Location based strategic relationship and geo-politics

Location dimension of geo-politics is one of the most misunderstood aspects of understanding geopolitical variables. Just by having the advantages of precious mineral resources, a location may not get geopolitical benefits. On a local level, Indian States of Bihar and Jharkhand are enormously backward. On the same note many African countries with their rare natural resources and wild life are not doing too well. On the other hand, countries like Japan, Singapore, Mauritius, and Indian State of Gujrat are able to do well by forging strategic relationships with such entities which matter on the global scale. These off located places have progressed well due to factors like – proximity to a super power, located on the important Sea Routes, having rich neighborhood, internal policies attracting huge investments and interest from all over the world. These places, however tend to always exploit their strategic locations in one way or the other.

Italy benefitted from the reconstruction of Europe after WWII, especially in the tile manufacturing, Canada benefitted from being close to the world’s most happening country (same is true for the fortunes of Mexico). Many new entrants of EU have benefitted from being part of Europe.  

Location can create strategic advantages and forge strategic relationships with mutual benefits. Most of the regionalism in the world is based on these motivations.

However we have several examples in the world which may indicate that other factors which make such obvious strategic advantages are not exploited even in the most tempting situations. Example of ‘no trade’ between India and Pakistan in spite of a long and porous border between the two countries & almost no relation between North Korea and South Korea, are some interesting phenomenon to mention. These events are strange in nature and defy any geopolitical understanding. India’s refusal to forge stronger trade ties with a rising China, of which India can be a sure beneficiary being its immediate neighbor, India’s failure to take the agenda of SAARC forward are some of the other examples of missed opportunities.

An interesting aspect of location dimension of Geopolitics is the need of the economically strong countries to have conducive strategic ties with its neighbors for sustaining their own supremacy in the world. US’s continued support to the economic well being of its partnering neighbors like Canada and Mexico is the result of correct understanding of the process of geopolitics. It has always resulted in geopolitical gains for US. On the same note, it is in India’s interest to start the process of not being suspicious of its neighbors and start the process of forging economic ties with its neighbor. In other words, India’s has still not succeeded in taking geopolitical advantages by having a conducive neighborhood.

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Time Dimension of Geopolitical Process – The world is not flat

Geopolitical Environment is a result of several variables including Historical events, cultural elements, resources at a given location, development process of the inhabitants of a place. Theoretically all these variables can be categorised in terms of three important dimensions of Geopolitical Process – Time Dimension, Location dimension and demographic dimension. Of these 3 dimensions, Time dimension remains a leading factor which influences the Geopolitical outcomes most.

If we look from the perspective of global geopolitical environment in the present times as a whole, the impact of Time dimension can be studied in blocks of mainly 3 periods of the recent history – The period from 16th century to 1940s, Post WW II period (cold war period) till 1991 and thirdly the post Soviet Period starting 1991 till date. Out of these perhaps second period (cold war period) seems to be most influential to the Geopolitical outcomes which we see today in the world.

From Henry IV in 16th century to 1940s, it was the colonial period. Geopolitics of the world during this period was characterized and motivated with the control of world resources by the colonial masters. The intercontinental relationships were based on ‘imports – resources’ equation. It was this equation which resulted into a unique state – private partnership among colonial masters nations. Under this partnership while state provided army protection and legitimacy to the overseas businesses of private enterprises in their colonies, it also provided much needed private investments and entrepreneurship to control the resources among colonies. Lack of local entrepreneurship helped develop this kind of partnerships. Britishers not only got much needed natural resources from India as their most prized colony, but also provided hard working labor to run their businesses elsewhere in the world.

These sea powers competed with each other to control world resources and sometimes even shared the booty. By the early 1940s, this competition took the ugly turn and perhaps became an important reason triggering the WW II.  While US was an isolationist state till the WW I, by 1940 it was emerging as an important factor. Elsewhere in USSR, the ideological fortunes were keeping the invaders at bay making it a strong nation with strong economy. The post WW II period saw the emergence of two superpowers of the world. Rest of the world was to toe the lines of anyone of these two super powers. While India unsuccessfully tried to create a third front, it was US which took the lead and favored China, observing cracks in USSR – Sino relationship, to become stronger to help the world come out of the bipolar rivalry which was not helping the multinational business community specially from the west and TRIAD. Kissinger’s geo -strategy to make the world tri polar worked and resulted into the split in the USSR into CIS states. An obvious beneficiary of this geo strategy has been China, the phenomenon which gave rise to the ‘Rise of East’ which unwittingly helped India work hard and become an aspiring potential and competing power of the world despite no strategic orientation of US towards India.

Therefore the second period (the cold war period) has the most potential effect on the current geopolitical situation. In geopolitical terms the third period is most recent to study and gauge its impact. However this third period is full of global events which can have long term effects on the geopolitical fortunes of the world in medium to long term future. Cracking US economy due to severe competition from emerging economies, debt crisis of both US and certain European countries, looming & increasing threat of Islamic terrorism, purple and orange revolutions in gulf and Central Asian states, increasing pressure on oil prices, aspiration of less developed states, sagging Japanese economies are some of the important developments in the world during the post cold war period, some of these events are of direct consequences of the cold war period.

There are some missed opportunities too. While China benefitted from the fortunes of time dimension and cold war period, India failed to share the booty, when China offered it to agree for a free trade agreement. China perhaps wanted India to follow suit like Canada did and which benefitted by being party to NAFTA agreement when US was growing and Canada grew piggybacking on US. China is definitely emerging as the world’s super power, India should have accepted to be part of this rise. However political ideology and past memories of Indo – Sino skirmishes kept the two countries disunited in the surging fortunes of East. Both countries could not maximize the benefits of the time dimensional fall out of these favorable geopolitical events. Today any Chinese corporate intervention in India is seen with suspicion, same is true in China. Therefore this third period of Time Dimensional Study is a story of missed opportunities. Unresolved issues of border disputes through out Asia and elsewhere have fueled these missed opportunities.

In short Time Dimension is a saga of mad stories, sometimes bad stories and ideas which have resulted into some very poor geopolitical outcomes. An intertwined world with advancement of technology and transportation is as far apart or even farther apart as had been centuries ago. Multinational businesses, global finance & global technology have however tried to survive on a global scale and are affecting the daily life of every individual on this planet. Thereby shaping the world into a pseudo global village with contradictory ideologies, dangerous powers among rogue groups, lesser control of any clear superpower on the world economy. Downgrade of US rating after 90 years is the recent example of the changing world.

Above issues were discussed in the class of GEB last week. Students are supposed to write the class assignment 2 – Explaining the time dimension and its importance in Geopolitics with the help of an example. In this assignment, students are supposed to do these steps – 1. What is time dimension of geopolitics? 2. Give some examples of geopolitical outcomes which are direct result of historical events explaining those events. 3. Explain how these examples affect the businesses worldwide or on local level. The assignment must be submitted before the end of this week.

Legacy of Mackinder’s Heartland Theory in Modern Times

It is very unfortunate that US should be downgraded to a lower rating after so long roughly 100 years in time. This timing incidently correspond to the origin of Modern Geopolitical Thinking and the prophecies of Geopolitical Scientists of this time of origin. One interesting theory of the time is Halford Mackinder’s Theory, popularly known as Heartland Theory (1904).  

Mackinder's Heartland Theory
As per the Heartland theory, those who rule the Eastern Europe, rules the World Island (shown in red highthed area in the picture above), those who rule the World Island (also popularly knowm as the Heartland) rules the world.
 
The other world comprised of the so called Rim Land and the Peripheral Land. US being part of the Peripheral Land was never the subject of a serious invasion by foreign power. US also did not make any serious attempt to attack the Heartland or even Eastern Europe. It was an isolationaist state till WW II. However after World War II, when US took active interest in the war, it became apparent that this part of the Peripheral Land mass, would certainly rule the world directly or indirectly. Be it the technological and transportation advancement, Mackinder’s theory failed to justify the Heartland Theory, inspite of the fact that certain countries did try to first rule the Eastern Europe and therefore be the world conqueror.
 
Rise of East – which include India, which is part of the Rim Land of the Hearland Geoplitics, and China, part of which was included in the Heartland seems to justify the theory again. Rising economies of East European Nations, weakening situation in Western Europe (which is part of the Rim Land), further give support to the Mackindor’s Theory. Resource rich Central Asia is still the fancy of the modern world. South America and African Continents are still to acquire world power status. Japan could still not keep its economy healthy and  acquiring military power is far away.
 
The present Geopolitics seems to be still showing the legacy of the Mackinder’s Geopolitical Prophecies of old times. It seems that whatever Peripheral Land does is not going to last long geopoltically.
 
This Time Dimesion was discussed today in the class of GEB. Off course there are other vairables for Modern Geopolitical Outcomes, Time variable remains the most strong variable.

Class Assignment 1 for GEB Students

The class assignment for GEB course relates to the case study done in the last class of GEB. As part of the class assignment 1 for this course each student group has to carry out following activities.

1. Identify another company in India who had invested in the country coming frm abroad and pulled out due to Geopolitical reasons.

2. Identify the reasons of such pull out from India. List out the circumstances leading to such a drastic decision.

3. Suggest what can be done to stop such pull outs at the Govt. Level in India.

 

Prepare a write up of around 5000 words explaining above points. Write down your group name and send me the soft copy by mail.

This assignment is of 10 marks and carry 5% overall weightage. Good luck.

What prompted Cogentrix to pull out from India?

It happened during the post reforms period. A model power plant for Indian economy as a showcase to attract investments in power sector could never see the light of the day. After spending thousands of crores of rupees and several years which saw three governments changing in India, one of the most respected US power company – Cogentrix pulled out of India leaving behind a trail of wastage of money, equipments and hopes. What prompted this model power investor to pull out of the country when India was shining and another power company, another failure was at the start of making investments in the power sector in India. Was it changing shapes of power purchase agreements with state electricity boards, or slow pace of govt clearances, or a trail of PIL against the company or just the cross cultural difference behind the costly decision.

These questions were discussed in the class today of GEB course at I.T.S, Ghaziabad. Students came out with their own explanations of the strange phenomenon. The risks involved in any international long term project are common and most companies are able to manage such risks. So it is not common for a company like Coegntrix which had a blanket assurance from Indian Government for a guaranteed 16 % return on investment, preferential treatment in policy making and being a fast track project.

An interesting explanation was related to geopolitical reasons for such a decision. When Cogentrix entered India the country required at least 100 Billion USD investments in the power sector to eventually add 1 L MW power to the country. Having come out of doom after 1991 financial crisis and post reforms, India never had this kind of its own money. So policy tilted towards the foreign investors especially from US where it seemed that US is finally was able to add India in its 3rd polar geostrategy to ensure a cold war free world. It was similar to giving India the same importance as China. Therefore geopolitical advantage was definitely in favor of India. With political power fast changing in India and emergence of Hindutva pride and US opposing rhetoric, Pokhran test ensured all such geopolitical advantages could not be made a reality in investments, US attention to Indian economy and ensured US look back to China as a more stable political model where long term investments could be safely made.

Cogentirx found itself at the midst of failed expectations from Indian political parties which were riding on a rising India post reforms and there did not seem to be anything amiss with the financial health of the country similar to what happened in 1990.

India with a full stomach could shout at the world powers and bully its neighbors for no apparent reasons. Thereby bullying any long term investments from the west.
These geopolitical changes could explain the pull out of Cogentirx from the Indian power scene, where company did not look for any future opportunities coming any soon.

Geopolitics and Change: Implications for Businesses

Geopolitics refers to the relationship between the political power and geographic space. The drivers of change for the geopolitical environment of a specific geographic space are – Time, Location and Demography. The main purpose of the Geopoliical studies is to understand the political and strategic significance of a geographic space when defined in terms of – Location, Size, Workings, Culture and Resources.

Geopolitics lead to geostrategies which bring about the change which businesses has to deal with. One good example of such changes is, the emergence of China as a third power in the world as a result of geostrategic efforts by America’s foreign policy which was an answer to the long haul of cold war during the years of a bipolar world which did not help grow the multinational business. America took note of the cracks in the Sino – Soviet relationship and encouraged the development of China as a third power centre as its geostrategic moves over the years.

These geoplotical changes were coincided with growing changes in the world brought about by the sudden advances of technology, communication and IT, which made the world highly connected.

How does business deal with such changes

It has been argued that businesses around the world can deal with such chances as well as the result of war and recession (caused by some bad geostrategic ideas), by democratization of technology, finance and Information. This could only happen with the support of poltical powers around the world which encourages such democratization.

This means above political effrots can being about prosperity through openness and democratization of modern fruits of advancement

Golden Straightjacket

The golden straightjacket view as popularized by Thomas Friedman is: Tight Money, Small Government, Low taxes, Flexible labor legislations, deregulations, privatization, and openness all around. Some of the smaller countries like Singapore, UAE, Mauritius and others have demonstrated the benefits of this view. These so called tax heavens and free ports are able to develop faster than the world average by using this democratization of technology, finance and information. Some of the larger countries are trying to follow suit and trying to finetune their own golden straightjackets.

Session 5 and 6 of Geopolitical Environment for Business discussed above details and threw open the subject to the students who interacted on diverse topics related to above phenomenon.

For the next class, case study on ‘Cogentrix’ has been given to be discussed in the next classes of GEB.

Sessions 3 and 4 of GEB course

Sessions 3 and 4 today had been very interactive. The session focused on the linkages between political systems, economic systems and ideology which have its own time, place and demographic dimensions capable of bringing Geopolitical changes. The discussions went on to discuss the comparison between the ideology of India and China and its Geopolitical implications.

It was argued that contribution and gains of RISE OF EAST are more in favor of China. By 2015 poverty levels are to reach a healthy 5% in China while in India it is likely to be around 22%. However political ideology of China is far behind India and is capable to undoing of these fast gains of China in next few decades. It was argued that Chinese growth has its negative side wherein common Chinese are victims of state coercion wherein for example, they are unable to express their anguish over forcible acquisition of their land in China as against India where judiciary can reverse any wrongly acquired land by the State Governments. While such judicial orders can slow the growth of development in India it may be easy to complete developmental projects in China due to forcible actuions of the government. However slow the growth in India it is more natural and has popular public support and therefore more sustainable. This makes the geopolitical environment more stable in India. It is expected that the fruits of developments in India are more sustainable.

Therefore this session discussed how Geopolitical environment on a regional level may be affected by the political, economic and ideological systems. The sessions successfully tried to infuse a sense of understanding of the play of national powers on the world stage. This play of soft or hard power on the world stage further shape the geopolitical environment which has its complex dynamics which must be well understood by a successful international marketer in order to take multinational strategic decisions.

In this line of thinking some very interesting arguments emerged from the students which are as follows:

1. India has one of world’s strongest soft powers (political say).

2. Many countries find it important to have smooth relations with India for their on geopolitical situations. For example in spite of the fact that India has a leaning towards Iran, both Israel and US can not afford to be on the wrong side with India, partly due to soft power of India and realization that India has sovereign right to be friendly with nations which has potential to safeguard India’s future energy requirements.

3. India’s leaning towards Iran is not just confined to energy security but also aims at bringing US on negotiating terms in the wake of growing military aid to Pakistan, which is being used against India.

4. While South Sudan, the newest nation of the world has world backing, there are places which are still fighting to be free and self governing. Perhaps the geopolitical fortunes of such nations are not as promising as has happened to South Sudan.

5. Purple Revolution of the Middle East, if it spreads to China, can be a short term disadvantage for China in economic terms but it has the potential to bring lots of Geopolitical gains for the world’s most populous country.

It was very interesting to note above points as these came straight from the discussions among students in the Class. Student seemed to perform impressively in these sessions that in just 4 sessions their understanding of world politics got more mature and interesting. Now the challenge is to take this understanding to higher levels so that Geopolitical understanding of the students has the potential to being mush desired global outlook among students and be prepared to be successful futuristic managers.

In the next session students are expected to read a caselet in order to discuss the same in the class and go into the depths of the unanswered issues discussed in the geopolitically charged caselet.