Businesses cooperate, politicians compete

By Scott Sumner.

"The FT points out that US businesses wish to cooperate with China while the politicians in both parties want to compete:

America’s public and private elites are no longer as one on China, if they ever were. In Washington, vigilance to Beijing is the nearest thing there is to a bipartisan verity. Democrats, no less than Republicans, brood over Chinese gains in artificial intelligence and hypersonic missiles. Successive governments have tried to knit a web of Asian and Australasian friends by way of counterweight. Trump’s tariffs remain largely in place.

In Wall Street and beyond, though, commercial imperatives are reasserting themselves. There is no outright contradiction here: it is not as if the government barred or even discouraged all business with China. There is no lack of logic, either. If US firms don’t seize the openings, ones from Europe or elsewhere will.

Among some people on the left, the term ‘cooperation’ has a much more positive vibe than ‘competition’.  They see the business world as ultra-competitive, and that often pushes their interests toward public policy.  But what if they have it backwards?  What if the business world is cooperative and the political world us ultra-competitive?  After all, businesses are trying to do deals with people in China–mutually beneficial trades.  That cooperation.  Politicians in American want to hurt the Chinese economy, to prevent China from threatening the US position as being number one in the world.  They do so with high tariffs on Chinese goods, and sanctions aimed at destroying Chinese tech firms such as Huawei.

Businesses are much less likely than politicians to engage in zero sum thinking.  If China booms, there’s more opportunity for all US businesses to make profits in that growing market.  On the other hand, there can be only one country that has the most powerful military on Earth.

This difference between business and politics shows up in many forms.  While a growing economy helps all firms, the size of Congress is fixed at 535 senators and representatives.  One more for the Democrats means one fewer from the Republicans.  Politics is zero sum, a dog eat dog world.

Many people inappropriately apply sports analogies to business “competition“.  When the Milwaukee Bucks played the Brooklyn Nets last night, the Bucks players stood in front of Nets players, trying to physically impede their progress.  This type of “competition” is pretty rare in the world of business.  You rarely see UPS organize blockades outside FedEx warehouses, trying to impede their trucks from delivering goods.

Most business advertising is aimed at making the firm’s products seem more desirable, to encourage cooperation with consumers and suppliers. A large share of political advertising is aimed at destroying the reputation of the other candidate—attack ads.  US government sanctions against China are aimed at preventing Chinese firms from doing business, not at making the American “political product” look more desirable.

While the Bucks and Nets compete on the basketball court, they do very little competing in the business world.  Indeed the two firms must cooperate at least to some extent; otherwise the league would not even be able to agree on a schedule of games.  To the extent that the Nets compete with anyone (very indirectly), it is by trying to be attractive enough to Brooklyn residents that they will chose Nets games over other Brooklyn activities.  They aren’t really even trying to lure Milwaukee fans away from the Bucks.  That’s a very mild form of ‘competition’, if you insist on using that sports term.  In a business sense, Nets star Kevin Durant “competes” only by trying to make his game look more appealing to fans at the nearby hockey game.  (From a business vantage point, the GOAT debate would be whether Michael Jordon or LeBron James was more effective at luring other sports fans to the NBA.)  In a business sense, Nets and Bucks players cooperate to produce “entertainment”.

At the end of the article, the FT issues a warning:

If what beckons is less a cold war than a lukewarm one, with contact maintained through economics, so much the better. But the US has not had to wrestle with such ambiguities before. It has never been so tied to an existential rival. As a doctrinally communist state, not a titular one, Soviet Russia wasn’t waving in foreign wealth-managers by the Audi-load. America was a relatively closed economy when it was up against wartime Germany, Imperial Japan and the Spanish empire.

If anything, there is something of turn-of-the-20th-century Europe about the US and China: the same economic integration and political froideur, the same sense of countries at once entwined and not. There is no reason the contradictions should unravel with similar force, but nor can they can be denied or glossed over.

I can’t know for certain who is right on the China issue, although my sympathies lie with the business perspective.  But we do now know with almost 100% certainty who was right in the early 1900s.  The Europeans businesses that favored globalization were right and the nationalists politicians were wrong.  Not just the German nationalists, pretty much all the European leaders were wrong.

PS.  BTW, when considering last night’s game keep in mind that the Bucks had a number of key injuries and the Nets shot a ridiculous 53% from three, in  . . . oh wait . . in losing to the Bucks by 23 points."