Warring twins on Wall Strasse

Warring TwinsTwo key concepts of the modern world were born at a similar time. The joint stock company appeared in the early 1600s with the English and the Dutch East India Companies as early examples. Then, in 1648, comes the Treaty of Westphalia which establishes the principles of the nation state . Both are abstract concepts: one economic, one political. Both are catataxic in that they are second level entities . They exist one level above the world of flesh and blood. Despite that, they are destined to fight each other with all the competitiveness of warring twins.

For a long time, country dominates company. Corporations are seen as national entities. In the most extreme cases like the East India Companies they become effectively an arm of their respective governments. As the industrial revolution comes, industrial prowess is seen as a form of nationalism. Steel production is used as measure of national potency for communists and capitalists alike. Breakthroughs in the chemical industries are seen as national secrets to be kept from foreign spies; secret formulas that are the macguffin at the heart of many adventure stories.

Then, starting in the 1950s, things begin to change. The company ceases to be national and becomes multinational. It is no longer contained by national boundaries. The key underlying economic inputs cease to be national too. Raw materials, labour and capital were originally national possessions but this is also in flux.

Raw materials become freely available to the highest bidder as colonialism breaks down and international commodity trading expands dramatically. Remember that the Japanese bombing of Pearl Harbour was all about access to raw materials. Labour frees up next. The shortage of workers in Europe prompts a big influx of immigrants. Multinational companies create openings for executives worldwide. Well educated people can get a job anywhere around the world. Then capital is set free when currencies move off the gold standard and exchange controls are abolished in the 1970s.

As a result, countries no longer control the levers of economic power. The second twin becomes ascendant, company becomes dominant over country. The economy is no longer national but global. The general populace still seems to find this fact hard to grasp. Companies are not national assets. They don’t belong to a country but to shareholders. The takeover of ‘national’ companies by foreigners is still anathema. This confused sentiment is catataxis: an attempt to apply out-of-date national rules to an international creature.

France is notoriously touchy about its ‘national champions’ . When Danone, a dairy products group, is threatened by takeover in 2005 the French Government drafts a special law to protect it. It seems yoghurt is a strategically important product for the French. But feelings in the UK still run on similar lines, hence the public moaning about Kraft’s recent takeover of Cadbury.

A better example of misplaced corporate nationalism is the confused sentiment about the ‘British’ film industry. Star Wars and the Indiana Jones movies were shot in Elstree , lovingly made by British craftsmen. Are they British movies? What about a Wallace and Gromit movie financed by a Hollywood studio? Or Scorsese’s “Gangs of New York” which was financed by a British producer ? Films may have a language but do not really have a nationality. Neither do companies.

The USA, which has gained most from globalisation, seems strangely intolerant when it comes to foreign takeovers. In the 1990s, Congressmen smashed Sony Hi Fis on the steps of the Capitol to protest a wave of Japanese takeovers. These fears have now been shifted to China. A string of proposed takeovers of US assets by Chinese companies have been refused in sectors including steel, mining, media, shipping and telecoms. Don’t feel too sorry for them because the Chinese are equally protectionist back.

The most recent twist in this tale is the proposed takeover of the New York Stock Exchange (NYSE) by the German exchange Deutsche Borse . This is stirring up nationalistic sentiment in the States again. It comes as a surprise to some that stock exchanges are not public institutions but companies that can be bought and sold like any others. So the takeover of the icon of American capitalism by the Germans rankles. But, of course, stock exchanges don’t have any real national identity either. The London stock exchange is merging with the Canadian exchange, and Singapore likewise with Australia. In the end, there is one big pool of capital trading on global exchanges free of national identities.

In Rome’s foundation myth, Romulus slays Remus and then names the city after himself. In a newly merged Wall Strasse we will see the triumph of another twin. The joint stock company slays the nation state to found a catataxic city at the heart of a new financial empire.

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