. Second, the aftermath of the Great Recession is characterized by dire geopolitical outcomes. Globalization has been contested in many centers of power, including the oval office under Donald Trump. Russia was initially only seen as an irritating political agitator and a resurgent empire by the leading European countries. It has now brought war on the continent after its invasion of a pro-western country. The Arab spring started a major upheaval in the Middle East, but it ended with the increased influence of two former historic hegemons of the region, Iran and Turkey. Third, from an economic standpoint, competition between the US, the EU and an assertive China is heating up, even more so under Joe Biden.
To sum it up, several powerful geopolitical forces threaten the global multilateral order, largely built by the USA, but based on permanent mutually agreed rules, influential international organizations, and global trade.
Technology must also be factored in. It has always been a differentiating factor between countries and firms. But in the immediate post WW2 period the world was mostly busy incrementally improving and spreading the use of existing technologies. Technology was never seen as a ‘trivial’ factor, but it was not seen as a major game changer in the competition between countries and the hierarchy of firms.
We are now in a different world, where technology causes massive shift of value and power. For example, the market capitalization of Apple now exceeds the value of the global telco sector. It was negligible 15 years ago. The power of Big Tech is challenging the rule of law in many countries. It is now subject to specific countermeasures in Europe. Artificial intelligence is a general-purpose technology, like electricity in the 20th century. It may well reshuffle the cards of power in the global geopolitical and business scenes, as evidenced by the fierce Sino-US competition in this field. The ZTE case demonstrates that a Chinese telecom giant can collapse as the result of a US embargo on semi-conductors. The situation of Huawei may be considered in the coming years as a textbook example of the influence of geopolitics on business. The US IRA and Chips Acts can also be read as geopolitical statements.
Last, but not least, the COVID crisis has magnified these existing trends. First, in many cases, governments were unable to appear to be in control, another cause for social anger. Second, relations between China, the US and Europe became more bitter, with a mixture of blaming exercises and hard-nosed diplomacy. Third, leadership in technology appeared to be even more desirable as it was obvious that the sector, including biotech, would extract a disproportionate share of value going forward.
As a result, business leaders must tackle two challenges:
Understand how and why governments implement policies that affect their business.
Take strategic decisions after having considered their political consequences at the country level, in addition to the usual global technology and competitive landscape.
Our purpose is to clarify i) the forces that shape the geopolitical world; ii) the interplay between geopolitics and business; iii) the increasing role of proprietary technology in the balance of powers.
- Teacher: Philippe Tibi