Editorial
International business policy in an age of political turbulence

https://doi.org/10.1016/j.jwb.2021.101263Get rights and content

Abstract

This editorial argues that international business studies should be grounded in an integrated view of social science, which is applied systematically to analyse international business behaviour and to address global policy issues. Economic, social and political trends that impact on IB need to be analysed in detail rather than taken as given. This approach is illustrated by a case study analysis of Brexit, Trump and other populist debates. The case study integrates economic, social, political and psychological theories to analyse, from an IB perspective, the causes and consequences of populism.

Introduction

There have been four years of turbulence in international relations since the Brexit vote of 23 June 2016 and the Trump inauguration of 20 January 2017. During this period international business (IB) scholars have debated the economic implications of both events (Rodrik, 2018; Mudambi, 2018). The thrust of the debate has been that disaffected voters in both countries have genuine grievances, but that globalisation in general, and off-shoring in particular, are not entirely to blame; automation, the digital revolution and the rise of China have all played a significant role.

Those on one side of the debate have claimed that ‘the system is broken’ and that radical change is required. Power must be confiscated from the liberal elite, who have done little to help ordinary people. Party politics is the means to power in a democracy; the ‘ends’ are so important that they justify any means of seizing power. Those on the other side of the debate, however, argue that while mistakes have certainly been made, the system of governance remains sound, and can deliver solutions in the medium term. Radical changes to the political system will only delay and impede the adoption of sensible policies.

This editorial argues that IB scholars have made little impact on this debate, compared to economists, political scientists and popular journalists, because they have been unwilling, or unable, to engage with the wider issues. IB, it is argued, should not be regarded as merely a branch of business and management studies devoted to international activities, but rather as a key component of an integrated social science. The subject of study should not be narrowed down to the operations of multinational firms (MNEs) and a few related issues, but instead expanded to encompass the operations of the global business system as a whole.

The activities of MNEs are a subset of the activities of the global economy. Economists have recognised this, and relate their analysis of MNEs to wider global issues. Similarly the interaction of MNEs with governments is not just a local matter, specific to individual countries, but a matter of global concern. Political scientists and researchers in development studies have long been aware of this. It is the views of economists and political scientists which tend to be cited as expert opinion in debates involving international business issues at the United Nations and elsewhere (e.g. Stiglitz, 2017).

The annual UNCTAD World Investment Report, with its emphasis on relations between developed and developing countries, continues to highlight the mediating role of foreign direct investment (FDI) in global political economy as a whole. These annual reports rely heavily on IB research, but their conclusions and policy recommendations are informed by consultations with diplomats and commentators in a wide range of countries. For too long IB scholars have cultivated an ‘inside out’ approach to IB studies, in which global issues are viewed through the lenses of the chair-persons and boards of MNEs. Economists, political scientists and scholars in other social sciences disciplines, however, have embraced an ‘outside in’ approach in which MNEs are studied from the outset within a wider global perspective, familiar to politicians and other influential policy-makers.

This editorial suggests that the ‘outside in’ approach provides the best framework in which to analyse controversial issues such as the costs and benefits of Brexit and the legacy of the Trump regime. It indicates what an ‘outside in’ approach might be like. It presents a ‘big picture’ view in which the traditional focus of the IB literature is just one element of a wider perspective. The main element is an integrated social science perspective, as described below. The place of IB activity within recent political debate is used as a case study. Such debates provide a useful context in which this alternative approach can be set out.

By contrast, the established view appears to be that IB studies should remain a specialised area focused on the strategies and structures of MNEs; it should not venture into wider areas in which IB scholars have limited competence. Topics in these areas should be left to specialists in other disciplines. However, IB studies has been willing to embrace debates on other potentially controversial issues such as the environmental crisis, global inequality, and corporate tax avoidance. The explanation seems to be that in these other areas there is a safe and respectable policy position that IB scholars can adopt; namely, that climate change is a real phenomenon; that inequality between the richest and the poorest countries is sustained; and that tax avoidance distorts the allocation of resources and deprives government of revenue for essential social services. The study of populism, however, has no comfortable agreed position.

Between these two extreme views of the scope of IB lies an intermediate view, namely that IB studies should encompass some of these wider issues but not others. Populism is a ‘danger area’, it may be said, because opinion remains divided over the issue and is likely to remain so for some considerable time. IB scholars may have strong personal views that could contaminate their analysis, and this could import party-political bias into the discipline. Populism therefore makes a useful test case; if IB studies can successfully analyse the influence of populism on IB policy then it can surely embrace a wider range of other less controversial topics too.

This does not mean that IB scholars need to study all forms of populism. Many populist issues have little direct bearing on IB. In the inter-war period, for example, there was a great debate over the relative merits of capitalism and socialism, but this had limited implications for IB because there was little multinational activity at the time. By contrast, the Brexit movement has directly impinged on international trade and investment between the UK and Europe and, by implication, between the UK and the rest of the world, whilst Trump's approach to immigration and to trade relations with China has generated knock-on effects for the entire world economy. IB scholars need to embrace the analysis of populism whenever populist movements impinge on IB activity, but can analyse other aspects of populism as they wish.

The remainder of this editorial is in two parts. The first part, comprising Sections 2-5, presents a case study analysis of populism, designed to explore the place of populism within IB studies as a whole. Populism is defined in a precise and non-pejorative way; namely as a social or political movement that provides a simple but unproven solution to a genuine but complex economic and social problem. This definition concedes that the problem that populists addresses is real, but leaves the validity of their solution open to doubt. It questions the integrity of making a complex problem appear simple, without condemning the practice outright.

Section 2 sets out five paradoxes in the study of contemporary populism. Section 3 examines the practice of populist leadership; it identifies the key strategies pursued by populists; it also examines the personal qualities that equip successful populists to perform their role. Section 4 assesses the performance of populist leaders, and identifies their most common causes of failure. Many political leaders, whether populist or not, ultimately fail, but populists often fail in a dramatic way. Section 5 summaries the results of the case study; it argues that, despite its failures, populism will continually reinvent itself so long as inequalities persist in one form or another, and underprivileged groups see populist leaders as their only hope.

The second part of the editorial reflects on the implications of the case study for IB studies as a whole. Section 6 argues that policy decisions by governments, and the influence of lobbyists and populist movements on these policies, need to be endogenized within a wider IB theory. Section 7 identifies four key advantages of this approach. Section 8 reviews previous attempts at an integrated social scientific approach to global issues, and puts the challenges into historical perspective. Section 9 summarises the conclusions.

Section snippets

The perceived anomalies of contemporary populism

This section sets out five main paradoxes that underlie the Trump and Brexit debates; each paradox is stated as a question, and a provisional answer is suggested.

Question 2.1. Living standards today are high by historical norms, yet popular discontent in developed countries is more widespread than at any time since the 1930s. In the US, for example, the economy has been growing steadily, yet discontent has been growing too. Why?

Answer. Happiness, or satisfaction with life, depends on relative

The practice of populist leadership

Question 3.1. How do populist leaders emerge, and why are they so divisive?

Answer. A populist leader typically establishes or takes over a campaigning party that presents a simple message to a susceptible group (Moffit, 2016, 2020; Muller, 2016). There have been many studies of populist leaders; in particular, biographies of notorious politicians who wreaked havoc on their countries, e.g. Adolf Hitler, Joseph Stalin, Benito Mussolini, Pol Pot, and Mao Tse-tung. More ‘moderate’ populists include

The practical consequences of populist leadership

Question 4.1. Why do populist leaders get elected when more experienced leaders often fail?

Answer. Successful populists are alert to opportunities, recognising when the time has come for them to act, and to take the leadership of a political party (Casson, 1991; Riggio & Ono, 2014). For example, the Brexit movement began as an independent party, which was then taken over by the governing party, whose leader was then deposed. Through this process the movement was transformed from an

Can populism be defeated?

In the long run, it would seem, only honest mainstream leadership can defeat the populist challenge. There is always a supply of populist leaders waiting for their opportunity. They thrive on the anxiety and low self-esteem of under-privileged groups. Populist politicians may not fully understand the principles of economics and IB, but they ‘know their market’. They understand the psychology of the ‘left behind’. They recognise, perhaps intuitively, that decision-making is ‘framed’. Anxiety and

General implications of the case study

The case study above has provided a simple causal interpretation of an important contemporary phenomenon that has often been poorly understood. It has ‘endogenised’ a factor, namely government policy-making, that was previously regarded as exogenous in much (but not all) IB theory.

Advantages of embedding IB within an integrated social science

This case study of populism has drawn on a range of concepts from behavioural economics, leadership studies, social psychology and political history. The literature on each of these topics is somewhat divorced from the literature on the others, which gives the previous case study analysis a rather ‘eclectic’ feel. This is not necessarily a problem; as Dunning (1977) noted, IB theory itself can be regarded for certain purposes as an eclectic endeavour. Nevertheless the eclectic elements need a

Conclusion

A reader of this editorial may have paused at various points to reflect ‘This may be an interesting point, but it isn't really IB theory’. The contention of this editorial is that it ought to be IB theory. IB studies has become too narrow in scope, and too specialised in content, to impact on the public. There is a need to re-draw the boundaries of IB to encompass the full range of issues addressed in this editorial.

This editorial has suggested a way of addressing this challenge. It is to

Acknowledgements

I am grateful to Peter Buckley, Janet Casson, Ajai Gaur, Philip McCann, Ram Mudambi, and two referees for comments on a previous draft of this paper.

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