Global conflict: multinationals are often wrong-footed by strong feelings about local issues
Few modern myths are as powerful as the idea that the world has fallen under the control of vast, all-powerful, multinational corporations. Echoes of this can be heard from all the Labour leadership candidates, President Obama and, most recently, in attacks by coalition ministers on the banking industry. But the events of the past three months in the Gulf of Mexico should convince us all that this is nonsense. The Deepwater Horizon accident itself, and the environmental damage done, were tragic. But the incident has also prompted a tragi-comic clash of two different cultures. On one side, a local aggrieved community whipped up by the US media and politicians conscious of impending elections; on the other, a huge, rich, remote company talking in a European accent. To better understand this conflict, we must appreciate the huge changes to the corporate world over the past 20 years. For business in general, globalisation in the 1990s came as a rational and attractive step forward, allowing companies to secure access to new markets, resources and talent. Through a series of mergers and acquisitions, BP—which had been just a two-pipeline company operating in the North sea and Alaska—was able to become a global player: one of the three largest companies in its sector alongside Exxon and Shell. By 2006, it was working in over 100 countries. The strategy was simple. As China and others began to develop their economies, the market for energy had become global, and so companies had to play on the world stage. Size mattered. It was also rational for companies like BP to develop what were termed "global cultures." The age of imperialism was over and no business could venture into Russia, Angola or China without employing and promoting local citizens. Far from relying on low-paid labour—a particularly inaccurate variant on the multinational myth—international companies were usually the highest payers and the employers of choice. The watchword was "diversity." For good economic reasons, companies fostered cultures in which the brightest and the best thrived. The result was the ultimate meritocracy in which no one talked much about religious beliefs or nationality. It was even rumoured that Goldman Sachs was thinking of creating its own passports for staff. And BP dropped the word "British" a decade ago precisely in order to become indisputably global. Seen from wood-panelled corporate offices looking out over London or Manhattan, the idea that the world could be run on completely rational lines by highly able men (and a few women) was seductive. Surely such a global approach, unprejudiced by race, creed, colour or history, must be the best way of doing things? Better for the company, yes, but also the world. Unfortunately the "little people"—a description used disastrously by BP's chairman Carl-Henric Svanberg—were slow to grasp how much they benefited. And the mistake in some companies was to think that their cool, rational, non-discriminatory approach was the best way to deal with those not travelling business class. The events of the past three months have emphasised just how much the people of Louisiana, and indeed most other places, are locally focused. Eleven local deaths will always get far more media coverage than 11,000 deaths on the other side of the world. Many global companies have come up against these realities: both Google and News International have found China a hard place to do business. Shell continues to struggle in Nigeria. Even BlackBerrys seem to be unacceptable in Saudi Arabia. But none has fallen foul of the realities quite so badly as BP, in what many assumed to be the world's most sophisticated economy: the United States. The corporate world seems shocked by how an accident was turned into "an attack on America," compared by the president to 9/11. Many are astonished that the use of the word "British" as a negative adjective should come from our closest ally. The resentment of external power and wealth, however, extends far beyond America. For many, the gains from globalisation are few; it appears to be an alien process in which someone else always wins. Yet if the events of the past few months have undermined the myth that global companies are all-powerful, the age of global companies is far from over. International trade will not diminish, and multinational companies have skills, technology and capital largely unavailable in many countries. These companies will adapt. The next phase of global corporate development will be built on partnerships: ventures in which global capital and technology are married with local needs and objectives. They will have a shared identity rather than a single brand. BP's venture in Russia—TNK-BP, owned on a 50:50 basis with a Russian company at the insistence of Vladimir Putin—is an early example. Several companies, including big carmakers, are attempting similar projects in China and India. Media and communications businesses are already patchwork quilts of co-operation between global entities, bringing international news and sport together with local producers attuned to specific market needs. Such partnerships are not simple to build or manage. But as a signal that indigenous resources and consumers are not being exploited for the benefit of a distant, anonymous corporation, they are invaluable—especially if things go wrong. Globalisation is entering a more complex phase. After the initial surge led by foreign direct investment from Europe and America, the next wave of investment will flow from Asia into the west. This is natural and necessary to keep the global economy in balance. The next "event" in the continuing drama of global change may come as an Indian company chooses to reinvent the British car industry, or Chinese investors decide they do not like the levels of pay in British banks—or indeed the Premier League. The cultural conflicts of globalisation have only just begun. Nick Butler is a fellow of Wolfson College, Cambridge, and a former special adviser to Gordon Brown
Few modern myths are as powerful as the idea that the world has fallen under the control of vast, all-powerful, multinational corporations. Echoes of this can be heard from all the Labour leadership candidates, President Obama and, most recently, in attacks by coalition ministers on the banking industry. But the events of the past three months in the Gulf of Mexico should convince us all that this is nonsense. The Deepwater Horizon accident itself, and the environmental damage done, were tragic. But the incident has also prompted a tragi-comic clash of two different cultures. On one side, a local aggrieved community whipped up by the US media and politicians conscious of impending elections; on the other, a huge, rich, remote company talking in a European accent. To better understand this conflict, we must appreciate the huge changes to the corporate world over the past 20 years. For business in general, globalisation in the 1990s came as a rational and attractive step forward, allowing companies to secure access to new markets, resources and talent. Through a series of mergers and acquisitions, BP—which had been just a two-pipeline company operating in the North sea and Alaska—was able to become a global player: one of the three largest companies in its sector alongside Exxon and Shell. By 2006, it was working in over 100 countries. The strategy was simple. As China and others began to develop their economies, the market for energy had become global, and so companies had to play on the world stage. Size mattered. It was also rational for companies like BP to develop what were termed "global cultures." The age of imperialism was over and no business could venture into Russia, Angola or China without employing and promoting local citizens. Far from relying on low-paid labour—a particularly inaccurate variant on the multinational myth—international companies were usually the highest payers and the employers of choice. The watchword was "diversity." For good economic reasons, companies fostered cultures in which the brightest and the best thrived. The result was the ultimate meritocracy in which no one talked much about religious beliefs or nationality. It was even rumoured that Goldman Sachs was thinking of creating its own passports for staff. And BP dropped the word "British" a decade ago precisely in order to become indisputably global. Seen from wood-panelled corporate offices looking out over London or Manhattan, the idea that the world could be run on completely rational lines by highly able men (and a few women) was seductive. Surely such a global approach, unprejudiced by race, creed, colour or history, must be the best way of doing things? Better for the company, yes, but also the world. Unfortunately the "little people"—a description used disastrously by BP's chairman Carl-Henric Svanberg—were slow to grasp how much they benefited. And the mistake in some companies was to think that their cool, rational, non-discriminatory approach was the best way to deal with those not travelling business class. The events of the past three months have emphasised just how much the people of Louisiana, and indeed most other places, are locally focused. Eleven local deaths will always get far more media coverage than 11,000 deaths on the other side of the world. Many global companies have come up against these realities: both Google and News International have found China a hard place to do business. Shell continues to struggle in Nigeria. Even BlackBerrys seem to be unacceptable in Saudi Arabia. But none has fallen foul of the realities quite so badly as BP, in what many assumed to be the world's most sophisticated economy: the United States. The corporate world seems shocked by how an accident was turned into "an attack on America," compared by the president to 9/11. Many are astonished that the use of the word "British" as a negative adjective should come from our closest ally. The resentment of external power and wealth, however, extends far beyond America. For many, the gains from globalisation are few; it appears to be an alien process in which someone else always wins. Yet if the events of the past few months have undermined the myth that global companies are all-powerful, the age of global companies is far from over. International trade will not diminish, and multinational companies have skills, technology and capital largely unavailable in many countries. These companies will adapt. The next phase of global corporate development will be built on partnerships: ventures in which global capital and technology are married with local needs and objectives. They will have a shared identity rather than a single brand. BP's venture in Russia—TNK-BP, owned on a 50:50 basis with a Russian company at the insistence of Vladimir Putin—is an early example. Several companies, including big carmakers, are attempting similar projects in China and India. Media and communications businesses are already patchwork quilts of co-operation between global entities, bringing international news and sport together with local producers attuned to specific market needs. Such partnerships are not simple to build or manage. But as a signal that indigenous resources and consumers are not being exploited for the benefit of a distant, anonymous corporation, they are invaluable—especially if things go wrong. Globalisation is entering a more complex phase. After the initial surge led by foreign direct investment from Europe and America, the next wave of investment will flow from Asia into the west. This is natural and necessary to keep the global economy in balance. The next "event" in the continuing drama of global change may come as an Indian company chooses to reinvent the British car industry, or Chinese investors decide they do not like the levels of pay in British banks—or indeed the Premier League. The cultural conflicts of globalisation have only just begun. Nick Butler is a fellow of Wolfson College, Cambridge, and a former special adviser to Gordon Brown
