Smart Power Opens Minds, Opens Markets
"Why give money to people that don't like us?"
"We're broke at home, so how can we afford to send money to people abroad?"
These are the two most oft-repeated objections heard by many US senators and congressmen to spending money on international affairs programs. So why would the US Chamber of Commerce and the US Global Leadership Coalition (USGLC), a coalition of over four hundred businesses and non-governmental organizations along with over one hundred thirty retired generals and admirals, call on Congress this week to do exactly that?
It's just smart business.
A senior sales executive at a major US company recently told me, "We're the best in the world at designing the next generation of products in [our industry]. But we're terrible at figuring out the next generation market for those products." For many American companies, from aviation to pharmaceuticals, the lead-time for product development can take decades. According to this executive, "As a company, we need to be in these developing markets now...investing through our corporate responsibility and citizenship programs," she said. "That's why we need partnerships with NGOs [non-governmental organizations] and folks like USAID...they've got intimate knowledge, on the ground in developing nations and can help us build trust in those countries now so we don't show up late to the party after the Chinese beat us to the punch."
Programs funded by the International Affairs Budget create enabling environments for American businesses to succeed in overseas markets today.
Unlike many of our counterparts in Europe and Asia, American businesses don't always think about export markets.
That has to change. “Outside our borders are markets that represent 80 percent of the world’s purchasing power, 92 percent of its economic growth, and 95 percent of its consumers," testified John Murphy, Vice President of International Affairs for the US Chamber of Commerce, before the Senate Foreign Relations Committee Wednesday.
As these data indicate, the American economy simply can't afford to ignore export markets any more. In fact, according to Murphy, many American businesses already grasp this reality and take advantage of it, "One in three manufacturing jobs depends on exports, and one in three acres on American farms is planted for hungry consumers overseas. Nearly 300,000 small and medium-sized businesses export, accounting for more than one-third of all merchandise exports."
The most forward-looking companies increasingly use their own "smart power" partnerships with international development agencies and NGOs as a way of opening markets. While a country uses smart power when it intelligently combines hard military power with soft – diplomatic, development, economic – power, companies combine their hard power – revenues, contracts, supply chains – with their soft power – brand, corporate citizenship, public-private partnership, philanthropy. A senior corporate responsibility officer at a major US corporation recently described the use of, "CSR and philanthropy in the 'pre-competitive' stage," as a way of investing in new markets before his products and those of his competitors have reached developing countries in order to build both trust and purchasing capacity. These smart power partnerships are another way the international affairs budget pays dividends for American companies.
In his testimony before the Senate Foreign Relations Committee, Bill Lane, head of Caterpillar's Washington Office and Co-President of the USGLC, pointed out that many developing countries have limited ability buy American products and services today. "In these countries the road to development – and the investment, commerce, and trade that follow –may begin (literally) with a road," testified Lane, "referring to the basic infrastructure that must be improved and, in some cases, created from scratch using machinery and expertise often supplied by companies like Caterpillar."
Lane said businesses need, "conditions where there are stable governments, transparency, predictability, adequate financial infrastructure, free market economic policies that allow for competition, and rule of law." Lane voiced the collective conviction of USGLC's four hundred business and NGO members that, "...programs funded in the International Affairs Budget are vitally important for America’s economic future, national security, and global influence."
Both Lane and Murphy urged America not "unilaterally disarm," in the face of growing competition from Chinese and other potential competitors. In their view, the smart power combinations of American businesses, NGOs, and government agencies can level the playing field abroad and expand the economy at home. For firms like Caterpillar, the math is simple, according to Lane, "The more trucks and tractors we sell overseas, the more jobs... in places like Peoria where those vehicles are manufactured."
Modest investments – the international affairs budget represents just over one percent of the federal budget – can pay big rewards for shareholders, America, and the world. After all, as Bill Gates has said, “Investing in the world’s poorest people is the smartest way our government spends money.”
Got a smart power innovation at your company? Tell me about it: email@example.com. I might profile it in an upcoming blog or the USGLC might highlight it.
Successful entrepreneur and business community organizer working with executives to transform their businesses for greater effectiveness. Helps companies obtain independent information and insight on transforming the Corporate Responsibility function.
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