Old-school ways are driving America’s re-emergence

ARE WE making a return to the Sixties and to the world of Mad Men? Or back even further to the US of Eisenhower’s day? Is America resuming its economic leadership of the world in the late days of the Obama presidency?

China appears to be in retreat for now — its currency, the yuan, is taking a tumble and in the process causing ructions across Asia. The US dollar, meanwhile, is like the cartoon character Popeye, emerging after demolishing a large dose of spinach, with muscles bulging.

The once mighty Opec oil cartel is in disarray. Against the expectation of many, oil and gas production across the plains of Texas and Dakota continues in spite of tumbling energy prices. Saudi Arabia has gambled on engineering a wipe out of American shale oil companies — a gamble which, it seems, is not working. The futures markets are marking down the price of oil, a process that has speeded up dramatically since the beginning of June and it is now being suggested that some shale companies could operate profitably even if the price drops to $30 a barrel.

China is concerned about a fall off in its export trade — a drop that amounted to around eight per cent in the year to July. Its leadership has decided to untie itself from the dollar. It looks like we can look forward to lower priced goods flooding in from Asia in the months ahead. Commodity prices, in general, are continuing to head down as the great Chinese construction boom tapers off.

All this is forcing the heads of the Central Banks of the US and Britain to look again at plans to raise interest rates. Janet Yellen, chair at the US Fed, may put plans to tighten in September on hold, with inflation sticking at levels close to those of half a century ago. In the US, business figures are back in vogue and many of the biggest names have a distinctly retro feel about them. Donald Trump commanded the headlines in the brash, wide- shouldered Eightis, with his Trump Tower and casino projects. He is leading the field in the race to the Republican nomination, while using the sort of language one would associate with a 1950s advertising executive with one too many cocktails on board following a long, liquid lunch with the guys. The brash New York mogul may have overreached himself in his treatment of Fox News broadcaster Megan Kelly, but he has had a pretty good run for his money.

Warren Buffett is a man who can well remember the Fifties. By the end of that decade, he was well on his way to setting up Berkshire Hathaway, his investment vehicle. The modest, unassuming Buffett would not wish to be associated with Trump in any way, but he too has a gift for the grand statement. Last week, on the eve of his 85th birthday, he engineered Berkshire Hathaway’s biggest ever deal with an agreement to acquire Precision Castparts for $37bn.

The deal is being viewed as a major bet on US manufacturing and its aerospace industry. It is yet another addition to the Buffet empire and the move is a sign that the conglomerate, as a form of business organisation, has a future despite recent evidence of decline.

The conglomerate, under which disparate businesses are operated under a single large corporate umbrella, reached its zenith in the 1960s but went out of fashion from 1980 on, when corporate raiders came in and broke up many of these large organisations. Buffett, however, has never followed the latest fashion, continuing to spread his company’s investment far and wide.

He ignores the passage of time, roaring through his ninth decade at record pace. Some American entrepreneurs simply won’t recognise when the game is up.

Elsewhere, the boss of Google, Larry Page, has just engineered a major restructuring at the group, with the establishment of a new holding company, Alphabet, and the splitting up of its core, cash-generative businesses from its emerging businesses. Google is one of a relatively small group of companies now driving the US and by extension, the global economy. It has gradually turned into a conglomerate in its own right.

With almost $65bn in cash in hand at the end of 2014, Google is as rich as Croesus, though still modestly endowed compared to Apple, which has built up a $180bn cash hoard which it has been investing through entities such as Google Ventures — which backs start-ups like Uber and has $1.5bn to play with. In effect, Google has become one of the new generation of conglomerates and this move is in response to a stagnating share price. It is seeking to reinvent itself, thereby disproving the old Scott Fitzgerald line that there are “no second acts in American lives.”

Innovation continues to drive America forward, confounding the doom merchants who talk of national decline. The sheer weight of numbers in Asia may eventually count against US dominance in the long-term. The dollar will surely dip at some point, but a mix of chutzpah and ingenuity will keep plenty of entrepreneurs on the far side of the Atlantic close to the great bulging buffet table for a long time to come.