“Global Capitalism – Local Values”
“We have the triumph of the global over the local, of the speculator over the manager and of the financier over the producer. We are witnessing the transformation of mid-20th century managerial capitalism into global financial capitalism.”
Martin Wolf, Financial Times
The development of the global economy has in past years been marked by two trends that, at first glance, appear contradictory. Starting from its original Western context, the capitalist economic order has launched into a global expansion that has even managed to overcome the restraint of political systems. But increasingly, the global business model is now running up against local barriers. In every conceivable way, a sharpened awareness of the value of the concept “local” has recently begun to take root.
Local roots – global competition
Basically, there is a close-meshed, productive relationship between the global market economy and “local values”, which can best be described as the overall mix of locally confined convictions, life styles, rules and identities. Essentially, therefore, global capitalism thrives on local input and innovation. Structurally, a certain distance between “local” and “global” might always be assumed, with economic activity constantly appearing to oscillate between these natural areas of human interaction. However, nowadays, the distance between local and global is particularly obvious, and set to grow steadily. Indeed, the polarisation between global markets and globally available know-how and capital on the one hand, and local interests, resources and politico-social structures on the other, is evident with increasing clarity. At first glance, this development is surprising: spreading throughout the world, the free economic order has boosted prosperity in almost all regions. However, it is now clear that the creation of a workable relationship between global business and local structures has turned out to be a complex and extremely difficult undertaking. Increasingly, one of the biggest corporate, political and social challenges of our time is to do justice to the demands of global competition in all areas while taking local preconditions into account. Where global visions come up against local realities, special efforts will be needed in order to bridge such a divergence productively.
Capitalism: a universal model?
The quality of capitalism to adapt to changing circumstances and gradually renew itself has kept it immune to the passing of time. Capitalism has succeeded in distancing itself completely from the great 20th Century system debate. Serious alternatives to capitalism in its present form are not discernable in the foreseeable future. Even state run economies and communist governments are – at least for now – managing to adapt market economy mechanisms with great success, and apparently without contradiction. With so much universality, the question arises as to the core meaning of capitalism, and whether that meaning is starting to shift. Frequently, the viewpoint is expressed that – similar to democracy – the spread of capitalism is merely superficial, at most an abstract term, and its content is being eroded. Over the long term, capitalism would not be possible (so the argument goes) outside a liberal-democratic context and the associated value and legal systems. Has not capitalism thus far been an attractive and binding concept precisely because it was linked to local (although always aspirationally universal) values like individual freedom, personal responsibility, and success for the fittest?
New markets – new systems – new values?
As the current regional versions of capitalism show, capitalist structures can also gain a foothold under alternative (i.e. locally varying) political, social and cultural environments. As currently practised in Russia, China or Vietnam, capitalism also appears to function in the absence of a liberal-democratic value system. So capitalism (or variations of it) appears to be thriving in different historical, cultural or religious settings. One of the most interesting questions soon in need of clarification will therefore be, whether the “universality“ of Western values is not actually an essential precondition for a global capitalist economic order.
The power of emerging markets
The first serious consequences of the global spread of capitalism are already clearly discernable. The integration of up-and-coming regions into world trade and the international financial markets has resulted in a significant expansion of the circle of national economies that help define the course of the global economy. A clear illustration of this development is the insistence by Western states that exchange rates of producing nations, especially in Asia, must reflect their own economic status. Equally, the (temporary) collapse of the Doha round has shown that the stronger emerging nations – examples of the success of capitalist structures and their universality – are staking their claims with unprecedented confidence while demanding a voice in the lawmaking process for world trade and the allocation of resources. All of this is taking place amidst a marked rise in population in these countries which backs the (new) desire to consume and the call for a higher standard of living, which is in turn accompanied by a willingness to invest the appropriate time and energy to achieve it. As a result, the global economy is increasingly being shaped by new locations while established centres will lose influence. The creation of new economic focal points, and the reassessment and downgrading of established ones, are the clearest expression of a sharper competition between the different locations around the globe.
Value creation
The present transformation of capitalism, where the “global” and “local” poles assume new meaning within an increasingly divergent relationship, stretches back to the period of exceptional global economic prosperity of the last couple of years. To a large extent, this transformation is determined by positive factors, and not so much by inroads into the system. Among the driving forces behind this dynamic is first of all the global expansion of all aspects of economic activity. Even in the smaller company environment, there are hardly any areas remaining without a global implication. Globalisation stands for the change in the way that economic activities unfold. The radical disconnection of the place where value creation occurs from the place where it is consumed has driven a wedge between global capitalism and local structures, and seems to have a long way still to go. Among the consequences of the spread of the global economy is a steep rise in the number of market players. Increased competition is the fruitful result. However, the global availability of capital and know-how also comes with an obligation to innovate and a simultaneous, drastic shortening of product cycles. In the future, charting an efficient and successful course from predominantly local innovation to global value creation will be an even greater challenge than before. With such competition, it remains to be seen which companies and institutions – and also which regions and educational systems – will be able to assume the leadership role in the area of technological development.
Global financial markets as a formative force
The financial and capital markets are nowadays seen as by far the most globalised markets. They are the real drivers of the global economy. However, over the last years and presently under the particular impression of the credit crunch, general insecurity about the long-term direction and role of the financial markets and their players has developed. Leaving aside the question of the robustness and vulnerability of the financial markets, the same can be said about the increasing complexity of financial instruments and products, the expansion of financing options, and the increasing activity of new investors. Innovative methods for the structuring and passing on of risks led to the situation where even locally contained events could have a direct influence on the sensitivities of the global economy. The sub-prime mortgage crisis in the US housing market is a perfect example. In past years, high liquidity in the financial markets as well as a willingness to finance debt also meant that no successfully led company could be safe from a potential takeover and restructuring – with the intention of predators often remaining hidden. Company management that is successful in the long term no longer appears to have real value, and what is traditionally understood by performance has undergone a radical change. In the light of the current financial crisis, the question thus arises as to the future impact of the conflict between the interests of the dynamic financial markets with their global mobility and global impact on the one hand, and the structurally static economic centres with their local production facilities, industries and regulations on the other.
Unease and criticism about capitalism
In recent times a feeling of uncertainty has been spreading, along with the critical question about the fairness of economic development and the distribution of income. The fact that national assets – including flagship companies – suddenly find themselves in foreign hands or radically modify their product range is seen in many places not so much as a chance but as a threat. Liberalisation across a wide front, as well as the adoption of the competitive principle in supposedly protected areas such as education, healthcare and state-run services, are viewed with suspicion not only by the direct losers but also across a broad, tendencially (social)conservative, stratum. Traditional ideas about the value of work versus the meaning of capital begin to falter. Quick and decisive political action is demanded as a consequence. However, there is doubt whether politics is in a position to give suitable answers. It is true that globally oriented companies continue to operate largely within a national regulatory framework and when required seek the protective closeness of the state and its ability to intervene. Nevertheless, political interests, which are based on legitimation and local consensus, and the global economy, which must primarily be focussed on economic performance, are tending to drift further and further apart.
Individual action in the global economy
Across wide sections of the population, the alienation between politics, the general public and business awakens reservations about current economic and social developments. One of the big challenges facing open societies will thus be to enable individuals to envisage a meaningful life, structured according to their own principles, within the context of the capitalist economic system. Where the scope of individual action within a global economy lies, and whether or not the entitlement to freedom of choice and subsequent action is an illusion, are questions that strike liberal-Western style capitalism at its core. It follows that they are of equal importance to business, politics and society. An answer to these questions will also determine whether the future concept of capitalism will, in contrast to the current one, be positively evaluated.
38th St. Gallen Symposium
With the theme “Global Capitalism – Local Values”, the 38th St. Gallen Symposium will place at the centre of the discussion the tense relationship between local economic, political and social structures on the one hand and the global capitalist economic order on the other. To what extent do the global financial markets today determine corporate management strategies? What chances do their players create for the development not only of individual companies but also entire economies? When evaluating these chances, what are the consequences of the relationship between company owners and management? Are there “good“ and ”bad” investors? What would cause them to be good or bad? Subsequently, how are the financial investments of state funds in crumbling financial institutions to be assessed?What does it mean for business activities over the long-term, if companies suffer from bias on the financial markets for which they are not responsible and which is unrelated to their products and services? What does it mean today for a company with local roots to be exposed to global competition and still thrive in such an environment? Bearing in mind the growing interdependency and interaction that economic activity nowadays implies, what status is granted local economic centres? When it comes to corporate alliances and mergers, what role do “national interests” play? And who defines these interests? Are there values that in global economic competition are seen as assets, or is there in fact – as is often suggested with greater or lesser clarity – a contradiction between capitalism and values? What responsibility do entrepreneurs and companies have as global players? The 38th St. Gallen Symposium will present its participants and speakers with these challenges and problems, and in the tradition of a constructive and practically relevant dialogue, give representatives from top management a chance to discuss their concerns and experience in the context of questions which define our era.
