Energy Security in Europe (A): Nord Stream

Rawi E. Abdelal; Sogomon  Tarontsi

Case | HBS Case Collection | November 2010 (Revised February 2013)

Energy Security in Europe (A): Nord Stream

by Rawi E. Abdelal and Sogomon Tarontsi

Abstract

Russian and German energy firms initiated the Nord Stream natural gas pipeline project with strong political support from their home governments but encountered resistance from other states. Although the pipeline would connect Russia with Germany directly, the project was not simply a bilateral matter. First, a need to secure construction permits in multiple jurisdictions around the Baltic Sea involved other countries. And second, Germany's membership in the European Union entailed compliance with goals and values of the entire union, which stressed the imperative of collective action in energy matters and dangers of succumbing to "national reflexes." Thus the implications of the project became a matter of concern to the entire European Union but Europeans struggled to articulate the meaning of Nord Stream: was it a "separate peace" between Russia and Germany to the detriment of the rest, or was it a pan-European deal to the benefit of all? As the case chronicles, the success of Nord Stream depended on the ability of its creators to ensure that latter view prevailed over the former.

Keywords: Non-Renewable Energy; Leadership; Distribution; Business and Government Relations; Conflict and Resolution; Energy Industry; Russia; European Union; Germany;

Language: English

Format: Print

40 pages

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Citation:

Abdelal, Rawi E., and Sogomon Tarontsi. "Energy Security in Europe (A): Nord Stream." Harvard Business School Case 711-026, November 2010. (Revised February 2013.)

The greatest challenge to the sustainability of our current era of globalization comes from within the United States. Most Americans have come to reject globalization. We must discern the lessons from the parts of the developed world where the backlash is also profound—France, for example—and where it has been more muted—such as Germany. In both the United States and France, gross Gini coefficients have increased sharply during the past thirty or so years. The French state has, however, delivered a net, after-tax, after-transfer distribution of income that is more equal than it was thirty years ago. And yet: France is still in the midst of an anti-systemic populist revolt. There is only one inescapable conclusion: It is not just about the money. Those who feel left behind in both countries feel that they have lost respect and dignity. We cannot redistribute our way out of the crisis of global capitalism. The German experience holds lessons. We must value and valorize the many ways in which people contribute. We must also pursue policies that create patterns of employment that confer dignity, meaning, and purpose. I argue for dignity as a tool of policy, beyond its normative desirability as a goal.

The prevalence of online platforms opens new doors to traditional businesses for customer reach and revenue growth. This research investigates platform choice in a setting where prices are determined by negotiations between platforms and businesses. We compile a unique and comprehensive dataset from the U.S. daily deal market, where merchants offer deals to generate revenues and attract new customers. We specify and estimate a two-stage supply-side model in which platforms and merchants bargain on the wholesale price of deals. Based on Nash bargaining solutions, our model generates insights into how bargaining and competition jointly determine the price and firm profits. Our results show that there is systematic variation in bargaining power between platforms and merchants with different characteristics. By working with a bigger platform, merchants enjoy a larger customer base, but they are subject to lower margins due to less bargaining power during negotiations. Our counterfactual results quantify the value of platforms for merchants and show that merchants with lower bargaining power benefit more by working with a smaller platform. Regarding the impact of price negotiations on platform competition, we estimate that roughly 11% of the deals on a smaller platform are attributable to the platform’s lower level of revenue sharing.

Working Paper | HBS Working Paper Series | 2020

Of Learning and Forgetting: Centrism, Populism, and the Legitimacy Crisis of Globalization

Rawi Abdelal

Every order is a bargain with disappointments and trade-offs. Thus is every order an unstable equilibrium. The first era of globalization, circa 1870–1914, created both international prosperity and domestic instability. That instability was fully realized during the interwar years, which were characterized by financial chaos, virulent populist movements, and war. European and American political leaders learned hard lessons from those decades: that the international order must tolerate a diversity of national capitalisms; and that capitalisms within nations must be tamed in order to be made compatible with democracy. A generation later, both scholars and policy makers seemed to have forgotten how important the post-war bargains were for maintaining economic and social stability. Instead, preoccupied by the disappointments of the 1970s, a new pro-market, pro-capital consensus emerged between the center-Left and center-Right. A second post-war international order emerged as a result: a new era of globalization made possible by this “neoliberal” political consensus. The new order was more trans-Atlantic than American, for European political transformations made it possible. This era of globalization created both prosperity and instability, just as the first era had done. Instability took the form again of virulent populism, driven by economic inequality, financial volatility, and a crisis of dignity among those who felt left behind by it. Although we are learning that neither national societies nor the international system can manage the trade-offs of globalization and neoliberalism well enough to avoid a backlash, in fact those lessons were learned once before. The cycle continues: learning, forgetting, and re-learning why these equilibria are unstable.

Keywords: centrism; populism; Globalization; History; Balance and Stability; Economic Systems; Government and Politics; Learning;

Citation:

Abdelal, Rawi. "Of Learning and Forgetting: Centrism, Populism, and the Legitimacy Crisis of Globalization." Harvard Business School Working Paper, No. 21-008, July 2020. View Details

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