Source: The Financial Times
Royal Dutch Shell is one of the world’s largest and most powerful companies. Bolivia is one of the planet’s poorest countries; its gross domestic product is a mere 3 per cent of Shell’s annual revenues. Recently, Shell chief executive Jeroen van der Veer noted, somewhat meekly, that his company was resigned to accepting Bolivia’s decision to break the contracts it had signed. He said it was no longer a good idea for oil companies to put up a legal fight against the nationalistic policies of countries such as Bolivia. Once upon a time, giant multinationals did not bend to the will of tiny governments. The behemoths of industry did not just stand by as their oil, gas or mining fields were seized under a national banner. They fought back and not just rhetorically.
In Iraq, a ragtag militia equipped with small arms and improvised explosive devices is denying the most powerful military in history – the US – control of the territory it swiftly conquered. This same pattern, in which “micropowers” are successfully contesting the dominion of traditional “megaplayers”, is also in evidence in a far more cerebral market: encyclopedias. The survival of the world’s oldest and most respected source of information, the Encyclopaedia Britannica, is threatened by strange newcomers. One of them, Wikipedia, though just five years old, is already 12 times larger than Britannica, which was first published in 1768. Wikipedia is free, exists only on the web, can be read in 229 languages and is expanded daily by unpaid volunteers. A recent study in Nature magazine found that, despite its far larger size, Wikipedia had 162 errors, while Britannica had 123.
Britannica is not, of course, the only business whose survival has been threatened by improbable new rivals. The New York Times, founded in 1851, now thinks of eight-year-old Google as one of its most serious competitors. All large companies are under pressure and the trend is accelerating. According to Professors Diego Comin and Thomas Philippon of New York University, a company in the top 20 per cent of its industry in 1980 faced only a 10 per cent chance of no longer being an industry leader five years later. By 1998, that risk had more than doubled. In fact, 39 of the top Fortune 100 companies in the US were not on that list last year. A high turnover of industry leaders means a high turnover of CEOs, too. Of the world’s 2,500 largest companies, 383 lost their CEO in 2005; half of them were fired. According to Booz Allen Hamilton, the consulting firm, the turnover last year was the highest in the decade since it began its survey and the number of CEOs dismissed because of poor performance quadrupled. Surprisingly, CEO turnover was highest among Japan’s largest companies, once considered safe havens for mediocre performers.
Shorter tenures at the top, unexpected new challengers and tighter margins to manoeuvre also describe political life today. For starters, landslide electoral victories, though still occurring – Jacques Chirac’s in 2002 or Junichiro Koizumi’s in 2005 – have become the exception rather than the rule. The trend, instead, is for presidents and prime ministers to win national elections with smaller margins. Razor-thin victories such as that of Germany’s Angela Merkel, Italy’s Romano Prodi or Peru’s Alan García epitomise a pattern whereby leaders elected with weak popular mandates are forced to govern by cobbling together fragile coalitions. These political partnerships are easily up-ended by microplayers who can use their ability to veto, stall decisions or use political guerrilla tactics to apply pressure on more powerful actors or limit their options. Naturally, this trend has also shortened the tenures of cabinet ministers, which in many countries are now measured in months rather than years. In effect, it has become common for political newcomers to contest successfully the hegemony of long-established political parties and incumbents.
The proliferation of new microplayers capable of constraining the autonomy of traditional mega-sized rivals is a rising trend everywhere. The US is constrained by Islamist terrorists. The power of central banks to rule over a nation’s currency is shared with thousands of hedge funds. In a growing number of countries, control of large swaths of territory, critical government agencies or the nation’s most lucrative business activities rest in the hands of criminal organisations that are part of sprawling global networks. Gigantic media companies are besieged and exposed by the daily postings of 40m bloggers whose number doubles every five months. Latin American governments have been overthrown by indigenous groups that only a few years earlier were politically insignificant.
Even the Vatican is facing stiffer competition. Fifty years ago, 90 per cent of Latin Americans were Catholic. Today, about one in five people in the region identify themselves as evangelical or Pentecostal Christians. This trend, where new players can rapidly accumulate significant power, where the power of traditional megaplayers is challenged and curbed, and where power is both more ephemeral and harder to exercise, is evident in every facet of human life. In fact, it is one of the defining and not yet fully understood characteristics of our time. Scholars are arguing whether the international system, once divided in half by the cold war, is transforming into a unipolar one where the US is the sole superpower, or whether we may be moving toward a multipolar system centred on the US, China and other powerful nations. I think that it will be neither.
What is coming – and in some important ways is already here – is a hyper-polar world where many large, powerful actors coexist with myriad smaller powers (not all of which are nation-states) that greatly limit the dominance of any single nation or institution. A common assumption is that we now live in a “winner-takes-all” era where power is concentrating: in military hegemons, enormous companies, “category killers”, dominant brands, mega-churches or even giant non- governmental organisations and charities. But there is mounting evidence that we live in an era when power is becoming more diffuse, that the barriers to acquiring it are falling and that the unbridled exercise of power by those who have it is an increasingly rare and fleeting occurrence.
Such a world opens many new attractive opportunities for the little guy, whether a small country, a new company, a citizen’s group that shares interests or a talented individual. But those opportunities must come at the expense of something – and, in this case, that is stability. Whether you prefer cheering for the megaplayers or the micropowers, the hyper-polar world will be more volatile and fractious. And its manifestations are already evident.
The writer is editor-in-chief of Foreign Policy and the author of Illicit: How Smugglers, Traffickers and Copycats are Hijacking the Global Economy (Wm Heinemann)