After America: Thinking beyond economic globalization

The following post is based on my presentation given at the ‘After America: Exploring a new world order’ event at Cass Business School, London, 3rd December 2012.

Dangerous Assumptions
One of the deep assumptions that we tend to make when we’re preparing our business plans is that we live in, and serve, markets that are driven largely – if not totally – by economic motivators. And that has been the big assumption underpinning the march of globalisation. ‘Making everyone richer’ is a commonly cited benefit of the drive to form one common, global market.

However, taking this viewpoint may be adopting a limited view of the world. There are other motivators or, as I call them, rallying points, that we need to consider. These new rallying points may help us to see the future of globalisation far better than just adopting a rational economic model. History has proven that the world is not a rational place. It more chaotic that we may care to imagine.

Back in 2007 I had just completed research on the future of globalisation and I was deeply concerned about the assumptions that were being made about globalisation, or, as I could say, the ‘mass Westernisation of the world’.

These assumptions were at best hopeful and many appeared to ignore lessons from history. The fact that we were rapidly approaching the greatest global power transition – that’s China and possibly India overtaking the US – that the world has ever seen, seemed to me to be treated too lightly, too optimistically even too simplistically. The reality for me seemed infinitely more complex and unpredictable.

I was struck too by the fact that business leaders didn’t have the tools to explore this new world. None of the tools in the strategy textbooks seemed to specifically address the road ahead – what we had were 20th century tools to tackle 21st century challenges!

So, I wanted to create the tools that we could all use to think about what a future world could look like and arguably even more importantly, what the pathways we might follow to get to that future world. That’s why I started putting together ideas for my book The Era of Global Transition back in the depths of the Great Recession.

But back to the present. Obama’s re-election speech on 7th November carries a very strong subliminal message. The US is resigning its role as the world’s policeman. It appears almost inconceivable that the US will become involved in a major military campaign ever again. The uncertainty of a world without a hard-edged power wielding leader has been so quickly thrust upon us. We face the prospect of a leadership vacuum that we may not have planned for.

The big ifs
We now have to think hard and quickly about what the world could look like.

You could say that there are a lot of projections out there of what the world will look like 10, 20 or even 50 years from now. Most share a few common problems and really big ones at that.

Economic projections typically show us a world that is surprisingly similar to the one that we live in today. OK, the relative size of economies are different and countries like China and India take the lion’s share, yet the names of the countries are the same and the world has a familiar feel to it. These projections are based on a series of assumptions, or big ifs. IF austerity works, IF there are no disorderly sovereign debt defaults, IF the new economies continue to expand, IF all countries open up their markets fully to competition, IF private credit and welfare support grow in the new economies. In other words, the BIG IF, if the world accepts unanimously the western way to growth or the Washington Consensus. Now there are too many ‘ifs’ in all that for me and whilst I hope that a future similar to this will come to fruition, it may well not for at least three reasons.

First – the global architects of the current world order are suffering from an unprecedented crisis of legitimacy. When I talk about global architects I mean powerful nations –most notably the US – and the financial markets. The US is struggling with inequality and the legacy of doubtful military excursions. The US isn’t alone. The legitimacy of China’s leaders hangs by the thin thread of continued economic expansion. And the financial markets face their own tests of legitimacy too. We are still reeling from the recession that was never supposed to have happened. We have had in the UK the outcry over bankers’ bonuses, the LIBOR scandal and now the fiscal multipliers issue – the admission that the effects of austerity had been badly under-estimated. In short, does the world have a reliable model? There are big doubts , big perceived legitimacy issues about both the western way – the Washington Consensus and the China Model or the Beijing Consensus.

Second there isn’t going to be another Bretton Woods moment – that time in July 1944 when the US pulled the free countries of the world together to define a new world order for the 20th century – is not going to happen again. The US and China have too many internal problems to take on that that role. Their focus will be more inward-looking.

Third – the reshaping of the world order won’t be conducted just by powerful nation states and the financial markets. That’s a 20th century way of seeing things. One of the concepts that I introduce in my book, The Era of Global Transition, is that the future will be shaped not by one, but by four global architects. The old architects will be joined by two new architects. And, if we look back 20 years from now it may well be that it was the new architects who were the most influential.

The first of the new architects is what I call social movements – people with a set of common values who are strongly drawn together to drive change. We’ve seen an example of the power of social movements in the Arab Spring and social movements are the real winners in our technology-driven world. Technology has given social movements the power to challenge and bring down national leaders.

Now, when you think about social movements I’d like you to reflect upon something. Currently, there are around 5.5m young people unemployed in Europe – to put that into context the population of Ireland is 4.5m. Now, think about how long it will take countries like Greece (whose economy is still contracting) to regain socially acceptable levels of unemployment – 5 years – 10 years – 20 years – and who will influence those young minds during those years?

The fourth architect is all about the future of nation states. This is a big complex issue that I deal with in my book, but looking at the world map as it stands now could be really misleading. Thinking about where new ideological blocs could appear is a far more fruitful way of thinking about the future.

So don’t just think about nations and financial markets – there will be four global architects that will battle to try to fill a leadership vacuum over the coming decades. Just looking at the world the way it is now could be a big mistake.

All this has obvious and major implications for business leaders.

More than one rallying point
This type of future crystallises the need to start to think about strategy-making in more than one form of globalisation.

Currently, we are pre-occupied with only one form of globalisation or one rallying point. But there are three types of globalisation that we could face each with different rallying points that I point to in my book. These are economic globalisation, security globalisation and value globalisation.

Economic globalisation is the rallying call of wealth creation – the attraction of consumerism, materialism and the emergence of the global shopping mall. The Washington Consensus fits in very nicely with economic globalisation. But there are other rallying points. The second is security globalisation. In a tough, fractious, resource-strapped world, people will value security for their property and loved ones. People will be attracted by the promise of security and strong leadership. And the Beijing Consensus seems to be attractive in that world. The final form of globalisation, value globalisation, is where values and culture are rallying points. I think of this as a world that will emerge if growth slows and stops, if the promise of consumerism for the young proves to be a hollow sham.

In my vision of the alternative future, the challenge will be that all three rallying points will exist simultaneously. The question is which one will be dominant and I don’t think it’s going to be economic globalisation. The challenge will be to spot where these new rallying points will emerge and I think that you will be in for a few big surprises. The global map could change dramatically.

So forget, for the next few decades, of just one economically rational world. It could happen, but we need to consider alternative worlds.

Tearing up certainties
All this means that we have to tear up what we take as a certainty, a given. I deal with nine certainties that are still popular but belong to an old world in my book.

Here are two to consider.

Most of our business plans assume that the world had matured and that we had left conflict behind. Many called this ‘the end of history’. The reality is that conflict is back on the agenda and it’s a complex issue that goes beyond traditional military wars, too complex to go into now, though I have devoted a whole chapter to exploring conflict, its motivators, what type of action key players might take and six possible scenarios or routes to the future.

I’d also like to introduce another thought… there’s another certainty that you are going to have to be really careful of and that is democracy. Of course everyone wants to live in a democracy? Don’t they? It’s absurd to think otherwise?

Well no. Research tells us that in times of crisis and hardship people will dump democracy for a strong believable leader, which is why I really worry about parts of the world, including Europe. There are other problems with democracy. The road from autocracy to democracy is typically a long and blood-stained one, a fact that many of the projections that I referred to earlier seem to ignore. The other issue is that democracy is not a permanent state. It can be lost quickly even in established democracies.

Developing your view
The future is far from clear and we need to look at worlds beyond the best economic projections. Our big challenge is to work out what a world without a global leader will look like.

I have given you just a glimpse of my view but you must develop your own and I hope that the toolkit that I provide in The Era of Global Transition will help you do just that.

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