Coexistence key to capitalism after Trump win
A new approach to commerce as anti-globalization takes hold
MAKOTO KAJIWARA, Nikkei Asian Review Columnist
NEW YORK -- Once the U.S. presidential election was over and Donald Trump emerged the victor, Thomas Gallagher of U.S. political consultancy The Scowcroft Group feared the demise of the North American Free Trade Agreement.
Against all expectations, the Rust Belt delivered Trump the presidency. The Midwest region, home to Detroit, the epicenter of American auto manufacturing in the state of Michigan, is emblematic of an old economy. Residents there had reason to support Trump, and pent-up grievances over two major issues spilled over.
One is NAFTA, the 1994 free trade agreement made by Canada, the U.S. and Mexico, which, they believe, has allowed Mexicans to steal their jobs.
The other is an income gap between the Midwest and the West Coast, home to global high-tech companies. Household income in San Francisco was $92,000 per family in 2015, up 60 percent from a decade earlier, compared with $26,000 in Detroit, down 7%.
Slowing trade growth
Some West Coast companies like Google have allegedly shifted profit to subsidiaries in foreign countries where tax rates are low. Looking askance at many of that region's companies riding the crest of globalization's wave, increasingly disgruntled people in the Midwest bet on Trump's anti-globalization campaign pledge to ditch NAFTA.
President-elect Trump has expressed his intention to withdraw the U.S. from the Trans-Pacific Partnership. If he reconsiders NAFTA too, which came into force nearly 23 years ago and has become an integral part of the U.S. economy, it would clearly underscore the inward-looking stance of the country.
After the Cold War ended, globalization became a driving force in an era when emerging economies are shoring up the world economy. Manufacturing companies in developed countries have shifted production to China and elsewhere in pursuit of low wages and then sold their wares around the world. In Asia, industries that are part of the supply chain to China have flourished.
This growth is now in danger. Trump has said that as president he will impose high tariffs on Chinese imports and declare China a currency manipulator. Stock markets in emerging nations have been limping since the U.S. presidential election because investors question the outlook for corporate earnings in those countries.
Amid a protracted economic slump, discontent prevails among people throughout the world, quietly fueling protectionism. With the rate of the increase in world trade expected to be outpaced by that of economic expansion this year, trade will no longer be the driver of growth. We now face the limitations of capitalism, which has pursued growth without addressing public concern over it.
A new way
One ray of hope is that the search has begun for ways that society and business can coexist. After the election, James Dimon, CEO of JPMorgan Chase, told his employees around the globe that the business world should listen to the voices of the people who confront ordeals and harbor grievances.
JPMorgan Chase, a major U.S. bank, has helped regional revival, providing advice on property development in Detroit, for instance. Having been the brunt of harsh criticism against Wall Street when the global financial crisis broke out in 2008, Dimon is fully aware of the vulnerability of a business approach that antagonizes the public.
Since 2007, a U.S. nonprofit organization has certified companies that benefit and contribute to society as they expand, calling them B Corps. Nearly 2,000 companies, including Patagonia, a U.S. company whose credo is to protect the environment, have been certified as B Corp. Half of all B Corps are based not in the U.S., but in Europe, Asia, Africa and elsewhere.
Companies that consider the well-being of society alleviate the public's anger. This new kind of capitalism is budding across borders in the midst of the anti-globalization storm.