Will American Firms Put America First?

At a panel discussion about global trade during the Munich Security Conference last week, BMW CEO Oliver Zipse praised his firm’s role in the global economy: Its largest manufacturing plant is in the United States, he said; its fastest growth is in China. Zipse, who is German, himself went to college in the United States and remains an international man at the helm of his international company: one of the world’s many phenomenally successful Davos men (and Davos women).

“There’s a trend of Dow components, the iconic representation of American corporate achievement, appointing non-American CEOs,” declared Slate in 2007, going on to list recent appointments: Indian-born Indra Nooyi at PepsiCo, Irishman Neville Isdell at Coca-Cola, German Klaus Kleinfeld at Alcoa. European companies followed the trend. In 2012, Germany’s Deutsche Bank announced that the British Indian banker Anshu Jain would become co-CEO, replacing the Swiss-born Josef Ackermann; three years later Jain was succeeded by John Cryan, a Briton.

Their co-CEO at the time, Jürgen Fitschen, was a German who had worked in countries including Britain and Singapore. Another German giant, Siemens, hired a German CEO with such an international mindset that he changed his name from Josef Käser to the Americanized Joe Kaeser. Nokia, the Finnish paper-and-pulp company that that transformed its fortunes by becoming a mobile-phone company, turned to network equipment and brought in a whole suite of new executives led by Indian-born Rajeev Suri. Suri’s counterpart at Swedish rival Ericsson, Börje Ekholm, also serves on the board of the Chinese e-retailing giant Alibaba. The American automotive icon Chrysler was sold to Germany’s Daimler; the quintessentially Swedish Volvo was acquired by Geely of China.

This sort of internationalization permeated corporate culture: nationality—corporate or individual—barely mattered. English increasingly became the working language. Executives regularly convened with political leaders to sort any the remaining obstacles to a smoothly running global economy. “Davos man” was in charge.

Today’s geopolitical standoffs are making companies’ home countries relevant again; companies have a role to play in their home countries’ national security.

But the world is changing. Indeed, today’s geopolitical standoffs are making companies’ home countries relevant again; companies have a role to play in their home countries’ national security. Countries are increasingly at loggerheads with one another, and those conflicts are playing out with minimal military aggression. Instead, countries are weaponizing globalization.

There’s Huawei’s government-supported international expansion that has seen the Chinese tech giant, aided by massive government subsidies, develop inexpensive 5G technology with which it undercuts its competitors Ericsson and Nokia. Many countries now planning to introduce 5G are quite reasonably opting for Huawei, much to the ire of advocates of fair business practices, who object to the unlevel playing field, and of the U.S. government, which senses a national security risk in having a firm linked to the Chinese government providing sensitive technology.

There’s also the Belt and Road Initiative, which offers infrastructure investment and construction to foreign countries at low cost, then leaves those countries beholden to China. Nord Stream 2, the natural gas pipeline between Russia and Germany—for which Germany’s government is being roundly criticized by allies who view it as a Russian tool of influence—is a partly private enterprise undertaken by a mix of Russia’s state-controlled Gazprom and a handful of Western European firms such as Wintershall and Engie. A 2019 report by the Swedish Defense Research Agency found that more than 1,000 Swedish businesses are now owned by Chinese nationals, with over half of the firms active in areas designated as priorities in China’s Made in China 2025 industrial plan. Volvo has been joined by other classic Swedish brands in being acquired by Chinese firms.

The U.S. National Defense Strategy speaks of “predatory economics,” and in 2018 Sens. Chris Coons, Jeff Merkley, Marco Rubio, and Todd Young introduced the bipartisan National Economic Security Strategy Act of 2018 bill, which would require U.S. administrations to treat predatory economics as seriously as military aggression.

In authoritarian countries, companies can of course act at the government’s behest. And so far, most predatory practices are not illegal. They do, however, require Western countries to put up a united front. As Sen. Mitt Romney pointed out at the Munich Security Conference, even the United States is small compared to China and should team up with its allies.

That includes captains of industry in the United States and allied countries. But with Davos man, there’s no such certainty. Last year, Kaeser announced that Siemens would invest another 100 million euros ($113 million) in Russia, even as Russia continues to undermine democracy in Germany and other Western countries by spreading disinformation and trying to interfere with elections. Apple has removed apps such as one used by Hong Kong protesters from its App Store at the request of the Chinese government while refusing to give the U.S. government access to its backdoor, which Washington argues is vital in terrorist investigations.

Facebook ran Russian ads designed to harm the 2016 election. Western telecommunications companies advocate using Huawei even though support from the Chinese government means it competes against Ericsson and Nokia on highly unequal terms. And U.S. President Donald Trump, who remains the owner though not the CEO of the Trump Organization, sometimes seems put the conglomerate’s global operations ahead of U.S. national interests even as he declares “America First.”

Sure, it’s tricky to help your home country counter predatory economics if your company is ultimately owned by a rival power—but a first step is for captains of industry to recognize the role of business in today’s geopolitical standoff.

Here’s the challenge: No government in a liberal democracy can oblige business leaders or companies to act in the interest of the country. While Ericsson and Nokia are currently fighting a fierce battle against their mighty Chinese rival, they could decide that the battle is quixotic and shift their focus to another business area. And although the two firms are headquartered in Sweden and Finland, respectively, they don’t represent the countries.

Indeed, no executives have an obligation to act in the interest of either country. Zipse’s BMW, meanwhile, keeps selling to China even though the country continues to steal intellectual property from the West, a significant problem Western governments are struggling to solve. Indeed, China is building a new airliner—the C919, which will compete head-on with Airbus and Boeing—largely by using intellectual property stolen from those two firms.

Governments, though, seem to assume that a company’s home base implies allegiance to that country. Ericsson and Nokia are treated as safe alternatives to Huawei simply because they’re Scandinavian. They are most likely safer—but that’s thanks to their higher ethical standards, not because they’re located in Finland and Sweden.

Governments sometimes also assume that large companies’ success is ultimately linked to the prosperity of the country: In other words, what’s good for General Motors is good for the United States, as then-GM President Charles Wilson once argued. That’s sometimes the case even when companies’ profits are channeled through other countries. Though the U.S. government was aware that Apple was moving profits to Ireland—which offered extremely low tax rates—the practice was allowed to go on for years. In 2018, the tech giant finally paid the U.S. tax collector $38 billion.

Global executives would, however, do well to understand that the continued prosperity of democratic countries is vital not just for the governments and ordinary taxpayers but ultimately for global companies, too. The success of such companies—even if their largest growth is in China, even if they invest enormous sums in Russia, even if they do business in authoritarian countries—depends on the rule of law, democracy, and prosperity in their home countries.

Global executives would do well to understand that the continued prosperity of their home countries is vital not just for the governments and ordinary taxpayers but ultimately for global companies, too.

Without such pillars of liberal democracy, companies’ profits aren’t safe, nor is their executives’ freedom. And even in a crisis short of war, a foreign government can simply decide to shut down their production, as is happening in China due to the coronavirus epidemic, forcing Apple to warn of impending iPhone shortages.

According to a 2018 YouGov poll, 50 percent of Americans believe Russia interfered in the 2016 election; Russia notoriously did so largely through Facebook. CEO Mark Zuckerberg may not realize it, but the democratic malaise his company has helped bring about in the United States will eventually harm Facebook, too. That malaise could, for example, led Facebook users to migrate to online platforms with even fewer restrictions, or it could be used for sophisticated disinformation campaigns against a country or specific companies that would cause a drop in the stock market.

As the much-maligned U.S. Attorney General William Barr has realized, the alternative is radical: nationalization. Earlier this month, Barr proposed at a think tank conference in Washington that the U.S. government should buy Ericsson and Nokia to blunt Huawei’s “drive to domination.”

Although the White House immediately dismissed the proposal, Barr had a point. During the Cold War, large chunks of critical national infrastructure in Western Europe—airlines, postal services, energy providers, railways, telephone companies—were government-owned precisely because governments calculated that they could not rely on the free market in vital areas. Today, social networks and 5G equipment are vital areas, too.

The global executive isn’t evil. But in an era of gray-zone aggression, having governments look after the national interest while business leaders pursue ever-increasing globalization is no longer sustainable. That doesn’t mean that businesses should become Western governments’ lackeys: they should simply show good corporate citizenship. Zuckerberg and his ilk, a highly educated group, will easily grasp that doing their part for their continued well-being of their democratic countries is the ultimate long-term strategy. Davos man must wake up; seamless globalization was nothing but a fleeting dream.