Klauswitz Meets Porter

Klauswitz Meets Porter

I wrote this a number of years ago after reading an op-ed piece in the Economist wherein the author accused the US of out and out imperialism.

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I write with respect to the idea of American Imperialism.  I disagree.  As an American, I view my country not so much as an empire-builder, but a corporation-builder.  The world is now a corporation.  The stockholders include every person on the earth.  The sooner you come to terms with the idea, the sooner you come to see how it benefits your country, your region, your hemisphere.

The basic premise
The world is easily divided into three categories; management, manufacturing and raw materials or supply.
Painting with a broad brush, the division roughly falls along the lines of first world, second world and third world.

• The US and Old Europe (to borrow a phrase from Mr. Rumsfeld) are the world’s management.  They have suffered through the machinations of developing through the supply and manufacturing tiers.  The greatest strength these countries bring to bear is experience and management ability.
  17th and 18th century colonialism was nothing more than an attempt to secure raw materials for manufacturing-based economies.
• Most of Central America and Asia fall into the manufacturing category.  India is a prime example, as are China, Korea and Mexico (although Mexico also has some supply capacity i.e. oil).
• The remainder of the world, the Middle East, Sub-Saharan Africa and South America are suppliers.  A notable anomaly in this category is Russia, clearly a supplier despite their former artificially created place in management.  They are better suited to supply, endowed with vast untapped natural resources.  The longer they try to be management, the longer it will hurt.

With the exception of certain geographic areas, a country can easily move from one tier to the next as they move along the continuum of industrialization.  Likewise, it may straddle tiers.  India, for example, may move from manufacturing to management, or it may hold some elements of both.
Geography dictates that certain states will never move from supply to management, although they may develop some other capacity.  Their strategic strength lies in their ability to extract oil from the ground, coax wheat from the earth, dig diamonds from the mines, get rubber from the trees. 
Each tier and state has a need for a certain amount of management.  The Middle East needs people adept at managing oil production and shipment.  China needs manufacturing managers.  The entire world needs infrastructure and upkeep.

Coincidences of birth do not doom a person to a life in their geographic region.  Someone with a penchant for management can easily move to a country in the management sector of the world.  Further, as noted above each division within the corporation needs effective management.  Ability to move is predicated on free flow of money, materials and human and intellectual capital across borders.

To not participate in the corporation is not an option.  As chairman of the board, it is incumbent on the US to manage the world’s supplies when artificial barriers arise.  A minor but nagging example of US hypocrisy on this subject is the recent imposition of steel tariffs, amounting to little more than shortsighted political positioning.  Better steel can be obtained cheaper and faster on the open market.  Despite the fact that it would mean a short-term loss of jobs in the steel-manufacturing sector of the US economy, we as human beings are retrainable.  Our strength lies in our ability to adapt.

Iraq is a country inescapably in the supply tier by virtue of geography.  No amount of patriotism, religious, cultural or otherwise will change that.  The management of the country took its oil supplies hostage.  The price paid for this hostage taking was an entire population denied the fruits of their labor and their resources.  Iraq’s management was unable or unwilling to see the larger picture and decided to be a big fish in a small pond.  They clearly did not realize that there is no small pond, only a big one.  Further, the ransom demanded was too great for corporate management to bear, the subjugation of an entire people to the whims of a megalomaniac.

Management is tasked with keeping the peace and seeing that resources are allocated appropriately.  Now and again, mid-level management needs to be replaced.  To this end, Saddam Hussein had to go.  Bad management is bad management.

Likewise, Kim Jong Il.  A unified Korean peninsula is a manufacturing powerhouse waiting to happen, artificially delayed by 50 years of “Socialism,� perhaps more appropriately called misguided centralization.  True socialism is of, by and for the people.  True socialism does not exist in the world today.  Even the Chinese understand the value of capitalism, incentive and positive reinforcement.

The modern world has become so small and interconnected that when a bottleneck in the supply chain develops, it affects the entire corporation.  Dependent upon the size of the bottleneck and its downstream effects, management can opt to ignore it unless and until it begins to affect other segments of the corporation.  When the bottleneck creates significant negative downstream effects, including but not limited to the financial and the social, it is incumbent upon management to remove the bottleneck.

Ultimately, the free flow of ideas, people and capital across borders and sometimes-arbitrary boundaries will produce this corporation.  Effective management will see that the suppliers and manufacturers are rewarded appropriately.  Suppliers and manufacturers will demand adequate compensation, banding together when necessary.  The stockholders are the workers, at all levels.  Wealth will spread, not equally but certainly more equitably than it does today.  Generation of wealth will affect every person on the earth.  A rising tide catches all boats.

The corporation needs security.  The apparatus in place to provide security currently is the UN.  The UN is overseen by the civilian populace, as is appropriate.  Unfortunately, the representatives that make up the management of the security force are myopic, unable to see beyond their own short-term self-interests, equally guilty of succumbing to political pressure as the US has been with respect to steel tariffs.  The occasional use of force, while unpleasant, is necessary in order to ensure the larger peace and the smooth operation of the corporation.  The fortitude to use this force is necessary if the security is to be maintained and respected.  If the security arm opts not to use force when appropriate, it becomes nothing more than a poor excuse for a Human Resources department.

A mechanism to air grievances is currently in place.  The mechanism to respond to threat is also in place, though there is obvious reluctance to use it.
Our world will grow smaller as we move into the future, not larger.  Borders will become more indistinct.  Today the European Union.  Tomorrow the Arab Union, the African Union, the Asian Union.  This is not utopian thinking, justification for nation building or an attempt to justify US hegemony in the world today, but rather a realistic look at the current state of affairs and where the world is headed.

I anticipate that in a hundred years the corporation will run much more smoothly as its management and employees figure out that we are all more alike than different and that ultimately we’re working toward the same goal, generating greater shareholder value.

Empire?  I don’t see it.  Corporation?  Absolutely.