by Michael Granger
In the realm of the superpower as in the field of business and economics, no lead is ever safe. History is replete with the rise and fall of great powers. Becoming a superpower has never been enough; maintaining the superpower status has always been the challenge. When seeking investors, a new computer start-up, with the best of technology (Apple, in this example) was always greeted with the question, what will IBM do?
As investment manager for Xerox Venture Capital in the 1980’s, I faced this question many times. We held an investment in Apple. Apple took Xerox’s graphical user interface, so common in modern computing devices, and used it to revolutionize the industry. Apple’s ability to execute made the difference – execution was Apple’s value-added. IBM was left behind.
President Obama talks about innovation, but innovation alone will not suffice. American business must return to the source of its strength, execution.
General Motors used to be the biggest and most feared auto manufacturer is the world, but of late it was reduced to a ward of the United States government. On the other hand, a refreshing example to the contrary has been General Electric. GE has demonstrated resilience. It has been challenged and has risen to the occasion every time, reinventing itself and emerging bigger and badder each time. And with all the change and transformation, GE has remained quintessentially an American company, much in the way that Daimler-Benz has remained a German company.
We might be tempted to say that these are mere corporations, while the United States is a massive nation of 300 million people. But these companies, coins of the democratic, capitalism realm, and their challenges, are microcosms of the United States and in some respects representative of what the United States is going through: How do we meet the challenges of the present and future and deal with formidable rivalries?
After millennia of human history, the road that humanity has marched is littered with fallen empires. It is cliché to say that the Persian, Roman and the Ottoman empires fell, because those truisms are etched in our consciousness as is the rising and setting of the sun. But in the lifetime of anyone over 30 years old, it is not cliché to say that the Soviet Empire fell. It is even more meaningful to us that it fell in competition with the United States. The battle with the Soviet Union dominated the foreign policy agenda of the Reagan Administration. Reagan stared the Soviet Union down and the Soviets blinked.
What sets the United States apart is that it is a society founded by people who were fleeing tyranny of various kinds. And those people forged a constitution that would accord rights to citizens and give some permanence to the nation. During the forging of the constitution and the struggle against King George and in the Civil War, the very existence of the nation was in play. However, the United States of America proved resilient. It is that resilience that is being called upon to get us through the current period. We are being called upon to lead with our strengths.
Our strengths begin with our culture and the individual freedoms and commitment to excellence it allows us and the constitution which is the guarantor of these freedoms. An American has rights which are guaranteed and upheld wherever he or she goes in the country. Knowing that his freedom is guaranteed, an American need not wake up every day negotiating those rights, but is free to pursue the higher callings of humanity.
We are free to educate ourselves in the best education system, taken as a whole, in the world. We are free to pursue enterprise in a $15 trillion economy, the most dynamic economy ever, and to use this base to compete worldwide. We are free to innovate and create goods and services which improve the quality of life of people here and around the globe.
China’s rise is an opportunity
China is not our problem. China’s rise is rather an opportunity. Our success is going to depend on what we choose to excel at and where we choose to go – and less so on what China is doing. In the area of starting and growing business into major enterprises, Americans have no equal. American companies can compete with and out-manage China’s state-owned enterprises. If American-based companies believe that they cannot out-compete Chinese state-owned enterprises, then we have a bigger problem than we once thought. One remarkable aspect of China’s precipitous rise as an economic power has been its activities in Africa.
China has surpassed the United States in market share of foreign, direct investments in Africa. The Chinese have moved with dispatch to lock up vital natural resources, such as copper mines in Zambia, and agricultural land across Sub-Saharan Africa. China’s great export to Africa is labor. The Chinese have dominated the building of infrastructure in Africa, including soccer stadiums in countries like Tanzania and hydro-electric power plants and railroads in Ethiopia. What they have not mastered is the development of small and medium enterprises (SMEs) that are the leading edge of economic growth in Africa. Africa is growing not because large companies are investing in extractive industries, but because the local economies are growing.
Out of Africa: Our past and our future
Investing in and developing SMEs in Africa would represent a significant paradigm shift from the exclusively extractive investments of the past and present. Investments in SMEs can be a compliment to large, extractive and infrastructure projects. SMEs are a way to tap into the mainstream of African economies and to benefit directly in the long term growth of the high potential economies in this region. Ethiopia, for example, a country of over 90 million people, is growing at more than 11% per annum, according to the Wall Street Journal. A U.S. ally, they are part of the East African region of over 320 million people, which includes oil rich Sudan, Uganda, Tanzania and Kenya. As these economies develop, there is a pent-up demand for American know-how and ingenuity, not to mention American goods and services.
The Africans are absolutely incredulous that with the first African American president in office, China is dominating the continent economically. The last time they remember a strong American interest in the continent was during the George W. Bush Administration. President Bush took a strong and personal interest in Africa and the Africans he touched remember him well. He went to Africa to help, not to exploit, as the Chinese are doing by exporting prison labor that displaces Africans seeking jobs. And the Africans are looking for the follow-up. Yet, despite China’s dominance on the continent, Africans still feel an affinity for the United States that China could not possibly replicate. Africans do not look to China for a way of life to emulate. They look to the Unites States as the model.
What should we do to continue as the strongest economy in the world? We should lead with our strengths, exercise our ingenuity and deploy our enviable culture.