Roosevelt, Churchill, Galbraith, Porter, Trump and the Long Term of Family Capitalism

Since the last familyandtrends, anything can be said to have happened on the world stage, and it can also be said that it is a stage because, however unedifying, what has been staged is a little theatre. We are but in the first few bars of the first act, but the plot can be glimpsed: the US has initiated the Pacific showdown; reviewing agreements to demand more from their allies and flexing their trade muscles at China.

In his 'oscope 23 for business', familyandtrends vaticinised: 'geopolitical rearrangements will continue; the Thatcher-Reagan era is over and a new one has opened that, if it goes well, will be characterised by multipolarity and strong, wealthy states, if it goes badly, by confusion and brawls'. The confusion is already there: the United States confuses allies with vassals, Europe confuses a moment that will define its destiny with a review of bureaucratic procedures, China a clash of cultures and visions as an economic tug-of-war. So much confusion is in serious danger of turning into brawls.

What should entrepreneurs do? Family capitalism revels in its long-term vision, well it's time to use it: you need to focus, invest, work on the next 50 years not the next 50 months.

Firstly, international business relations are no longer to be taken for granted. In August 41 Churchill and Roosevelt signed the Atlantic Charter off Newfoundland. While Hitler was striding towards Moscow and Rommel was advancing towards Alexandria, they declared that their countries: '4. ... will endeavour to ensure that all countries, large and small, victors and vanquished, shall have access on equal terms to the world trade and raw materials necessary for their economic prosperity; 5. ... desire to bring about among all peoples the fullest co-operation in the economic field, in order to secure for all better conditions of work, economic progress and social security. These were not notes in the margins of a bureaucratic directive, but rather points 4 and 5 of a document of 8: the prosperity we have known for the last eighty years was born from the vision of two heads of state who, if they were not on the run, would meet secretly on a military cruiser with great attention to enemy submarines. In the coming decades, having solid and fruitful international relations will once again become a source of competitive advantage for business families, these will have to partly replace economic relations between states, sovereign wealth funds, banks etc. These channels of communication, understanding and exchange with those on the other side, whatever this 'other side' may be, will provide strategic advantages but may also help what will become of international cooperation.

Second, trade and international financial circuits will be more composite. The US seems to have decided that it is no longer convenient for it to use the dollar as the world's reserve currency. Fifteen years ago McKinsey published a study which put the privilege of seigniorage for the US at 40/70 billion, a few basis points of GDP, not to mention the additional cost of maintaining a military force that has always been necessary for those who want to coin money. Seigniorage privilege offers the state exercising it the advantage of raising capital at lower cost, an advantage that spreads to households and firms, and the disadvantage of a higher exchange rate for the greater inflow of foreign capital, a disadvantage that spreads to exporting firms. It may be that in an era of low rates and the need for military force more for the Yokota base than to support the dollar and supply oil, it is conceivable to disengage. For business families this means having to learn to do business with many currencies, less stable and with more expensive interest rates and capital collections: to do this requires developing more financial skills and having the ability and credibility to operate in multiple financial centres even within some system of control of international capital flows.