The Era of Digital Mercantilism

Digital mercantilism is currently transpiring around the world with China leading the charge.

While many in the financial community and in the business world try to establish relevance by referring to blockchain, autonomous cars, and other avant-garde fintech innovations, the world is steadfastly moving from digital mercantilism to a shared economy.

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In its most basic term, mercantilism is an economic regime that provides every advantage to the dominant or hegemonic country while victimizing the ‘colonized’ nation or target economy. What is little recognized is that there are modern forms of mercantilism, such as digital mercantilism. Digital mercantilism constitutes the competition unfolding in the digital economy for influence.

The Road to Digital Mercantilism

China has largely failed to improve the quality of life of the countries with which it has engaged in Resources for Investment or R4I. Making loans to such countries as Angola and Venezuela has certainly not turned these economies into role models of economic growth and quality of life advancement.

What R4I has done is to provide China with access to the mineral resources and retail markets of the participating economies. For China, R4I is so yesterday. Now we have OBOR or ‘One Belt One Road’, China’s plan for economic expansion and growth, a plan that stretches geographically from the South China Sea to the Horn of Africa, to Central Asia (the Silk Road) and Europe.

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We also have Chinese fintech firms Tencent and Alibaba, both closely linked to e-commerce platforms that are now processing more financial transactions than the largest Chinese banks. One Road One Belt is a digital road and a digital belt. The major Chinese player on this road and belt is Alibaba. Its major US competitors are Amazon, Amazon Web Services and the lesser-known Infor in which the Koch brothers intend to invest $2.5 billion.

E-commerce and digital commerce are now closely linked to the economic growth and job development of nations. The question is whose economic growth and whose jobs?

The Battle of the Platforms

Three prominent platforms promise to provide transformative economic and job growth to countries. Before naming them, I would like to explain that these platforms represent the empowerment of SMEs and their ability to scale globally, supported by a multifunctional ecosystem that provides for the global scaling of the products and services of these nations and their small businesses.

Predictably, Europeans can be counted on to provide an ideological context to digital commerce. The replacement of the social safety net in a sharing economy is the main concern. In the meantime, China is using its digital commerce platforms to provide global scale to Chinese SMEs. Amazon and Infor provide a competitive US response to this global scaling for US SMEs.

On the Digital Road

For those of us who recognize the advance of the digital economy in global trade, Donald Trump’s invitation to Masayoshi Son, an early investor in Alibaba and principal in SoftBank, was an act of unprecedented naïveté and global trade ignorance. The US president-elect met the nation’s tech elite on 14 December and offered “anything the government can do to help this go along, were going to be there for you.”

What the US government and Mr. Trump can do is to recognize that the all out digital platform war for world markets has been joined and that he just invited the fox to pluck the plumpest chickens in the coop.

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