The new geopolitics of global business

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Only America and China have been able to marshal the process of creative destruction at scale. Other countries have squandered the opportunity

Creative destruction often makes predictions look silly, but even by these standards the post-pandemic business world is dramatically different from what you might have expected two decades ago. Tech firms comprise a quarter of theand the geographic mix has become strikingly lopsided. America and, increasingly, China are ascendant, accounting for 76 of the world’s 100 most valuable firms. Europe’s tally has fallen from 41 in 2000 to 15 today.

In themselves, big companies are no better than small ones. Japan Inc’s status soared in the 1980s only to collapse. Big firms can be a sign of success but also of sloth. Saudi Aramco, the world’s second-most-valuable firm, is not so much a $2trn symbol of vigour as of a desert kingdom’s dangerous dependency on fossil fuels. Even so, the right sort of giant company is a sign of a healthy business ecology in which big, efficient firms are created and constantly swept away by competition.

Part of the explanation is Europe’s squandered opportunity. Political meddling and the debt crisis in 2010-12 have stalled the continent’s economic integration. Firms there largely failed to anticipate the shift towards the intangible economy. Europe has no startups to rival Amazon or Google. But other countries have struggled, too. A decade ago Brazil, Mexico and India were poised to create a large cohort of global firms. Few have emerged.

The recent erosion of this political consensus in both countries is one reason this dominance could prove unsustainable. Americans are worried about national decline, as well as low wages and monopolies .supports the Biden administration’s aim to promote competition and expand the social safety-net to protect workers hurt by disruption.

 

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