First of all many thanks to the kind folk of Afoe offering me the possibility of expressing my views on some European reactions to the Mittal Steel bid for the European steel giant Arcelor. By now most of you must have heard about this sitation. Mittal Steel is the worldâ€™s largest steelmaker and was founded (and is still currently run) by the Indian-born steel maker Lakshmi Nivas Mittal, the third richest man in the world.
Mittal himself is based in London and he has headquartered his company in Rotterdam. Arcelor is a Europe based global company – it is registered in Luxembourg and was created in 2001 by a merger of the Spanish Aceralia, the French Usinor and the Luxembourg based company Arbed. So what has happened? Well here is a summary from Daniel Gross on Slate in his aptly titled article Indian Steel and Egyptian Cell Phones.
The good folks in the West are generally happy to sell real estate to nouveau riche Arabs and Asians. After all, cash-flush foreigners generally pay top dollar. In 2004, Lakshmi Mittal, the acquisitive Indian steel baron, dished out $128 million for a residence in London. (And few of the bienpensant clucked when Mittal rented out Versailles for his daughterâ€™s wedding.) Thereâ€™s no clash of cultures and civilizations when it comes to real estate. Would you like to buy Pebble Beach? How about Rockefeller Center?
But when the purchase involves a corporation that produces an essential industrial product, that we-are-the-world comity disappears. Since January, when Mittal announced a hostile bid for Luxembourg-based steel company Arcelor, the French and Luxembourgians (Luxembourgeoisie?) have reacted harshly. On Jan. 29, Arcelorâ€™s board rejected Mittalâ€™s offer as unacceptable in every way. Arcelorâ€™s Runyonesque CEO, Guy Dolle, has sniffed that his steel is â€œperfumeâ€ while Mittalâ€™s product is like â€œeau de cologne.â€ Thierry Breton, Franceâ€™s finance minister, fretted over the potential clash of civilizations that would ensue if Mittal were to emerge victorious. (Never mind that Mittalâ€™s company has its headquarters in Rotterdam, is owned by a man whose primary residence is in London, and has steel-making operations in the United States and Germanyâ€”but not in India.) In response, Indiaâ€™s minister of commerce and industry, Kamal Nath, flung back: â€œThis is an era of globalization, cross-border investment and liberalization, not one in which investors are judged by the color of their skin.â€ TouchÃ©!
That is the crux of the story. The European side seems to be worried about job losses whilst never actually providing any substantial reasoning to back up why this will happen when Mittal has promised the contrary. Curiously, even though Mittal himself does not have a single investment in India, he has been receiving a lot of support from inside India, from the press, India Inc and the government.
The reasons why this is happening are not hard to find, you only have to look at the comments made by Arcelorâ€™s chief Guy Dolle who talks about a ‘company of Indians’, ‘monkey money’ and how Arcelor is perfume and Mittal Steel is Eau De Cologne.
On a European-based list I participate in, one of the posters made the following point.
The hostile bid by Mittal for Arcelor, the big European steel conglomerate, has set a lot of feathers ruffling over in Europe.we will be doing a piece on this trying to put it in the context of globalisation and the changing balance of global economic power though Mittal is strictly speaking a Dutch company, in fact everyone here perceives it as Indian.
As this poster rightly mentioned the Mittal debate is about globalization and the balance of power. If Western companies want to enter India and China, want to outsource their manufacturing and services to these countries, and generally talk about the greatness and goodness of globalization and open markets then they should start getting ready for the process to also run the other way round.
I believe this whole issue comes down to the belief, in this case on the part of many Europeans, that third world countries and their people in general are just not capable. After all, if they were, they would be rich, now wouldâ€™nt they?
This is a valid question if based on the misplaced assumption that poor countries have incapable people. It is related to the idea that poor people are somehow less able than rich people. I think that this is a gross oversimplification of the process of economic development. The development of economies is a complex social phenomenon, and it cannot simply be reduced to any one event or any particular component.
Poor countries and poor people both are immensely capable. The reason for the lack of economic development and wealth is a systemic issue and not an individual one. If that was not true, then it would be hard to explain the progress enjoyed by the millions of Indian and Chinese people currently living in the US, the UK and to some extent in the Middle East, Africa and Australia.
Thomas Friedman says â€˜The World is Flatâ€™ however, he may need to mention that apart from being flat it is also equipped with a playing pitch which runs in two directions. Globalization makes it easy for emerging countries to invest in the more developed countries. The poor and emerging countries of Asia are already supporting the huge budget deficit being generated by the US.
The strange thing in this case however is that this is one European company bidding for another european company. So what really could the problem be, apart, that is, from the colour of the bidder?