Global power: Blurring the lines between corporations and governments

Todd Moses
Oct. 30, 2023
12 min read

Following the defeat of Germany and Japan in 1945, relations between the United States and Russia eroded. This cold war finally ended in 1991 with the collapse of Russia [Alchin 2018]. In retrospect, these two countries operated much like business competitors, making deals with allies to build strength, using media to gain support, and trying to beat each other to market with technological advances.


The perception of strength drives the international relations between countries. Military alliances increase this perception [Dalio 2021]. In business, a strategic alliance is an agreement between two companies to undertake a mutually beneficial project [Kenton 2022]. For countries, these alliances center around military or economic conflict—for example, the economic sanctions placed on Cuba and its allies in the early 1960s.


A business alliance is often designed to protect market share. It can even be used to get around monopoly legislation, where two competing companies secretly work together to protect a market from incumbents. At other times, it is to combine forces to increase market share. For example, in 2019, Microsoft created an equity alliance with OpenAI using a $1 billion investment. The reason, according to Microsoft CEO Satya Nadella, is to expand its Azure Machine Learning service [Novet 2023].


OpenAI and Microsoft face fierce competition in the developing A.I. space. They can exponentiate their competitive advantage by combining the computing power of Azure with the software research from OpenAI. This makes it hard for other technology industry leaders to compete, not to mention the difficulty for a small company to gain ground against them.


It's all about the technology


In the 1600s, the Dutch invented ships capable of sailing globally. This technology, fueled by capitalist investment, created breakthroughs that made the country extremely powerful on the world stage [Dalio 2021]. Since that time, the ability to finance the creation of new technology is what has built world powers. In turn, this proprietary technology makes it easier to gain alliances that further increase that power. 


The Atomic Bomb program by the United States was credited with ending World War II [Alchin 2018]. During the war, technological advances were made by both sides. These included jet airplanes, rocket propulsion, cryptographic advancements, and even the creation of the first computer. While war has a tremendous cost for both the winner and loser, the result is societal change and new technology [Dalio 2021].


Alan Turing, a British mathematician, designed an electro-mechanical device that ultimately decoded communications from the German navy, a technology credited with shortening the Second World War by two years and ushering in the computer era [Miller 2021]. The winners of the war got to acquire their rival's technology. Operation Paperclip was the secret mission the Allies used to divide up the technological spoils from Nazy Germany [Jacobsen 2014]. The scope of technological advancements from this operation became the seed for much of the innovation of the 20th century.


Transnational corporations


The first transnational corporation was created by the Dutch in 1602 as the Dutch East India Company (VOC). It lasted until 1800 with semi-governmental powers and a monopoly over the spice trade [Briney 2019]. These powers included the ability to wage war, prosecute convicts, negotiate treaties, and establish colonies. Unlike the business before VOC, this conglomerate spanned multiple sectors [Atluri And Dietz 2023]. 


Fast forward to the 1920s, when DuPont and General Motors used the VOC model to grow by competitor acquisition; this led the United States government to enact antitrust laws such as the Celler-Kefauver Act of 1950 that made monopolies primarily illegal. As a result, companies had to grow horizontally through expansion into other industries.


CEOs, taking a page from portfolio theory, believed that expansion into other industries gave them protection from diversification. This multiple-basket approach became the norm until around 1968, when mergers began to slow [Atluri And Dietz 2023]. By the 1980s, the conglomerate model proved overly complex and riddled with inefficiencies for Western companies, but their Eastern counterparts thrived.


The decline of conglomerates in the West came from the efficiencies of global markets. As the markets improved, diversification was needed less and less. Eventually, the overhead and management complexity of these conglomerates outweighed the benefits. In the East, such market efficiencies were slower to realize, and the benefits of the conglomerates outweigh the negatives [Atluri And Dietz 2023]. By the time the market efficiencies caught up, the savvy leaders of these eastern conglomerates had solved many of the issues that caused havoc to their western competitors.


Capitalism vs communism


Capitalism has always produced economic prosperity with the downside of vast wealth differences between the classes. Those who can raise money to fund successful ideas prosper, those who invest well become wealthy, and everyone else trades their hours for dollars as employees. The best of these employees are rewarded financially; however, the average person lives at the going market rate.


The average population in a capitalist society is better off, but the idea of being better off is subjective. For example, some people may enjoy the benefits of a socialist government over the incentive system of the capitalist system [Dalio 2021]. At the extreme far spectrum of non-incentive-based governments is Marxism, a system that resulted from the conflicts between the classes.


China adopted the Marxist-Lennist approach to government in 1949 as an isolated country. It survived until Mao died in 1976. His successor, Deng Xiaoping, took power in 1978 and moved the country out of isolation. In a 60 Minutes interview, Deng explains, "communist society is based on material abundance." He continues to educate the Western audience on the maxim of 'from each according to his ability, to each according to his needs.' This is a direct criticism of the wealth disparity created by capitalism.


Deng was credited with opening China to world trade and adopting some of the principles of capitalism. Since 2012, Xi Jinping has continued operating China in a similar fashion, trading with the world while maintaining strict government control at home. Over the past 40 years, this combination of communism and capitalism has done well for the country [Dalio 2021].


Bailouts and too big to fail


Governments and businesses have a symbiotic relationship where each relies on the other. In 2008, the news in the United States centered around "too big to fail" and the near death of what many believed to be financially strong companies. As a result, The Emergency Economic Stabilization Act of 2008 was created to save multiple financial institutions from total collapse. Ultimately, the U.S. Department of the Treasury purchased nearly $700 billion in toxic assets to save these firms from destruction [Davis 2023].


What many may not realize is that the first U.S. bailouts occurred in 1792 under Treasury Secretary Alexander Hamilton. Facing the collapse of the infant securities market, Hamilton authorized purchases to keep the entire system solvent [Davis 2023]. Since then, the U.S. government has stepped in during the Great Depression to buy mortgages, in 1990 to lessen the damage from Savings and loans, and most recently in 2020 for COVID relief.


The most surprising U.S. intervention occurred in 2008 when the U.S. government and central bank took control of American International Group (AIG) to ensure the fifth largest insurer did not go bankrupt [Davis 2023]. The Federal Reserve and Treasury Department bought a 92% ownership stake for $141.8 billion. Later, they sold it back at a profit. Such interference in the free market is very similar to that of China—an indicator of the expanding global nature of companies and governments. 




The global stage is controlled by power. That power comes from technology. The technology comes from the private sector but with the assistance of financial institutions in the form of investments and credit. It is in the government's best interest to maintain a healthy financial system to empower technological progress—a loop of interdependence between investors, entrepreneurs, and government.


  • Alchin, L. (2018) Cold War Timeline. Siteseen Ltd. 

  • Atluri, V. And Dietz, M. (2023) The Ecosystem Economy - How To Lead In the New Age Of Sectors Without Borders. Wiley

  • Briney, A. (2019) The Dutch East India Company - The Rise and Decline of an Early Global Corporation. ThoughtCo.

  • Dalio, R. (2021) Principles for Dealing with The Changing World Order. Avid Reader Press

  • Davis, M. (2023) A History of U.S. Government Financial Bailouts. Investopedia.

  • Jacobsen, A. (2014) Operation Paperclip: The Secret Intelligence Program That Brought Nazi Scientists To America. Little, Brown and Company

  • Kenton, W. (2022) Strategic Alliances: Strategic Alliances: How They Work in Business, With Examples. Investopedia.

  • Miller, O. (2021) 80th Anniversary of the Enigma Code being cracked. University of Kent.

  • Novet, J. (2023) Microsoft’s $13 billion bet on OpenAI carries huge potential along with plenty of uncertainty. CNBC.

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