Growth in a G-Zero World
It is easy to be pessimistic about the current state of the world and the prospects for business growth that underlie the state of our future prosperity. In much of the world a zero-sum mindset has replaced shared principles in the realm of trade. In a new report by the Eurasia Group and KPMG, Ian Bremmer describes this as a ‘G-Zero’ world, in which a large number of issues are enframed in us vs them terms.
We seem to be facing an economic slowdown in the short term. We have seen a rise of populism, nativism and exclusionism. There has been a loss of power in the centre and an increase in more extreme views.
We have seen a recent decline in the ability to deal with the global commons of climate change, cyber-security and space. Globally we are irresponsibly borrowing from future generations through high public debt. There is a sense for many that our children will have a lesser standard of living than we have had.
But, while we are also hopeful beings – “‘Hope’ is the thing with feathers that perches on the soul”, as Emily Dickinson famously reminds us – there is a cause for optimism beyond mere hope. A rational optimism.
As Frederick Hegel points out, contradictions arise out of a state of affairs. There is thesis, antithesis and synthesis. Thus, there is geopolitical upheaval – which is not without risk – but disorder sows the seeds for new ways of thinking, better reflection on the circumstances of others and new forms of growth. Tectonic shifts produce new lands which are as often fertile as barren.
On trade, little focus has been given to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership which came into force earlier this year. It reduces 95 percent of tariffs between the 11 member countries, including Australia, Canada, Japan, Mexico and Vietnam which comprise 13.3 percent of Global GDP.
The Regional Comprehensive Economic Partnership is currently being negotiated and, if implemented, will comprise the ASEAN states plus Australia, China, India, Japan, New Zealand and South Korea. This comprises nearly a third of global GDP and a bit less than half of the global population. There is the possibility that India could be added to the group.
Trade friction, whilst substantially bad, also creates alternative paths of co-operation and different ways of doing things.
The disenchantment that forms the fundamental base of populism, has also thrown up new ways of thinking. Recently we have debated the specifics of Newstart. The adequacy of Commonwealth Rent Assistance has also been under discussion by one of our major think tanks, as has the economics of the urban-regional divide and even new forms of democratic participation. Inclusive Growth is increasingly on the OECD and G7 agendas.
At the business level, there is an expanding scope of our primary duties. We are seeing the rise of ‘customer first’ principles, greater focus on gender equality, the benefits of a more diverse pool of talent and companies are thinking about ethical frameworks that set the bar above what is legally required by regulation.
As Larry Fink, of BlackRock importantly said last year in an open letter to CEOs, “Purpose is not a mere tagline or marketing campaign; it is a company’s fundamental reason for being – what it does every day to create value for its stakeholders.” Such stakeholders include employees, customers and communities.
This is a long way in from Milton Friedman’s view that a company’s sole purpose is profit to its shareholders. Last week the powerful US Business Roundtable too signed a new statement of its principles of corporate governance, moving away from its long-held view of the ‘purpose of a corporation’ and widening it to take into account the interests of a diverse group of stakeholders.
We are beginning to realise that re-engineered businesses can provide not only a stronger sense of purpose, but are also more sustainable growth in the longer term.
Opportunities, as we know, are often the flip-side of risks. Many abound in the current business environment: on data – managing privacy, while leveraging opportunities that are well-received by potential customers; on cybersecurity – dealing with a potential public backlash and being open where there are breaches; on supply chains – ensuring that you do not become a target at home, but that a business reputation is enhanced by thinking about those with whom you deal.
There is also a realisation that one can think both globally and locally. One does not preclude the other and thinking in nuanced terms on local markets, technology and a licence to operate can be a powerful business advantage.
So ultimately, we need to focus not just on what is most obvious before of us, but the contradictions that arise from the obvious. This is the source of our new opportunities.