How Multinationals Decline And Fall.

East India Company Headquarters.

With apologies to Edward Gibbons, and his great tome, the Decline, and Fall of the Roman Empire. Perhaps there is a similar fate that lies in store for American Multinationals? The current masters of the universe, and the most powerful and wealthy of all the companies in the world.

It is a story that we’ve seen play out before. The most outstanding example of the rule of corporations is the British East India Company of two and a half centuries ago.

If anything today’s multinational companies are a pale reflection, of what the East India Company was able to achieve beginning in the mid-18th century.

In 1757 Robert Clive commanded an army. Yes, you heard that right, a multinational company actually had its own army of mercenaries.

And that army was able to defeat the Indians in the Battle of Plassey. Effectively taking control of India. And the East India company essentially ruled India for the next 100 years.

Remarkable.

At the beginning of its reign, the East India Company had all the advantages. The ability to transport and sell goods literally around the world. A strong currency, and the ability to finance their far-flung empire. Through the stock and bond exchanges located on Fleet Street. And, finally, as we’ve seen they had a stronger military.

In 1981, when first Nike and shortly thereafter Apple Computer open up trade with China, they too had many advantages. Like the East India Company, they had tremendous marketing and distribution capability.

The ability to ship and sell goods in the largest marketplace in the world, the United States. Like the East India Company, the American’s Apple et al had a strong currency and access to the stock and bond markets on Wall Street.

Now the Americans did not have an army. But they did have advanced technology. Able to both create new products, and new ways of manufacturing those products. They also had production lines that the Chinese would have taken years to develop without the American leadership.

However eventually, all must come to an end.

That was true for the East India Company. After their 100 year reign, the company had become over-extended.

A few British trying to manage hundreds of thousands of Indians was becoming simply unworkable. And their former military superiority was declining. In 1857 the Indian Rebellion put an end to East India Company’s rule.

In a similar manner, the advantages that the American Multinationals have enjoyed in China and other countries have been slowly eroding.

China in particular has demanded, and obtained, access to the modern technology of the American companies. Apple Computer, in particular, has shared much of its technology with the Chinese.

Further, the mere presence of the American manufacturing plants on foreign soil has de facto presented those countries with that American technology.

The logistical, and financial advantages of the Americans have also diminished as both the wealth of the other countries and their ability to reach foreign markets have grown geometrically.

Today just half a century after Richard Nixon and Henry Kissenger open China up to global trade and finance. The tables have turned. The former advantages for America and for the Multinationals now reside on the other side of the world with China and the other developing countries.

Production and manufacturing prowess are now on that side of the Pacific.

It is America that must stand in line, waiting for the things we need from them. We must hope that Supply Chains can operate efficiently. That China et al will continue to provide for our needs and wants.

What’s more China and India are now considered the preeminent markets in the world. No longer America.

For the East India Company, the end came quickly. From their loss at the Indian Rebellion to the take over of the company by the British Crown, was only one year.

An ominous analog for today’s multinationals, don’t you think?

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David Reavill writer + finance +iconoclast + hiker + Pennsylvania #valueside daily podcast + medium + meditate valueside.com/links

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David Reavill

David Reavill

David Reavill writer + finance +iconoclast + hiker + Pennsylvania #valueside daily podcast + medium + meditate valueside.com/links

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