It’s interesting to observe, over time, the changing business fortunes of various countries. If we look back a couple of hundred years, we see that the dominant country worldwide, politically and economically, was Great Britain. In fact, it maintained its dominance until shortly after World War I.
Some time after World War I, as Great Britain’s economic dominance began to decline, its monetary unit, the pound, gave way to the dollar as the dominant world currency. The dollar is still a dominant currency, but is no longer the only dominant one. We now have currency zones with three dominant monetary units — the dollar, the euro and the yen.
Europe made an extremely strong economic statement to the world when it decided to create an economic political entity, the European Union. This conglomeration of countries now has a gross national product that rivals the U.S. The creation of the euro, Europe’s dominant currency, came on the heels of the formation of the European Union.
Once again, keeping an eye on currency dominance gives us a great indication of which countries are leading in world business.
For example, Japan has become a dominant economic force in the last twenty years or so. For this reason, its currency, the yen, is widely accepted in the Far East.
Emergence of China and India
Currently, China and India are emerging as economic forces to contend with. At this point, their currencies do not experience any regional dominance — but who knows? If they continues on their aggressive growth paths, currency dominance of some kind is sure to follow.
Both countries, China and India, have achieved their success through diligently focusing on homegrown creation of goods and services to be exported to the rest of the world.
China’s political bosses decided that central management of the economy, though a failure in the Soviet Union, would work for them. China made national business development a priority and cleared the path for regional entrepreneurs to succeed without being hampered by a crippling bureaucracy.
India decided to create the Indian Institutes of Technology, ITTs. These institutions rival some of the best technology universities in the world. Graduates are able to compete with the best and the brightest technical people that the globe has to offer.
Factors Leading to Global Business Dominance
Following are six factors that, in my opinion, inevitably lead to global business dominance:
- 1. Common national goals. Just take a look at India’s creation of ITTs. The country’s best and brightest quickly bought into the government program of improving education and creating valuable skills that make an Indian employee a highly marketable and sought-after person on the international playing field.
2. Strong educational system. A government must assure its citizens that they are getting the highest quality education available. A country cannot effectively compete on the international scene without providing its citizens with a superior education.
3. Producer country as opposed to consumer country. In the long run, for a country to become strong and prosperous, it must provide attractive added value to its products and services, either in a competitive price and/or in an exceptional product or service. The country, government and citizens, must be united in this focus.
4. Strong national treasury. The country’s government must focus on balanced budgets and relatively low national debt if it is to achieve and maintain global business dominance in the long run.
5. Strong economy. This element inevitably follows from the above factors. When the governed are united with their government in focusing on common economic goals that will bring about prosperity, when there is a strong educational system and a culture of producing more than is consumed, and when the government enforces sound monetary and fiscal policies, it’s inevitable that a strong economy will be the result.
6. Strong currency. This is the ultimate benefit that flows from the previous five conditions. In order for other countries to readily accept a currency as a dominant one, they must feel secure that the politics and fiscal philosophy of the issuing country are sound and reasonable. They must also believe that the issuing country will maintain its prudent course for some time to come.
The above six factors must be operative in order for the U.S. dollar to continue to appeal to other countries as a safe haven for some of their national treasuries.
Changing global business fortunes in coming years promise to be quite interesting. There is no doubt that the U.S. can continue to effectively compete with other major countries. What’s required is staying focused on the important things.
Theodore F. di Stefano is a founder and managing partner at Capital Source Partners, which deals in bringing small-cap companies public. He also is a frequent speaker on the subject of financial advice for small businesses as well as the IPO process. He can be contacted at Ted@capitalsourcepartners.com.