3 October 2018 – Parents generally try to drum into their childrens’ heads a simple maxim: “People judge you by the company you keep.”
Children (and we’re all children, no matter how mature and sophisticated we pretend to be) just as generally find it hard to follow that maxim. We all screw it up once in a while by succumbing to the temptation of some perceived advantage to be had by dealing with some unsavory character.
Large corporations and national governments are at least as likely to succumb to the prospect of making a fast buck or signing some treaty with peers who don’t entertain the same values we have (or at least pretend to have). Governments, especially, have a tough time in dealing with what I’ll call “Bad Guys.”
Let’s face it, better than half the nations of the world are run by people we wouldn’t want in our living rooms!
I’m specifically thinking about totalitarian regimes like the People’s Republic of China (PRC).
‘Way back in the last century, Mao Tse-tung (or Mao Zedong, depending on how you choose to mis-spell the anglicization of his name) clearly placed China on the “Anti-American” team, espousing a virulent form of Marxism and descending into the totalitarian authoritarianism Marxist regimes are so prone to. This situation continued from the PRC’s founding in 1949 through 1972, when notoriously authoritarian-friendly U.S. President Richard Nixon toured China in an effort to start a trade relationship between the two countries.
Greedy U.S. corporations quickly started falling all over themselves in an effort to gain access to China’s enormous potential market. Mesmerized by the statistics of more than a billion people spread out over China’s enormous land mass, they ignored the fact that those people were struggling in a subsistence-agriculture economy that had collapsed under decades of mis-managment by Mao’s authoritarian regime.
What they hoped those generally dirt-poor peasants were going to buy from them I never could figure out.
Unfortunately, years later I found myself embedded in the management of one of those starry-eyed multinational corporations that was hoping to take advantage of the developing Chinese electronics industry. Fresh off our success launching Test & Measurement Europe, they wanted to launch a new publication called Test & Measurement China. Recalling the then-recent calamity ending the Tiananmen Square protests of 1989, I pulled a Nancy Reagan and just said “No.”
I pointed out that the PRC was still run by a totalitarian, authoritarian regime, and that you just couldn’t trust those guys. You never knew when they were going to decide to sacrifice you on the altar of internal politics.
Today, American corporations are seeing the mistakes they made in pursuit of Chinese business, which like Robert Southey’s chickens, are coming home to roost. In 2015, Chinese Premier Li Keqiang announced the “Made in China 2025” plan to make China the World’s technology leader. It quickly became apparent that Mao’s current successor, Xi Jinping intends to achieve his goals by building on technology pilfered from western companies who’d naively partnered with Chinese firms.
Now, their only protector is another authoritarian-friendly president, Donald Trump. Remember it was Trump who, following his ill-advised summit with North Korean strongman Kim Jong Un, got caught on video enviously saying: “He speaks, and his people sit up at attention. I want my people to do the same.”
So, now these corporations have to look to an American would-be dictator for protection from an entrenched Chinese dictator. No wonder they find themselves screwed, blued, and tattooed!
Governments are not immune to the PRC’s siren song, either. Pundits are pointing out that the PRC’s vaunted “One Belt, One Road” initiative is likely an example of “debt-trap diplomacy.”
Debt-trap diplomacy is a strategy similar to organized crime’s loan-shark operations. An unscrupulous cash-rich organization, the loan shark, offers funds to a cash-strapped individual, such as an ambitious entrepreneur, in a deal that seems too good to be true. It’s NOT true because the deal comes in the form of a loan at terms that nearly guarantee that the debtor will default. The shark then offers to write off the debt in exchange for the debtor’s participation in some unsavory scheme, such as money laundering.
In the debt-trap diplomacy version, the PRC stands in the place of the loan shark while some emerging-economy nation, such as, say, Malaysia, accepts the unsupportable debt. In the PRC/ Malaysia case, the unsavory scheme is helping support China’s imperial ambitions in the western Pacific.
Earlier this month, Malaysia wisely backed out of the deal.
It’s not just the post-Maoist PRC that makes a dangerous place for western corporations to do business, authoritarians all over the world treat people like Heart’s Barracuda. They suck you in with mesmerizing bright and shiny promises, then leave you twisting in the wind.
Yes, I’ve piled up a whole mess of mixed metaphors here, but I’m trying to drive home a point!
Another example of the traps business people can get into by trying to deal with authoritarians is afforded by Danske Bank’s Estonia branch and their dealings with Vladimir Putin‘s Russian kleptocracy. Danske Bank is a Danish financial institution with a pan-European footprint and global ambitions. Recent release of a Danske Bank internal report produced by the Danish law firm Bruun & Hjejle says that the Estonia branch engaged in “dodgy dealings” with numerous corrupt Russian officials. Basically, the bank set up a scheme to launder money stolen from Russian tax receipts by organized criminals.
The scandal broke in Russia in June of 2007 when dozens of police officers raided the Moscow offices of Hermitage Global, an activist fund focused on global emerging markets. A coverup by Kremlin authorities resulted in the death (while in a Russian prison) of Sergei Leonidovich Magnitsky, a Russian tax accountant who specialized in anti-corruption activities.
Magnitsky’s case became an international cause célèbre. The U.S. Congress and President Barack Obama enacted the Magnitsky Act at the end of 2012, barring, among others, those Russian officials believed to be involved in Magnitsky’s death from entering the United States or using its banking system.
Apparently, the purpose of the infamous Trump Tower meeting of June 9, 2016 was, on the Russian side, an effort to secure repeal of the Magnitsky Act should then-candidate Trump win the election. The Russians dangled release of stolen emails incriminating Trump-rival Hillary Clinton as bait. This activity started the whole Mueller Investigation, which has so far resulted in dozens of indictments for federal crimes, and at least eight guilty pleas or convictions.
The latest business strung up in this mega-scandal was the whole corrupt banking system of Cyprus, whose laundering of Russian oligarchs’ money amounted to over $20B.
The moral of this story is: Don’t do business with bad guys, no matter how good they make the deal look.