So it’s over for now, the prospect of a US debt default. The can has been kicked down the road. But the road is a dead end and there’s not much tarmac left. Whether we like it or not, a new world order, or orders in the plural, is headed towards us, quicker than we ever expected. I wrote the following piece in The Conversation last week before the crisis was temporarily resolved. But the message is the same. Which of the following four world orders will your business face?
US default could lead to a new world order – firms must prepare
By Robert Davies, City University London
“As autumn dawns, so does the business planning season, that time when we consider 2014 and beyond. We are used to going through this process surrounded by uncertainty, especially following the meltdown of 2008. However, recently, a feeling of confidence has fuelled us; things seemed to be getting back to normal.
But news of the “shutdown” in the US and the fast-approaching nightmarish prospect of a US default, introduces a new feeling of unease, despite talks of a short-term increase in the debt ceiling. And it’s not just businesses that feel uneasy, so do nation states including China.
If we consider the position that the “shutdown” and a default may abruptly curtail US influence, then the question “Just what type of future world could my business face?” must be top of the agenda. This is a seemingly impossible question to answer. But we can develop a glimpse of future post-US default worlds if we consider two issues – power and dissonance.
The first step, in building these future snapshots, is to consider who are the “global architects”, the players that could redefine the rules that run the world, just as the US did, largely single-handedly, at towards the end of World War II. Traditionally, we think of powerful nation states – like the US, China and Russia – as global architects. But considering just nation states is a 20th century perspective. But now we also need to think about other influencers, and there are at least two groups to consider.
First, we have the financial markets, including powerful multi-national corporations. But second we have the newest player, social movements: groups of technologically empowered people, united by a common cause and bent on change. In the coming years it will be a constructive (or destructive) tension between these three global architects, nation states, financial markets and social movements, that will decide the shape of our world.
The next step is to consider the power these global architects could apply. We can think of three types of power: hard power, or the use of violence (usually in the form of military force); economic power, or the ability to shape the rules of the global business world; and soft power or the power of persuasion. It’s worth noting that if the US defaults it faces a dramatic and immediate loss of both economic and soft power.
Then we have the issue of dissonance. That is, the degree to which each of these global architect supports or rejects the world order that the US has tried to create, especially after the fall of the Berlin Wall in 1989.
Now we are in a position to map out our four potential future worlds:
The first axis refers to the power, available to aspiring global architects, relative to that held by the US. It horizontally from low on the left to high on the right. The second axis describes dissonance, or the level of agreement or disagreement with the US world order.
The four quadrants represent our possible future worlds. Starting at the bottom left hand quadrant we have a relatively benign future of continued cooperation. There is still broad support for the US-defined world order and power is widely dispersed. We could think of this as an influence-sharing G20 kind of world, where it is business as usual. In the absence of a contender, the US would retain considerable influence.
The top left corner is very different. There are those who have different ideas on the way the world works, but nobody has the power to impose their way globally. This is a fractious place with actors behaving irrationally and many going their own way. The Middle East provides us with a snapshot of such a world.
In the top right quadrant, we have a new, dangerous place. There are powerful players that could fill the vacuum left by the US, but they have totally different recipes. China contends it has a tested centralised model for wealth generation, Russia aspires to rebuild its empire, Europe struggles to remain intact, the US attempts to uphold a more liberal order. Social movements feel empowered to disrupt the old status quo. But the big question in this world is how will the new players get their way – through persuasion or hard-edged power?
Our final world is in the bottom right, a world of new powers but powers that are prepared to work in partnership with the US. Rather than a G20 or a G7 world, this would be more a G2 or G3 world. We can expect change, but it will appear gradually.
Take another look at the map. The quadrant with the highest concentration of power may hold the key to the future of your business and its future strategy. US default or long-term shutdown will bring new players to the fore, rupturing the previous world order. Whether we end up with geopolitics that resembles the G20, the Middle East or a new Cold War, we cannot be sure. But business leaders need to start considering these alternative worlds right now.“
Robert Davies advises organisations in the areas of global foresight, strategy, innovation and change.