Kenichi Ohmae is a management consultant who has written more than 100 books and I just finished reading his latest: “The Next Global Stage: Challenges and Opportunities in our Borderless World.” The book is a good primer on the global economy. Ohmae makes a convincing case that communities defined by capital flows are more meaningful than communities formed by political interests. If nothing else, he demonstrates that the two are on a collision course.
Just as sure as water will always move toward the lowest ground, capital will always gravitate toward the places where it produces the greatest return. This has always been true but until the advent of the internet and other technology, physical and political barriers distorted the flow of capital, the same way a dam can prevent water from flowing down a hill. The technology which converts currency to electronic impulses, however, is enabling the natural migration of money. The result is investors are moving money to the most profitable places with greater ease than ever before.
Ohmae notes that money is flowing completely independently of political boundaries. Decades ago, when it was cumbersome to invest internationally, capital often stayed home, even if the homeland offered poor investment options. Now that money is flowing across political borders and oceans into places that offer attractive investments. Politicians who embrace a role in the global economy will see their countries prosper, while those that resist by passing protectionist laws, will put their countries on the sidelines. The way Ohmae describes it, capitalists really control things in the macro sense, not the politicians; the influence of elected officials is really limited to local, short-term situations.
For example, politicians may pass laws preventing outsourcing of jobs, but in the long run, foreign investors won’t look to those countries to set up new companies if they know they are handcuffed on their employment practices. Even home-grown companies are likely to look to foreign countries for starting new ventures if the local hiring laws are more favorable than the domestic ones. Over time, countries permitting the greatest flexibility for the investment of capital will attract much more of it than countries that hold investors to numerous restrictions. Countries that attract capital, inevitably position themselves to offer their citizens a higher standard of living than countries which have trouble attracting capital.
The incongruity of populist political agendas with the natural global flows of capital sets up a battle. Watch Fed Chairman Ben Bernanke and members of congress over the next several years to see how they accommodate these often competing sets of interests.
As a book, “The Next Global Stage” has some drawbacks, such as periodic awkwardness in its use of language, and repetition. Ohmae also makes an unconvincing argument that a high-interest rate economy is better than a low-interest rate economy. These deficiencies aside, “The Next Global Stage” offers some useful insight into the battle for our future.
tMichaelB is the web site for Tom Bengtson, who writes about business, religion, family and politics.
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