10     Supercitizens and Semi-States

We can’t let little countries screw around with big companies like this—companies that have made big investments in the world.

—anonymous Chevron lobbyist

We live in a time when people are losing confidence in the ability of government to solve problems. But at Wal-Mart, we don’t see the sidelines that politicians see. And we do not wait for someone else to solve problems.

—H. Lee Scott, Jr., Wal-Mart CEO, 2008

The world’s largest company, Wal-Mart Stores, Inc., has revenues higher than the GDP of all but twenty-five of the world’s countries. Its employees outnumber the populations of almost a hundred nations. The world’s largest asset manager, a comparatively low-profile New York company called BlackRock, controls assets greater than the national reserves of any country on the planet. A private philanthropic organization, the Gates Foundation, spends as much worldwide on health care as does the World Health Organization.

There is no disputing the rise of private power. There are literally thousands of striking statements like those in the preceding paragraph that can challenge expectations and the ingrained sense of the world order that is taught in schools. The question is: What does the centuries-long rise of private power mean to the way the world works? The question is accompanied by important ancillary considerations: What does this mean for ordinary people? For the governments that represent them? How are current trends likely to further alter the relationship between those people, countries, and companies? Do we need a new rulebook or a new playbook for leaders that better reflects current and evolving realities? What can or should be done to ensure that the new global power mix serves the needs of all people as justly as possible?

To begin with, we need to acknowledge that the lines between public and private power have become so blurred that old distinctions and frameworks no longer work. Whether or not there was ever a truly Westphalian moment when the system of nation-states defined international relations, certainly the new picture is both messier and more dynamic than the conventional view that the Westphalian order took hold for a time. National, international, and private sector leaders alike need a new framework that goes beyond a world of sovereign states acting as the ultimate arbiters of international issues. Most of the planet’s states have had so many of their sovereign prerogatives stripped away and are so impotent to address key global challenges, from climate to fighting disease to combating nuclear proliferation to regulating global financial markets, that they can no longer fulfill the basic terms of the social contract that is the sole justification for their existence. At the same time, most of the new powers on the scene are constituted in such a way that they are precluded by nature and by law from acting in the broad public interest. There are few effective interfaces between the two, and most thoughts of public-private partnerships or networks are vague, aspirational, impractical, and limited in their potential impact.

At the same time, and for the same reasons, in the United States in particular we need to finally move past ideological and political views of business and government that are artifacts of the cold war. The false choice between “big government” and “free markets” is a distraction that echoes the zero-sum Manichean battle between communism and capitalism, left and right. If there is one thing that history conclusively shows, it is that unlike some dimensions of the battle between church and state, which was in fact over ultimate supremacy and could not end in a tie, the public and private sectors are—when properly balanced—complementary halves of a whole. They may often be rivals, but they are also essential to each other and to the well-being of everyone. When public interest is allowed to determine that final balance, promoting cooperation and collaboration between these forces, everyone benefits. The issue then becomes finding the appropriate balance and the best mechanisms to ensure that it serves the greater good.

To develop a framework suited to rapidly evolving contemporary global realities, we need to move beyond the notion of a world of sovereign states and subordinated private actors that is more suited to seventeenth-century sensibilities (and not entirely even to seventeenth-century realities). We must come to understand and accept that the mix of the world’s most influential players is one of major countries that can still act largely as countries are expected to act; semi-states that have seen the pillars of their sovereign power undermined and their ability to serve their constituents undercut; supercitizens that are private actors with narrow, self-interested, primarily (but not exclusively) economic agendas; and the rest of us, just citizens, the governed, who at least in theory are to empower those who lead us through our consent and who as signatories to the social contract expect the powers that organize society to provide us with certain basic rights and conditions.

Lies, Damned Lies, and Something like the Truth

The fact that power is abstract, relative, and as changeable as a teenager’s moods has not stopped generations of academics and pundits from trying to quantify it, classify it, and work out its recipe. There is a cottage industry among political scientists, for example, in trying to develop power metrics for states. Single-variable metrics are so simple as to be meaningless, but they are regularly bruited about.

Gross domestic product (GDP) is the metric that has been used most frequently to measure the economic health, vitality, and related strength of countries. It is derived from attempting to calculate the market value of the goods and services being produced in a country. It is a fairly recent idea, having been introduced in a report to the U.S. Congress in 1934. Almost as soon as it was developed, its inventor, Simon Kuznets, noted that it is not a good way of measuring the well-being of a nation. It has other deficiencies as well, but that doesn’t stop people from using it for the same reason that it is often used throughout this book: it’s easy. It roughly tallies up consumption, investment, government spending, and net trade, sometimes swapping out some of these elements and adding in wages or other earnings metrics in order to get an estimate of the economic output of a country. (It differs from gross national product in that, while GDP looks at what is produced within certain borders, GNP looks at what is produced by the people living within those borders, by the enterprises they own.) Also, and not coincidentally, it is a number that guides the attention of political leaders to the issues of greatest importance to business leaders.

Of course, any such number is a gross approximation, full of estimates and inaccuracies. The worth of the currencies by which value is measured shifts all the time. Ownership changes on markets daily. Profits flow in and out of countries in a variety of forms. Some products are ephemeral and hard to track or have values that are hard to calculate. Some portion of every economy is illicit and unrecorded. Tax records are also inaccurate. The whole idea of GDP is further confused greatly by globalization, with all the cross-border intellectual property transfers, complex intracompany trade, and deals going on in the ether of the Internet. But having some number is better than having no number, and over time, methodologies have developed that allow us to make fairly accurate calculations and comparisons between countries with regard to this one crude statistic.

Perhaps the greatest defect associated with GDP is not how it is calculated but how it is interpreted. GDP has come to be seen as perhaps the primary score measuring the performance of countries and governments. If GDP goes up enough, that’s a sign of success. If it goes down, it’s a problem. It can make or break political careers. If it goes down for two consecutive quarters, a recession is said to occur. A very high rate of growth represents a boom. But of course, as Kuznets noted and most people immediately forgot, GDP is really a kind of a statistical blunt instrument that fails to capture many aspects of a society’s condition or progress. GDP does not tell you anything about whether income is distributed equitably within a society. It doesn’t measure quality of life. It doesn’t measure whether what’s being produced is new or duplicative or better or worse than what was produced before. As a consequence, it—like stock market indices or other financial market metrics—is one of those dangerous numbers that is seen to reflect far more than it really measures, that distorts perceptions of the real condition of societies, that distracts from real problems or successes, and that therefore can send leaders off on statistical wild goose chases, pursuing numerical outcomes and ignoring what’s really happening or needs to be done.

The flaws of overrelying on GDP as a measure are well illustrated by considering the case of the world’s GDP leader, the United States. America outstrips the world by many measures but lags, sometimes shockingly, in many others. Countries that could hardly hope to outperform the world in any category are far ahead of the United States when it comes to things that matter more to average people. Choosing metrics to measure our performance as a society is not a value-free process. As a country, America has consistently relied on indicators that keep us focused on the interests of business, financial institutions, or the defense industry, whereas equity, quality of life, and even social-mobility metrics are played down.

Americans use GDP in discussions about how well we are doing. It’s at the heart of discussions of whether we are in a recession or not, ahead, or spiraling into a troubling decline.

Yet, when China “passes” the United States, it will remain for the most part a very poor country racked with social problems. And though the past decade was marked mostly by U.S. “growth,” census data shows that since 1999, median American incomes have fallen more than 7 percent while the top 1 percent showed gains. Almost one in four American children live in poverty. The United States has a high level of unemployment compared to many of its peers.

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The GDP number is not the only culprit, of course. Listening to the news, you might be forgiven for thinking that stock-market performance was linked to reality. But markets are oceans of teeming emotions that make the average hormone-infused high school look calmly rational, and much of the “data” that moves markets is just bunk. Trade-deficit numbers may be scary, but they are also frighteningly flawed, doing a terrible job of accounting for trade in services, trade via the Internet, and intercompany trade, to pick just three among many problem areas.

Worse than the shortcomings of these statistics are the consequences of our overdependence on them as measures of the success of our society. A country, for example, that overemphasizes GDP growth and market performance is likely to focus its policies on the big drivers of those—corporations and financial institutions—even when, as during the recent past, there has been little correlation between the performance of big businesses or elites and that of most people.

Furthermore, of course, the purpose of a society is not merely the creation of wealth, especially if most of it goes to the few. Even John Locke, who famously enumerated our fundamental rights as being to life, liberty, and property, qualified this by asserting that people should appropriate only what they could use, leaving “enough and as good” for others. As we have noted in chapter 4, Thomas Jefferson later consciously replaced the right to property with a right to “the pursuit of happiness.” And happiness has become the watchword for those seeking different measures that might better guide governments.

According to the economist Carol Graham, the author of a recent book called The Pursuit of Happiness: An Economy of Well-Being, “happiness is, in the end, a much more complicated concept than income. Yet it is also a laudable and much more ambitious policy objective.” While Graham notes distinctions between approaches to happiness—with some societies more focused on such goals as contentment, and others on the creation of equal opportunities—she joins a growing chorus of leading thinkers who suggest that the time has come to rethink how we measure our performance and how we set our goals.

This diverse group has included thinkers and public figures like President Nicolas Sarkozy of France, who established a commission to address the issue in 2008 that was co-led by the Nobel Prize–winning economist Joseph E. Stiglitz; the Columbia economist Jeffrey D. Sachs; the British prime minister, David Cameron; and the trailblazing people of Bhutan, who since 1972 have set a goal of raising their gross national happiness.

Graham admits that it’s a challenge to set criteria for measuring happiness. However, in a conversation, she told me she did not see it is an insurmountable one: “It doesn’t have to be perfect; after all, it took us decades to agree upon what to include in GDP, and it is still far from a perfect metric.”

But for Americans, beyond choosing the right goals, there remains the issue of being No. 1. Many of us have lived our lives in a country that has thought itself the world’s most powerful and successful. But with the U.S. economy in a frustrating stall as China rises, it seems that period is coming to an end. America is suffering a national identity crisis, and politicians are competing with one another to win favor by assuring a return to old familiar ways.

This approach, too, is problematic. The United States, as a developed nation, is unlikely to grow at the rapid pace of emerging powers (the United States is currently ranked 127th in real GDP growth rate). Europe and Japan, too, are grappling with the realities of being maturing societies.

But maturing societies can offer many benefits to their citizens that are unavailable to most in the rapidly growing world—the products of rich educational and cultural resources, capable institutions, stability, and prosperity.

As a consequence, countries that at different times in history were among the world’s great powers, such as Sweden, the Netherlands, France, Britain, and Germany, have gradually shifted their sights, either in the wake of defeat or after protracted periods of grappling with decline, from winning the great power sweepstakes to topping lists of nations offering the best quality of life.

When Newsweek ranked the “world’s best countries” based on measures of health, education, and politics, the United States ranked eleventh. In the 2011 Quality of Life Index by Nation Ranking, the United States was thirty-first. Similarly, in recent rankings of the world’s most livable cities, the Economist Intelligence Unit has the top American entry at number twenty-nine. Mercer’s Quality of Living Survey has the first U.S. entry at number thirty-one, and Monocle magazine showed only three U.S. cities in the top twenty-five.

On each of these lists, the top performers were heavily concentrated in Northern Europe, Australia, and Canada, with strong showings in East Asian countries from Japan to Singapore. It is no accident that there is a heavy overlap between the top-performing countries and those that also outperform the United States in terms of educational performance—acknowledging, of course, the mistake it would be to overemphasize any one factor in contributing to something as complex as overall quality of life. Nearly all the world’s quality-of-life leaders are also countries that spend more on infrastructure than the United States does. In addition, almost all are more environmentally conscious and offer more comprehensive social safety nets and national health care to their citizens.

That virtually all the top performers place a much greater emphasis on government’s role in ensuring social well being is also undeniable. But the politics of such distinctions aside, the focus of those governments on social outcomes—on policies that enhance contentment and security as well as enrich both human capabilities and opportunities—may be seen as yet another sign of maturity.

It is also worth noting that providing the basics to ensure a high quality of life is not a formula for excess or the kind of economic calamities befalling parts of Europe today. For example, many of the countries that top quality-of-life lists, including Sweden, Luxembourg, Denmark, the Netherlands, and Norway, all rank high in lists of fiscally responsible nations—well ahead of the United States, which ranks twenty-eighth on the Sovereign Fiscal Responsibility Index.

What these societies have in common is that rather than striving to be the biggest, they instead aspire to be constantly better. Which, in the end, offers an important antidote to both the rhetoric of decline and mindless boosterism: the recognition that whether a country is falling behind or achieving new heights is greatly determined both by what goals it sets and how it measures its performance.

The search for more useful measures of national performance, strength, or weakness has led to the creation by social scientists of other “big number” metrics. These include gross military capability, total fuel and electric consumption, or territorial size and population. All are useful to the degree to which their defects and limitations are recognized.

The same cannot be said for some of the multivariable approaches that have been cooked up to assess broader definitions of national power. These factor in a specified number of elements perceived to be contributing to or otherwise affecting a nation’s power. The problem with them is that in degree of inaccuracy, they are very similar to single-variable approaches in that there are millions of constantly changing factors impacting national power, and choosing to look at one or six or twenty-five is still leaving out millions. Hans Morgenthau, the father of modern international relations theory, developed one approach that looks at eight factors: geography, natural resources, industrial capacity, military preparedness, population, national character, national morale, and quality of diplomacy. He later added a ninth: quality of government. You can see the problem at first glance; small nations with few resources, little industrial capacity, small population, defective national character, low national morale, and no diplomacy at all can be quite powerful if they are willing to blow themselves and their neighbors to kingdom come. North Korea is quite powerful, at least as far as bankrupt, small, failing states run by deranged, out-of-touch leaders go.

Other models include Clifford German’s formula for assessing national power, which tried to weigh nuclear capability, land, population, industrial base, and military size to come up with a power number. Or Wilhelm Fuck’s approach, which used population, energy production, and steel production. Or the regression analyses of Alcock and Newcombe or the Correlates of War Project, which looks at demographic, urban, and military capabilities. Wayne Ferris and Ray Cline offered approaches that use these variables but include others like trade and the “will to pursue national strategy.” And although all these subjective efforts were as distorting as they were illuminating, they go on to this day because people want an answer to who is up and who is down.

In the same way, while assessing a company’s sales is a useful way of knowing the volume of its business, it is not so useful when comparing a retail company (whose sales reflect the value of goods others manufacture, bought at a wholesale price and resold) to a manufacturer (selling what it makes). And if one company has big sales but is losing money hand over fist, it may not be as “strong” as a smaller company making big profits. Market capitalization is a helpful guide except that, as we know, markets can make big mistakes in under- or overvaluing stocks, and so you can end up with Internet companies with very limited revenues and perhaps not even a real business model having a higher market cap than companies with real assets and sales histories. Number of employees, value of assets, and other measures make a difference but can be deceiving, given the divergence in structure among companies in different industries.

The point is that coming up with one-size-fits-all or definitive numbers to measure power or relative power is a slippery and deceptive business. For our purposes, we are better off going in with our eyes wide open, taking some rough numbers, knowing that they are rough and sometimes terribly inexact (as noted earlier, comparing a country’s GDP and a company’s sales is comparing a value-added measure to one that is not) but using a little common sense in weighing them. For example, if a company has annual sales of $400 billion and profits of $80 billion, that is not the same as a country with a GDP of $400 billion and an annual budget with discretionary spending within it of $80 billion, but we know that such a big company probably has resources and clout and global operations that may give it the relative advantages of a “similar-sized” country in a number of key areas (in the courts, including the court of public opinion; in influencing foreign governments; in mobilizing assets quickly, and other areas of influence) and that it certainly has more resources than countries that are much smaller. (The character of the power they have is very different, but you don’t really doubt that Exxon has more clout than say, Guatemala, do you? On most issues, internationally?)

Private actors may typically (but not always) possess more “persuasive” tools, while countries’ tools are more in the “coercive” vein. Businesses may be more easily able to operate globally and to do so with less concern about public opinion than many governments. But both control financial, human, and natural resources; both have proven mechanisms for advancing their interests, and history shows that when both seek to influence a single issue, either can prevail. And so even as we understand the distinctions between the two kinds of power and the difficulties associated with coming up with finely tuned comparative metrics, we can nonetheless use the inexact tools at our disposal to conclude that there has been a change in the character of the international system associated with the introduction of a large number of big private actors that have at least as many resources and tools available to them as do most countries on many issues, and that it is therefore worth studying the consequences.

Or, to put it another way, as we consider the following section, we will work under the assumption that, for example, supercitizens do not have to be absolutely or definitively more powerful than every state for us to consider them large, influential, and worthy of note. In the same way, semi-states do not have to be inferior to companies in every way to be less powerful than some in some very important ways. And if both things are true, then we need to account for the new players and the new strata of power in the international system and the way that we—as public or private actors—may participate in that system.

Semi-States

Our definition of a semi-state is a state that, while legally sovereign, is not practically sovereign. It may claim control over its territory and assert all the rights and privileges appertaining to statehood, but more than one of its four key pillars of statehood has been so compromised as to be little more than a symbol. Those pillars are the ability to make and enforce its laws; to control its borders; to manage its finances through monetary, tax and fiscal policies; and to project force or at least effectively defend itself. A fifth characteristic of a true state that may be a useful metric is whether its citizens believe that a state can effectively meet the terms of its social contract with them: Can it keep them safe, bring order to their lives, preserve their basic rights to life, liberty, property, and happiness?

In the global era, no state can be said to control all its borders at all times, to control all aspects of its financial destiny in a world of interconnected markets, or to manage or hold at bay all global threats. But some states have seen the pillars of their sovereignty more degraded than others. (There is a school of thought that “sovereignty” is a legal concept and thus not reducible. But it can be compromised in practice, and it is challengeable if it cannot be preserved and asserted, and that’s the point here.) As we discussed in the last section, the factors that have undercut the status and powers of many states are diverse and do not always operate in the same way or to the same degree in all countries. In some cases, globalization is the driver of the diminution of traditional powers. In some cases, legal evolution is. In some cases, multiple revolutions in military affairs are what have done the trick. In some cases, new technologies or changing public attitudes have done it. In some cases, it is just circumstances—not enough money, not enough people, not enough institutional infrastructure, not enough critical mass to make it as an independent actor in the community of nations and among the others who are joining them on the global stage. And of course, in many cases, it is the rise of new private actors to become supercitizens, interlopers into the social contract with rights, influence, and opportunities that rival or exceed that of the states that gave them artificial life, that has underscored the diminished nature of these status-challenged public-sector powers.

Because the metrics available to us are so inaccurate or misleading, and because we would like to be as objective as possible in determining which countries are and are not semi-states, we need to come at the problem from several directions. There are 192 member countries in the United Nations. Some of these are indisputably major powers by any definition. They can demonstrate strength in each of the pillars of their sovereign power and exert measurably greater influence than almost any other actors on the planet. The United States, for a brief post–cold war moment considered the world’s hyperpower, is foremost in this group. The permanent members of the U.N. Security Council or the members of the G8 or perhaps the G20 or the world’s nuclear states might all fall into this group. We will revisit this idea in a moment.

But first, it is also worth noting that there are some states that no one would dispute have had their claims to practical sovereignty deeply and perhaps irreparably compromised. These are the so-called failed states, the countries where anarchy reigns and that often attract bad actors, conflict, and, with unsettling frequency, the United States military. Since 2005, Foreign Policy magazine and the Fund for Peace have published the Failed States Index, examining 177 states based on criteria including demographic pressures, delegitimization of the state, and factionalized elites to establish which states can be categorized as “critical” (failed), “in danger,” “borderline,” “stable,” or “most stable.” In 2009, fourteen states were listed as critical, including Sudan, Haiti, and Burma. Certainly, these failed states and those that come nearest to that category would qualify as semi-states because of their inability to provide the most basic services expected of a country. They may have the right to self-determination, but they don’t have the capacity to serve their people in the minimum way a state should.

To give some idea of the gap between the major powers and the rest, let’s go back to the discussion of military muscle in the last chapter. One of the symbols of a world-class navy is the aircraft carrier. But only ten navies in the world have even one aircraft carrier. The United Kingdom and Italy have two each. France, Japan, Spain, Russia, Brazil, India, and Thailand have one. The U.S. Navy has eleven carriers, ten of which are Nimitz-class nuclear-powered giants that each displace nearly a hundred thousand tons of water. The U.S. Navy will, in 2015, launch a new generation of carriers with the planned christening of the USS Gerald Ford. The estimated price tag for this new type of seagoing behemoth is $14 billion—larger than the total annual military budget of all but eleven nations worldwide. Or, to put it monetary terms, the U.S. financial stimulus and Troubled Asset Relief Program launched after the financial crisis of 2008 and totaling $1.487 trillion were together larger than the 2008 GDP of all but eleven countries.

To understand where to draw the line between fully empowered, fully functioning states in the global era and those that might be characterized as semi-states, we can build from the bottom up. Foreign Policy’s full list of fourteen states considered to have failed due to a combination of demographic, political, social, and economic pressures includes Haiti, Burma, Afghanistan, Pakistan, Iraq, Somalia, Kenya, Sudan, Chad, the Central African Republic, the Democratic Republic of the Congo, Zimbabwe, Ivory Coast, and Guinea. The “in danger” countries that just missed the cut include Nigeria, Ethiopia, North Korea, Yemen, Bangladesh, and East Timor. Nigeria is big. North Korea is noisy. But neither can effectively meet the basic terms of the social contract for most of its people, albeit for completely different reasons (in one case too little government control or power, in the other case too much).

We can also help the selection process by identifying which states are too big to be included on the semi-state list. To begin with, let’s take a look at the twenty-three states that have GDPs bigger than the annual revenues of the world’s largest corporations, such as Wal-Mart or Royal Dutch Shell ($458 billion in revenue) or Exxon ($442 billion). According to the IMF, a GDP of $458 billion would place a country at twenty-fourth in the world’s rankings, right after Saudi Arabia and right before Norway. A few of these twenty-three are obvious candidates that rise above the level of semi-states. That includes the United States and China, the world’s number-one and number-two economies, which are also number one and two in military spending and other measures. If the European Union were a state, of course, it would be bigger than these two, but it is just a collection of states and semi-states.

The next ten countries also all clearly make the cut: Japan, Germany, France, the United Kingdom, Italy, Russia, Spain, Brazil, Canada, and India. This group plus the top two contain all the original G7 members, the five permanent voting members of the U.N. Security Council, the four countries most often mentioned as candidates for additional permanent seats (Japan, India, Brazil, and Germany), and the BRICs, the most important of the world’s fast-growing emerging economies. (BRICs is the Goldman Sachs–created acronym for Brazil, Russia, India, and China.) All twelve also have significant voting power in the IMF and the World Bank, comparatively strong militaries, functioning economies, orderly borders, and systems of law that the governments clearly control—all the hallmarks expected of a state with all the attributes needed to preserve and act upon sovereignty in the global era, an important and increasingly important criterion.

Once we get into the next eleven, however, we see how difficult it is to maintain the full range of practical dimensions of sovereignty. These eleven include Mexico, Australia, Korea, the Netherlands, Turkey, Poland, Indonesia, Belgium, Switzerland, Sweden, and Saudi Arabia. Of these, four are listed as “borderline” in the Failed States Index, indicating potential problems: Mexico, Turkey, Indonesia, and Saudi Arabia. All no longer really control their own currencies, Indonesia and Mexico are having trouble controlling their borders, and Turkey and Saudi Arabia are facing powerful internal stresses that could test their ability to enforce their laws. Given their size and resources, however, perhaps it is best to describe them as states at risk of becoming semi-states if they cannot reform and strengthen institutions quickly enough. All the top twelve countries are in the top sixteen in military spending, but among the next group, only Australia, Korea, and the Netherlands are. Poland, Belgium, Switzerland, and Sweden are much more limited in their military capabilities. Does a state have to be bellicose to be a state? No, but ceding any real ability to defend yourself or to influence at least your near neighbors does forfeit one of the traditional prerogatives of being an independent country. (And whereas being part of an active alliance like NATO might help offset this, there is no denying that such alliances are often fitful, sluggish, hostage to the views of reluctant or larger members, and, when relied on as a nation’s primary means of projecting force, thus dilutive of traditional state power.) Among the remaining 158 states, some certainly possess the characteristics of functioning states that color our views as to how they should be classified. Stable, high-functioning, prosperous, secure, financially at least fairly independent, these candidates for full-state status include, from the next twenty or so countries on the GDP list, Taiwan, Norway, Austria, South Africa, Denmark, Finland, Singapore, Israel, and Chile. Of the next twenty, who? Almost certainly New Zealand and Vietnam.

A lively debate is possible as to whether there are twenty or thirty or forty states that are not semi-states. But it is very difficult to look at the remaining 160 or so countries in the world and say, in an era in which few truly control their currencies, their ability to tax, their ability to regulate their economies and their borders, the ability to enforce laws against major independent economic actors, their ability to defend themselves, project force, or meet the terms of a social contract for the global era, that they qualify as anything but a faded version of what a state used to be or was supposed to be.

To underscore the point, look at a couple of other criteria in just the financial areas we have already discussed:

•  64 percent of all foreign exchange holdings are held in dollars; 4.1 percent are held in British sterling; 3.3 percent are held in yen. Of the remaining 28.6 percent, almost all of it—26.5 percent—is held in euros.

•  The euro is, of course an example of how the seventeen members of the Eurozone have given up monetary control to the European Central Bank, as have semi-states such as Montenegro, Kosovo, Andorra, the Vatican, and Monaco. More than two dozen other states have pegged their currency to the euro. And countries such as Ecuador, Panama, El Salvador, East Timor, and a number of Caribbean and Pacific Island nations use the American dollar, while countries such as Saudi Arabia, the United Arab Emirates, and Oman have currencies pegged to the dollar.

•  Not only have most states given up monetary sovereignty, but when they get into trouble, they find themselves at the mercy of institutions effectively controlled by what might be called the Big Fifteen nations. The United States, the European nations, and Japan have historically dominated these institutions, and recent structural changes are likely to primarily benefit those largest emerging powers that are also among the top fifteen countries in GDP.

•  The shift of coordinating economic control of the world economy from the G8 to the G20 is encouraging, although the group is still dominated by its largest members and 85 percent of the countries on the planet are not represented within it.

Finally, to put the relative size and influence of these countries in some perspective, consider that of the five hundred largest companies in the world according to Fortune magazine’s Global 500 list, all five hundred would rank with the top one hundred countries according to the World Bank (again, by applying the flawed but nonetheless usefully illustrative annual-sales-to-annual-GDP comparison). Stora Enso, the multinational most readers never heard of before picking up this book, would be seen to have more economic clout than half the countries in the world.

Supercitizens

What makes a supercitizen? To begin with, the characteristics that give corporations their special advantages: their immortality; their ability to operate globally independent of national ties with great flexibility, mobility, and leverage; and their status as artificial persons with special rights and limited liability. In addition, they are made “super” by virtue of their size. On the one hand, size brings them economies of scale, greater competitiveness, and thus the ability to grow further, to raise capital, to make acquisitions, to invest in research and development, and to extend their commercial and political reach. On the other hand, it gives them the ability to weather tough times, to gain leverage over competitors and even public-sector opponents through costly legal or political strategies, and to powerfully impact the lives of all the people in their very considerable spheres of influence: employees, shareholders, customers, suppliers, competitors, and all the family members of each group, plus the communities in which they live and work. In addition, they often control key resources, land, technologies, infrastructure, systems, and other tools that give them special leverage.

It must be acknowledged that many companies, tens of thousands of them worldwide, have a lifespan, political clout, resources, and options unavailable to ordinary people. But for the purposes of this discussion, we want to limit ourselves only to those private actors who don’t just exert more influence than average citizens but also rival many states.

As noted above, the metrics for comparison are troublesome. But again, if we use them just as a rough reference point, it is very compelling to note that:

•  Using annual sales as a criterion, the one-thousandth-largest company in the world according to Forbes magazine would still be larger than a third of all the world’s countries. That company, Owens-Illinois, had annual sales in 2010 in excess of $7 billion.

•  That company’s sales were larger than the GDPs of countries like Malta, the Bahamas, Monaco, Haiti, Chad, Benin, Nicaragua, Bermuda, Laos, Moldova, Niger, Kosovo, Rwanda, Liechtenstein, Tajikistan, Malawi, Kyrgyzstan, Mongolia, and more than fifty others.

•  For those who fear that state-owned companies are dominating the ranks of the world’s biggest companies, only a small handful of the companies in the top one thousand are state-owned, and only four of the top one hundred.

•  Each of the world’s ten biggest companies in terms of number of employees has in excess of approximately four hundred thousand employees working for it. If, as is estimated, each of the families dependent on those employees is approximately five people, that would mean the smallest of these has an extended family directly supported by it of two million, a population the size of Namibia, Botswana, Qatar, or Estonia, larger than the fifty smallest countries. Wal-Mart, with more than two million employees, supports an employee/family community of eight to ten million, which is about the size of Austria, Switzerland, or Israel, and larger than a hundred other countries. Add in suppliers, distributors, and other companies reliant on these companies for support, you get enormous reach and countrylike scale, but spread worldwide in ways that vastly exceed the global personnel reach of all but a tiny handful of public-sector entities.

•  To put the previous point in perspective, Wal-Mart serves 200 million people a week, Royal Dutch Shell provides fuel to approximately ten million customers a day at fourty-four thousand service stations worldwide, Toyota sells more than seven million cars a year, and AXA has almost 100 million insurance clients.

•  Royal Dutch Shell alone produces 2 percent of the world’s oil and 3 percent of the world’s gas.

•  The world’s largest asset manager, BlackRock, as noted at the outset of this chapter, controls assets worth almost as much as the total currency reserves of the number-one and number-two countries, China and Japan, combined. BlackRock has $3.3 trillion under management; China and Japan’s combined reserves are $3.6 trillion. BlackRock controls twenty-five times the assets that the United States has in its national currency reserves.

•  The top twenty countries in the world in terms of currency reserves each hold hard currency worth in excess of $100 billion. The top 125 asset managers each control the same amount.

•  Each of the top twenty-seven banks in the world controls over $1 trillion in assets. The largest, BNP Paribas, controls almost $3 trillion. The fiftieth-largest bank controls almost $500 billion.

•  While the role of big philanthropies is important—the Gates Foundation puts as much money in the field each year as the World Health Organization—it needs to be put in perspective as a force. Currently, the total annual giving to philanthropy of all Americans is about $300 billion. That’s a very large sum of money, but taken together it does not equal the annual revenues of even one of the world’s biggest companies. Furthermore, the top four hundred American taxpayers, who had total adjusted income of $138 billion in 2007, donate only about $11 billion, including the big donations of people such as Warren Buffett.

•  While the annual budget of World Vision, the world’s largest nongovernmental organization (NGO), is $2.1 billion, bigger than the GDP of the world’s thirty smallest countries, other “big” NGOs wouldn’t even make it near the lists of the top one thousand companies. The next biggest is Save the Children, with almost $900 million in annual spending. Clearly, many of these organizations are providing vital social services that governments cannot otherwise handle on their own. They also are very influential in terms of disaster relief and development efforts generally. So their influence can, at times, often be greater than their absolute size—a fact that, as we have seen, is true for both public and private actors.

Using statistics such as these, it is easy to conclude that there are among the world’s corporations, financial institutions, and private nonprofit organizations well in excess of two thousand supercitizens whose clout rivals that of a substantial number of countries.

One final note is worth inserting here about the GDP-to-sales comparison. Those who do not like it argue that since GDP is a value-added measure, it does not reflect the total “sales” of a country, thus putting the state at a disadvantage in such comparisons; but such an analysis cuts both ways. First, much of what is counted against GDP is private revenue that quickly leaves the country one way or another. Further, the resources available to a state are of course limited to what is in a budget or a treasury or can be borrowed. National budgets typically constitute a fraction of GDP, and even when that is a high fraction, most of what is in a budget is in many cases not discretionary spending. For example, while the U.S. federal budget is estimated to be in excess of 24 percent of U.S. GDP in 2010, less than one-third is discretionary and only about 12 percent of that budget is nondefense discretionary spending. That means that what the government spends that it actually has some control over is the equivalent of about 12 percent of the GDP number, whereas companies have much greater control over the allocation of sales revenues.

Finally, and importantly, GDP represents the aggregated output of disaggregated producers: the people, companies, government, and other actors in a complex national economy. It is not an expression of a coherent economic activity. Unlike a company’s economic plan, virtually all the activity is unconnected, undirected, and difficult even to nudge in one direction or another except in very small, comparatively homogeneous economies (see the discussion that follows on entrepreneurial states). On the other hand, a company’s economic activity is directed and coordinated, and assets are allocated rationally and with a common, consistent purpose. This is an economic force multiplier for corporate economies versus national ones and is another reason it may actually be possible to argue that in terms of economic power, the GDP-to-sales comparison, while undeniably apples and oranges, may actually be understating the clout not of countries but of companies.

Often, however, it is not just financial clout that gives a special edge to these supercitizens. The ability to shift domiciles in order to avoid tax consequences has already been cited. This is often controversial, as when Halliburton, the big U.S. government contractor mentioned earlier, moved its headquarters to Dubai from Houston. In 2008, in response to a spate of relocations of headquarters operations of U.K. companies to Ireland, Vince Cable, treasury spokesperson for the opposition Liberal Democrats, attacked the moves as “blatant tax avoidance.” Switzerland, Luxembourg, and the Netherlands have also actively competed for and won corporate relocations by tailoring their tax codes to attract companies. While the countries showed initiative and their sovereign ability to reset their tax rates, it was the mobility of the companies that suddenly made a market out of what was once a situation whose terms could be dictated by a single actor, the sovereign.

Said one prominent chief executive of a leading technology company to me, “I am an American. Our company was founded in the United States. Most of our management is from the United States. But having a national allegiance is a luxury we can’t afford. We have to go where the conditions are best, and if that means shifting jobs or triggering a bidding war for financing or tax treatment, all the better. Being global means being competitive … and we know we are in the driver’s seat when it comes to setting terms.”

In their useful book The Nation-State and Global Order, Walter Opello and Stephen Rosow offer the following observation:

The global market has increasingly taken on the role of a regulator of sovereignty, creating institutions and generating norms and discourses that make it appear necessary and inevitable that states both adopt free market economic policies and proffer interpretations of the national interests that conform to the norms of global competitiveness. This is especially true of the poorest states, whose economies are heavily influenced by international regulatory agencies …

The growth of the internet and other digital networks will make it increasingly difficult for nation-states to tax global commerce effectively. These new technologies are undermining the efficiency of the state as a taxing entity, which may shift authority away from the state and reduce its capacity to make the financial resources necessary to make war.

This accurate depiction explains the motivations behind many state reforms, framing them not as acts of national will so much as acts of capitulation to market forces. This assessment can also be used to explain why, for example, China, in desperate need of capital to fuel growth to provide social stability, found itself eschewing Maoist and Marxist economics and embracing capitalism. This was the act not of an authoritarian leadership dictating terms to the people, as the Chinese Communist Party is often depicted as doing. Rather it was that of a “supreme” leadership giving in to the demands of high powers on Wall Street and in the boardrooms of the corporations on which China knew it would depend to fuel its future growth. Money talks. The world listens.

To find an example of the clout supercitizens wield versus that of states, we need look no farther than Sweden. Sweden’s GDP in 2009 was $406 billion. Exxon’s annual sales that year were $442 billion. Although Sweden ranks ninth in the world in per capita GDP, in terms of almost any fair assessment of clout it cannot keep up with the flagship descendant of Rockefeller’s empire. Sweden has nine million inhabitants. While Exxon has 83,600 employees, that accounts for directly supporting perhaps half a million lives. Add in its global network of 175,000 supplier companies and ten million customers and the reach grows. Exxon has 2.5 million shareholders, of which two thousand are institutional and represent the retirement savings of millions who are thereby also linked to the company’s fate. With its ownership interest in forty-six refineries, Exxon has a distillation capacity of six million refined barrels a day. In 2006, Exxon’s budgeted expenditures exceeded $400 billion. Sweden’s were less than one-third of that amount. Further, following on the earlier point, Sweden’s budget is heavily dominated by entitlement spending, over which its government has little control. Exxon spent $66 billion on operating costs alone and $20 billion on capital projects—several times what Sweden could afford.

While Sweden has embassies in about thirty countries, Exxon operates in almost every country worldwide, with product and marketing offices in more than eighty countries and more than a hundred exploration and production sites in thirty countries internationally. In terms of force, Sweden’s standing army is tiny, and its reserves, while consisting of approximately 290,000 people, represent a neutral nation and are virtually never deployed. ExxonMobil has been known to hire private forces and members of the local military for security missions in countries throughout Asia and Africa, notably in the province of Aceh in Indonesia. In 2000, during a period of heightened conflict between the government and the separatist movement, ExxonMobil spent over half a million dollars a month on security personnel—many of whom were accused of committing human-rights abuses including torture and murder—illustrating the company’s willingness to protect its assets with force worldwide.

Finally, to give a head-to-head example of influence related to the climate change debate we cited earlier in this respect, while Sweden was one of the leading nations in engineering the Kyoto Protocol on reducing the emissions of greenhouse gases, it managed to help get only 173 countries to sign up. This was at least one too few, since the world’s leading emitter—the United States—opted not to sign, in part due to an orchestrated, well-financed push by a group of corporations, including ExxonMobil, oil and gas industry peers, car companies, and emissions-intensive groups. The Guardian later reported that the undersecretary Paula Dobriansky wrote in a pre-briefing note to this group, “POTUS rejected Kyoto in part based on input from you.” Sweden had a vote and used its leverage cannily. But ExxonMobil, as it turned out, had a veto.

If there is any consolation in this for the Swedes, it is that companies that at least once had a Swedish identity, like Stora Enso, handily make the supercitizen list. Stora Enso’s annual sales of $20 billion would place it squarely in the middle of the country rankings, between Bosnia and Iceland. Stora today has thirty-two thousand employees and eighty-five production facilities in more than thirty-five countries worldwide. It owns land the size of Qatar. Other Swedish companies of comparable or slightly larger size—all of which, unlike Stora, remain headquartered in Sweden—include Volvo, L. M. Ericsson, Vatenfall, Nordska Bank, and Skanska.

Companies More like Countries: The Myth and Reality of Corporate Social Responsibility

We have already seen many instances throughout history in which corporations, evolving supercitizens, acted in ways that mimicked, duplicated, or exceeded those of states. From Stora’s providing housing, schooling, its own courts, and even its own military to the miners of Falun and their families, to the British East India Company’s governing the Indian subcontinent and managing one of the world’s largest armed forces, to the small cities for workers built, supplied, and even suffused with a semblance of cultural life by Andrew Carnegie, Henry Ford, and some of the other great industrialists of America’s Gilded Age, the phenomenon is not new. However, over the course of the past century, the statelike roles of companies have grown and changed and become both more common and more complex as multinational corporations themselves have grown bigger.

Today’s corporations often conduct something very much like their own foreign policy, and it is not uncommon for former senior diplomats, generals, or naval flag officers to be hired by corporations to interface with governments and to shape international strategies. These companies conduct active political advocacy campaigns. They undertake significant security initiatives. They also provide health care, training, shelter, security, and other functions that states ought to but can’t or won’t provide. Increasingly, companies are found to be either co-opting the role of governments or seeking to profoundly and sometimes illegally influence their direction. At the same time, there is a rapidly growing set of companies that are identifying and pursuing what they are characterizing as their “corporate social responsibilities.”

In fact, some academics, such as Rosabeth Moss Kanter in her book SuperCorp, argue that “vanguard companies,” by pursuing such high-minded goals, also become better corporate performers. It’s a canny if circular argument, because in my experience working with companies, the primary reasons they actively pursue “corporate social responsibilities” is to improve the bottom line—either by satisfying a political need, engendering community support, saving money, getting a tax benefit, winning investor support, or some such goal. It’s not that CEOs aren’t fine people. The vast majority that I know are, and they truly seek to “give back” to their communities—within very circumscribed limits. According to a 2008 report issued by the Committee Encouraging Corporate Philanthropy that surveyed the CSR (corporate social responsibility) contributions of 155 companies (69 of them Fortune 100 corporations), the median total spending on CSR as a percentage of corporate revenue was only 0.13 percent. Change is unlikely unless it is mandated by investors or by governments that increasingly recognize that they require assistance in fulfilling social-contract obligations. Of course, the precise role in fulfilling the terms of the social contract played by the public and the private sector is different in each variant of capitalism that exists in the world, a fact that we will discuss in the next and final chapter.

However, in other areas, the history of private actors undertaking roles or behaving in ways typically associated with states is extensive and seems to be accelerating with the growth and broadening interests of very large corporations, and the results are not always in the public interest, or for that matter in the interest of liberal society’s fundamental values such as democracy or respect for the rule of law. The following brief examples from the past century help illustrate this point.

The United Fruit Company in Central America

The United Fruit Company was a trailblazer, literally and figuratively. It got its start building railways in the midst of the forbidding, sweltering jungles of Central America late in the nineteenth century. Minor C. Keith of Boston and his uncle Henry Meiggs, an experienced railroad man, encountered brutal circumstances on their first project in Costa Rica. Due to the heat and jungle diseases, more than five thousand men died during construction. Among them were Meiggs’s and Keith’s two brothers. As a way of feeding the workers, Keith planted bananas along the line. Although there wasn’t much demand for the railroad, Keith saw an opportunity with the bananas. The fruit wasn’t well known in the United States, but it was cheap to grow and easy to ship, and the Costa Ricans were happy to give him the unused jungle land for a pittance in exchange for his railroad building. Soon the principal cargo of the railways was the bananas, and following the merger of his Tropical Trading and Transport Company with the Boston Fruit Company to become United Fruit, Keith was centrally involved not only in building extensive elements of the region’s transportation, port, and telegraph infrastructure, but also in building the export industry for which the region would come to be known for decades.

This gave the company both leverage and a deep interest in maintaining stable governments in the region. In the interest of contributing to the well-being of the local population, UFC built a private hospital system that was the largest private health organization in the world. It built trams and put in streetlights. And, in the words of one commentator, “United Fruit … possibly launched more exercises in ‘regime change’ on the banana’s behalf than had even been carried [out] in the name of oil.”

In 1911, when Honduran president Miguel Dávila, in cooperation with the U.S. government, sought to launch financial reforms that UFC felt might threaten some of its cozy dealings, the company teamed up with another big fruit provider and supported Dávila’s overthrow and replacement with a former president who was more willing to deal. Later, the two companies got into a dispute over land on the Honduran-Guatemalan border and both sides enlisted the help of the local army to bring pressure to bear, almost triggering a war over banana rights. As a consequence of repeated incidents of this nature, in which political leaders were lifted up and brought down and national governments operated essentially as a support organization for a big foreign investor (a company that later became known as Chiquita Brands), the companies gave the region something else: a nickname. The countries would henceforth be known as “banana republics.”

ITT in Chile

Another Latin American country also witnessed another instance of a corporate kingmaker seeking to obtain favorable working conditions. The place was Chile, and the company was the International Telephone and Telegraph Company. ITT had a healthy little business in Chile covering everything from telecom services to rental cars. But when the socialist Salvador Allende arrived on the scene in 1970 as a presidential candidate, ITT and its CEO, Harold Geneen, worried about deteriorating conditions or, worse, expropriation of their assets via nationalization if Allende were to triumph. ITT had a lot to lose: assets worth over $200 million, the biggest of which was a 70 percent stake in the Chilean national telephone company.

Geneen had close ties to the U.S. government, was a substantial donor to President Nixon, and was one of America’s most high-profile CEOs at the time. In order to foil Allende’s candidacy, his people began to work with other concerned U.S. companies to tip popular support in the direction of the right wing. Dow Chemical, Pfizer, and Firestone Tire and Rubber formed a secret “Chile Ad Hoc Committee” to advance their political interests. But, as it was later revealed, they didn’t stop there. According to explosive reports in The Washington Post by the columnist Jack Anderson, what ensued were “regular discussions between ITT and the United States Central Intelligence Agency concerning the role of American transnational corporations in creating economic chaos within Chile to push the country to the right. [Documents found by Anderson] mentioned discussion of the feasibility of an American-backed coup. They even revealed an offer by ITT Chairman Harold Geneen to contribute ‘up to seven figures’ to the CIA to stop Allende.”

ITT didn’t stop there. It donated $700,000 to Allende’s opponent. When Allende won anyway, Geneen lobbied hard for a U.S. coup. President Nixon and his advisers resisted, and the CIA and ITT agreed to focus on placing economic pressures on Allende. At least that was the stated plan. On September 11, 1973, General Augusto Pinochet assumed power in a bloody coup d’état that resulted not only in Allende’s death but also in the ascendancy in Chile of the pro-business, pro-market policies of Milton Friedman and Arnold Harberger of the University of Chicago. The coup thereby marked the culmination of a U.S. State Department–Ford Foundation project dating back to the 1950s designed to introduce protocapitalist U.S. policy frameworks to Chile. It involved the training over a period of just over a dozen years of more than a hundred Chileans in a program that even its funder, the Ford Foundation, criticized because “its ideological narrowness constituted a serious deficiency.” Orlando Letelier, Allende’s ambassador to Washington, who was later murdered, characterized the coup as “an equal partnership between the army and the economists.” (I don’t want to give the wrong impression here. Many of these economists instituted important reforms and managed programs that brought great growth and stability to the Chilean economy. Rather, I offer the program and the process within Chile as an example of the not exactly market-driven nature of the spread of key free-market ideas.)

Despite repeated public statements to the contrary, it is clear that the coup was enabled through the support of the U.S. government with blessings at the highest level. Kissinger himself is quoted as saying just days after the coup, in a conversation with Nixon: “In the Eisenhower period we would be heroes.”

He then adds, “We didn’t do it. I mean we helped them [by making] the conditions as great as possible.” Geneen was once quoted as saying, “You read a book from beginning to end. You run a business the opposite way. You start with the end, and then you do everything you must do to reach it.”

Royal Dutch Shell in Nigeria

Such freelancing in government affairs is hardly a historical relic, consigned to stories about “old-school” CEOs and corporations far removed from today’s business ethos. The Wikileaks scandal, for example, revealed much about the activities of one of the world’s largest and most powerful companies, Royal Dutch Shell, in one of the world’s largest and most wild and corrupt semi-states, Nigeria. In one confidential document, the chairwoman of Shell Australia, Ann Pickard, is quoted as claiming that Shell Oil had “access to everything that was being done” in the country. In a cable dating from 2009, Robin Sanders, the U.S. ambassador to Nigeria, writes that Pickard had boasted that the Nigerian government had “forgotten” that “Shell had seconded people to all the relevant ministries and Shell consequently had access to everything that was being done in those ministries.” At the meeting with Sanders, Pickard claimed Shell had obtained evidence that Nigeria had invited “bids for oil concessions from China.” According to Celestine AkpoBari of a local NGO, Social Action Nigeria, “Shell is everywhere. They have an eye and an ear in every ministry in Nigeria. They are more powerful than the Nigerian government.”

Whether this is overstatement or not, the fact is that the oil industry in Nigeria has extraordinary clout, having generated over $600 billion since the 1960s. Shell’s own estimate is that its venture in the country between the years 2005 and 2009 “contributed about $36 billion to the government,” plus $3 billion in offshore operations. About 80 percent of budgetary revenues in the country come from the oil sector. At the same time, Shell also illustrated the “nonaligned” nature of multinational corporations by both cultivating relations that have been accused of being “too close” with Nigeria’s corrupt and often brutal military regimes and also having attempted to improve their standing with governments like that of the United States by sharing with them intelligence on politicians it suspected of cooperating with militants in the Niger Delta. The immediate quid for that particular quo was that, according to the Wikileaks information, Shell requested sensitive information about its Russian rival Gazprom from the U.S. consulate.

As for the benefit to the people of Nigeria, take the Niger Delta, from which a large proportion of the country’s oil wealth is extracted, a region that is home to more than thirty million people and has been called “one of the ten most important wetland and coastal marine ecosystems in the world.” Despite the economic activity generated there, the U.N. Development Program describes the region as suffering from “administrative neglect, crumbling social infrastructure and services, high unemployment, social deprivation, abject poverty, filth and squalor, and endemic conflict.” Most residents of the region do not have access to either clean water or health care. While, for example, Transparency International in 2004 ranked Nigeria’s then president Sani Abacha as number four on its list of most self-enriching leaders, asserting that he stole $2 billion to $5 billion during his presidency, the people of the region have suffered disproportionately. According to a recent Greenpeace report, “although Shell operates in more than 100 countries, 40 percent of all its oil spills happen in Nigeria.” With the government of Nigeria content to look the other way, Shell reported double its 2007 number of oil spills in the country in 2008, and double the 2008 number in 2009. According to one estimate, “some 13 million barrels of oil have been spilt in the Niger Delta since oil exploration began in 1958. This is the equivalent of one Exxon Valdez every year for 50 years.”

For years, it seemed Shell was embracing the view of economists like Friedman, who said, “a corporation is the property of its stockholders … Its interests are the interests of its stockholders. Now, beyond that should it spend the stockholders’ money for purposes which it regards as socially responsible but which it cannot connect to its bottom line? The answer I would say is no.” In the past, Shell put the blame on the shoulders of the government without acknowledging its influence within that government. But that has recently started to change.

In a 2004 internal ethics study, Shell admitted that “we sometimes feed conflict by the way we award contracts, gain access to land and deal with community representatives.” Further, in 2010, Shell announced a plan to clean up 268 oil spills in the Niger Delta. While it remains to be seen to what extent these developments will be successful, they do reflect a broader sense that corporations that blindly seek profit without consideration of social consequences incur hidden costs not only to their standing and influence but in terms of real liabilities and shareholder value. In this respect, the Kanter thesis and the work of groups such as the Clinton Global Initiative and the World Economic Forum to promote social entrepreneurship may have some starkly practical roots that even Friedman would appreciate in the context of his formulation. In particular, the growing focus of major public-sector institutional investors, who have enormous governance clout with big companies on socially responsible practices among their portfolio companies, actually may be an area in which good old-fashioned capitalist self-interest drives companies toward serving the greater good.

Countries More like Companies: The Promise of the Entrepreneurial State

Just as companies are assuming a wide variety of roles historically played by governments, or, alternatively, are actively collaborating with governments to influence public-policy decisions, openly or otherwise, so too are some governments recognizing that to better compete in the modern global economic environment, they would benefit by embracing practices that are more commonly found in corporate suites. These entrepreneurial states are typically small, but they can be seen as laboratories for best practices and innovation in government that might help larger governments, or regional or metropolitan governments within them, compete more successfully for the private-sector investment dollars that have become essential to the survival of most economies.

Here again we see the recurrent historical paradox: governments gave birth to companies, but today it is the private sector upon which governments must depend for approval and support, whether these come in the form of good credit ratings, demand for debt offerings, or flows of foreign direct or indirect investment that are essential to maintaining growth and political stability. Indeed, it has come to the point that many current and prospective government leaders feel they serve two constituencies. One votes in polling stations in the elections within their countries. The other votes with their money in a global referendum that takes place twenty-four hours a day on every continent.

Candidates for high office in countries worldwide go to New York and London not only to raise funds for their campaigns but also to raise their stature within the companies that will vote for them. During the Clinton years, one of the reasons for the Treasury secretary Robert Rubin’s clout was that Clinton dreaded losing the support of the financial community. He was to Clinton’s market campaign what political advisers like James Carville or George Stephanopoulos were to his political efforts. I have sat with senior Latin American government leaders as they planned and opened offices on Wall Street or set up “campaign” lunches with investors (and donors) like George Soros or senior executives from Goldman Sachs, Citigroup, or JPMorgan Chase.

For some, this dependency is a matter of life and death. I recall sitting in the office of a well-known sovereign-debt specialist during the late 1990s. During our conversation, he got a call from the deputy prime minister of Russia, who also served as finance minister. The two talked for about five minutes and then the banker, an old friend, hung up the phone. “It’s crazy,” he said. “It’s short-term debt. They can’t get enough of it. It’s how they pay their army, how they pay their bills. They’re like crack addicts.”

“Well, if they are addicts,” I said, “what does that make you?” The fact that months later Russia’s addiction triggered a crisis throughout the emerging world is yet another illustration of the leverage the markets have over such leaders. My friend the banker continued in his long career of making money even though the fellow he lent it to couldn’t repay it and caused an international crisis. The government leader who couldn’t repay—well, of course he was fired immediately.

Further, the intelligence and analytical tools that financial firms have at their disposal make even greater demands on countries to manage their information flows to the financial community much like the investor-relations arms of big companies. Just as an illustration of how Wall Street monitors global developments, take BlackRock, the world’s biggest asset manager. They have 8,900 employees, at the core of whom are a group of elite high-paid analysts who meticulously assess the state of play in countries and markets in real time all the time. According to a CNN story filed in 2008:

Currently BlackRock runs tens of millions of risk models a day. On each of these, computers continually run through an ever-changing number of potential risk scenarios, some 200 million of them per week—everything from what happens if the U.S. starts defaulting on its debt to what happens if China stops buying it. This type of analytical power is [what sets BlackRock apart].

They are not alone. But that power not only to make millions of judgments a day but to translate those judgments into the allocation of trillions of dollars of capital is, in a real sense, what amounts to the life force of the global economy in the twenty-first century. And clearly it is not controlled within governments. At best they can only influence it.

Some of those who have been most effective at doing so are the entrepreneurial states. They share many characteristics with business entrepreneurs. They are often small, scrappy, pugnacious, sometimes even arrogant, and cognizant that they are battling long odds. These factors play into a sense of urgency and a recognition that they will require innovation and energy and special commitment in order to succeed. They also demonstrate that being small does not mean being limited by semi-statehood. You can either look at smallish states as being too little and too stripped of traditional state powers to play with the biggest public actors, or, alternatively, you can look at them as being very big economic actors compared even to most very big corporations. This comparison is only apposite to the extent that they make themselves companylike creatures of the global marketplace.

Singapore, Israel, and the United Arab Emirates have done that. By rights, none has any right to survive, much less thrive. They are small. Singapore has essentially no resources; Israel’s are limited. The UAE has oil and gas but is not willing to succumb to the pitfalls of complacency that destroy many petro-states. They all face challenging local geopolitical environments. And they all have made the decision that to succeed they must aggressively cultivate the international business and financial communities, attract technology, and train world-class students. In addition, all have embraced approaches that are right out of best management practices from international corporations, whether that means aggressive recruiting of top people into the government, implementation of systematic strategic planning processes, embrace of meaningful metrics, strong outreach to investor communities, or a focus on innovation as a part of a national “corporate culture.”

Singapore

When you land at Singapore’s Changi Airport from the United States, Europe, or even Tokyo’s Narita, you cannot help but be struck by its modernity, cleanliness, and efficiency. Frankly, if you are stepping off a Singapore Airlines flight, it is hardly a shock, because no airline in the world compares to it for quality of service. And then you drive into downtown Singapore along wide, well-lit, immaculate highways, past glistening office towers nestled among carefully manicured gardens, tropical flowers, and palm trees. And, like many other visitors, you wonder whether this tiny island that did not even exist as a truly independent nation until 1965 is perhaps the best-run city in the world, whether maybe the ancient Greeks and Singapore’s founder, Lee Kwan Yew, were on to something when they settled on the idea of city-states.

Once a Sumatran outpost and then a British trading post run in conjunction with the British East India Company, Singapore was the site of a catastrophic British defeat during World War II. Winston Churchill called the defeat in the Battle of Singapore “the worst disaster and largest capitulation in British history.” When the bits and pieces of the British empire came undone in the years after the war, Singapore was among them, assuming the right of self-government in 1959. When the island gained sovereignty on August 9, 1963, it had a special advantage working in its favor. Its new prime minister was a forty-one-year-old politician who led the most important political party on the island: the People’s Action Party. He was a Cambridge-educated lawyer named Lee Kwan Yew, and during the course of the half century in which he has led Singapore, he has emerged as one of the world’s most effective if sometimes controversial leaders.

The controversy surrounding Lee is often associated with the strong control he and his party have maintained over the state and the strong controls the Singaporean state has maintained over its people. From strict rules about public behavior (don’t spit out your chewing gum in the street) to caning as a form of punishment, Singapore does not conform to Western standards of a free society in key respects. What has made these issues more noisome to Western critics, however, is that Singapore has been so successful at creating a superior quality of life for its people by an active and creative embrace of the power of the marketplace that it seems a contradiction. To Lee, who now holds the title of Minister Mentor, there is no contradiction. They have created what leading Singaporean diplomat Kishore Mahubani once described to me as “a very Asian model, a Singaporean capitalism that blends our ideas about the importance of and respect for community with our appreciation of free markets and competition.”

Over a dinner, Singapore’s finance minister, Tharman Shanmugarantnam, placed the idea in a broader perspective. An economist educated at the London School of Economics, Cambridge, and Harvard—regarded by other finance ministers as among the world’s very smartest and most capable—Tharman spoke in the wake of the 2008–2009 financial crisis, saying, “We have seen the defects in Anglo-American capitalism. We have seen some of the challenges associated with Eurosocialism. We certainly know that communism has failed. There is a place now for a different view, a different balance … and it is one we have cultivated for a long time here in Singapore.”

When pressed as to his meaning, Tharman said: “Our view is [that] the role of government is to empower people to be able to seize their own opportunities. We must provide the education, the infrastructure, and the climate in which they can then succeed for themselves.”

Lee has himself said the goal is to “offer what every citizen wants—a good life, security, good education and a future for their children. That is good governance.” While this means a more paternalistic state in the Singaporean view and more controls on the press and public discourse than many Americans or Europeans would be comfortable with, it also means a systematic national effort to develop and update a national competitiveness strategy every two years, an effort that starts with public-private-academic discussions of how the world is changing and where Singapore’s comparative advantages lie and that ends with reallocation of assets to support new priorities. These have not been mere exercises, and as a result Singapore has shifted from building up traditional manufacturing sectors to becoming a world leader in areas such as biotech and water.

To reduce corruption in the government and to continue to attract the best and the brightest, Lee determined that Singaporean ministers should get salaries comparable to those of CEOs in the country’s leading industries. A compensation system was devised that calculated a rate based on what top executives in several important sectors make. The country’s prime minister makes over $3 million a year; other ministers make over $1 million. To critics who say the officials get too much, Lee has responded, “the cure to all this talk is really a good dose of incompetent government. You get that alternative, and you’ll never put Singapore together again.”

Similar ideas are seen throughout the system, such as the utilization of an interdepartmental charging system that “makes use of the market concept to impose incentives and discipline on both the providers and consumers of internal [government] services.” More efficient ministries are rewarded with more resources. Health care, housing, and education services are all provided via user-pay market mechanisms with prices determined by demand. This doesn’t mean the government doesn’t provide for people; during the economic crisis, its bailout and protections for displaced workers were among the most extensive in the world. The stimulus was $15 billion, 6 percent of GDP, and included “skills upgrading, the lowering of the corporate income tax to 17 percent, loan assistance to small and medium enterprises, helping low-income households through fee waivers and cash payouts, as well as increased public expenditures for infrastructure, health care, and education.”

To an American or a British citizen accustomed to polarizing ideological debates on these issues, the Singaporean approach is turning market thinking on its head—combining innovation and belief in competition with a recognition of the importance of an active role for the state and values that place community ahead of the individual. It is hard to argue with the results. Singapore has the second-highest per capita income in Asia, one of the highest in the world. Its GDP per capita is $62,200, fifth in the world. It has one of the lowest unemployment rates in the world and is among the lowest in infant mortality. It offers the thirteenth-highest life expectancy and is ranked sixth in health system performance while spending only 1 percent of its GDP on health care (the United States is currently heading toward spending at twenty times that rate).

Singapore is rated number one among the world’s easiest places to do business and the second-freest economy in the world (after Hong Kong, an interesting development given that both are part of systems with very different roles for the state than found in the West). At the same time, it is seen as the Asian country with the most business-conducive labor relations. All these things taken together are why Global Business Network founder and chairman Peter Schwartz has said of the city-state, “Singapore is the best-managed company in the world.” They are also the reasons that the night that I was having dinner with Tharman in 2010, he was concerned about having to go back and explain to his parliament why the country would record growth for the year of “only” approximately 14 percent.

While Singapore is “just” a city-state, and while many of its policies are difficult to replicate across much larger, more diverse economies and societies, the relevance of its case is enhanced for several reasons. First, it is one of Asia’s most important entrepots and is thus connected to the economies of the region not only economically but intellectually as well. Singapore has not only attracted the attention and inspired the emulation that any other success story would, but the government has actively sought to share its approaches to building and managing modern urban societies throughout the region, in particular with the Chinese. After observing China’s “new city” projects like Suzhou, Singapore has taken a cutting from China’s stem and replanted it in a much larger field. Further, because the city-state has prominent Chinese and other Asian populations, Singaporeans find it easy to communicate with leaders throughout Asia, and, given their English colonial heritage, around the world. So although Singapore is small, its impact has been amplified and continues to grow.

The United Arab Emirates

If the contrast between Changi airport and airports in America is striking, so too is the comparison between the modern highway stretching from Dubai Airport to Abu Dhabi and the pothole-riddled routes you might find in the American heartland. In the United Arab Emirates, the modern skyscrapers look like something out of a futuristic movie. In America, you often creep along congested roads and look out at rusting industrial wastelands. It reminds one just how far the United Arab Emirates has come since oil was discovered there in the 1960s. These are world-class places that, even after the UAE was rocked by the global financial crisis, are still hatch-marked with construction cranes and scaffolding, major projects, giant skyscrapers, and entertainment complexes rising everywhere. But the real story is what is happening in these cities: the Emiratis are not doing like so many of their neighbors and simply spending the money from their oil. They are actively diversifying, spending money on new industries, educating their people, importing talent from around the world. They are, in fact, so aggressively turning their country into a business incubator that one westerner at an Aspen Institute conference on innovation I attended in Abu Dhabi in October 2010 said, “This is not a country, it’s a venture capital fund.”

Today only 25 percent of the UAE’s revenues are derived from oil and gas. Within Dubai, this number is even lower, only about 5 percent. From construction to engineering, from information technologies to the experimental “green city” of Masdar, where next-generation energy technologies are being developed, the UAE is seeking to turn the fact that it holds 9 percent of the world’s proven oil reserves and almost 5 percent of the world’s natural gas reserves into a legacy of growth that can benefit the country’s approximately one million people for decades to come, long after the reserves run out.

One way the Emiratis have done this follows the Singaporean model of developing major sovereign wealth funds that redirect national wealth into global investment projects that produce both return and know-how about important sectors. They are also affording semi-states new sources of power and leverage associated with their active market engagement. The Abu Dhabi Investment Authority is the largest sovereign wealth fund in the world, with an estimated $627 billion worth of assets under management.

The Singapore-like spirit of development in the UAE is not an accident. The Emiratis have studied Singapore’s story carefully. And the results they have achieved in a short time are Singaporean as well. The World Bank currently lists the UAE in third place in terms of its ease of trading across borders. The World Economic Forum ranks it third in countries of the world in investments in infrastructure, fourteenth in penetration rates of new technologies, and sixth in terms of having highly efficient goods markets. The country’s per capita income is eighteenth in the world at $40,000 a year.

While Dubai in particular was buffeted by the financial crisis because of its dependency on tourism, it is clear that the country is being prudent and creative in terms of diversifying its long-term assets. Again, this is not by any means a democracy, and the state has serious potential tensions brewing between the empowered local elites and the workers from elsewhere in the greater Middle East who have been imported and live in cramped communities and with comparatively less opportunity for advancement. (It is estimated that the per capita income of UAE nationals ranges from $275,000 a year in Abu Dhabi to $120,000 in Dubai, which gives an idea of the gap between them and the workers who bring the average “down” to the $40,000 level.) But the country’s leader, Khalifa bin Zayed Al Nahyan, has aggressively worked to promote education and entrepreneurship in ways that are unheard of elsewhere in the Middle East (outside of Israel). During the group discussions at the Aspen event I attended, among the most outspoken, compelling, and challenging of the participants were young, very well educated professional women—clad in traditional garb but offering far from traditional views and suggesting a very bright promise for the country.

Israel

Elsewhere in the Middle East, Israel has long been famous for turning the desert green, for building a thriving economy that has recently enabled Israel to become an Organization for Economic Co-operation and Development (OECD) member despite not having the oil and gas on which its neighbors are largely dependent. While Israel differs from Singapore and the UAE in that it has a thriving and contentious democracy, it also differs from the Anglo-U.S. model of capitalism in that it has managed to combine the “big government” traditions of a welfare state with a culture of innovation. Israel is currently ranked sixth in the world in capacity for innovation and twenty-fourth in overall competitiveness.

Israel’s early political and economic approaches were heavily influenced by the fact that the country’s founding was led in large part by the labor Zionist movement, a group with strong far-left positions and an ideology that held that a powerful Jewish state, to be successful, must originate from working-class settlers through cooperative agricultural labor. This philosophy has been characterized as “a hybrid socialist-nationalist ideology of Marxist dogma mixed with utopian agrarianism.” This is the thinking that gave the world the kibbutz and a range of public policies that included central controls and ownership so extensive that it was labeled “the most socialist economy outside the Soviet bloc.”

At one point during the first forty years of the country’s life, the public sector’s role got so large that it accounted for as much as 80 percent of the total economy. However, by the 1970s, other factors were putting pressure on the system, including a large inflow of Jewish immigrants (many from the Soviet Union), spiraling inflation, a growing deficit, and a big public debt. The economy was stalled, and it became increasingly clear that something needed to be fixed in the overall policies of the government.

Inflation hit 500 percent in 1984, and by 1985 a major reform, called the Economic Stabilization Plan, was under way. It called for a major reduction in government spending, a deal with labor unions to put wage controls in place, a devaluation of the shekel, and a flat exchange rate. Inflation was brought under control, but the socialist structure of the economy had not been addressed. At this point, Israel received a contingent of University of Chicago–educated young leaders who advocated an Israeli version of a “Thatcherite revolution.” Among this group of neoliberals was a young Israeli-born former commando, brother of a war hero, son of a leading historian, named Benjamin Netanyahu. Like others in the group, he decried the failures of the socialist model and worried that Israel would not be able to keep up with the IT revolution or the other trends reshaping the world economy.

While little progress on reform was made in the 1990s, from 2001 to 2003 Israel suffered the worst recession in its history. In 2003, Netanyahu took over as finance minister and launched an initiative called the Program for the Resuscitation of Israel’s Economy. Its four main elements included “shrinking the public sector,” “privatization and tax reform,” “reforming monopolies and cartels,” and “restructuring the Israeli capital market.” By 2008, the Israeli public sector was down to being “just” 45 percent of GDP. And a period of unprecedented economic growth and stability followed.

While there is much debate about what worked, one area in which there is consensus is that Israel’s ability to innovate played a central role. Today, Israel “has the highest number of start-ups in the world per capita, 3,850, or 1 for every 1,844 Israelis.” Israel has more tech companies listed on the NASDAQ stock exchange than does all of Europe combined. Limited by its lack of raw materials, Israel has focused instead on its strong comparative advantages in the high-tech sector, becoming an important exporter of high-tech and IT goods and services. More than 40 percent of industrial output is now directed at exports, with about one-quarter of that being electronics and about one-half services exports pertaining to technology-intensive offerings.

Again, Israel, like Singapore and the UAE, was responding to world markets in a way a successful company might: adjusting its strategy, playing to its strengths, innovating. As an illustration, in the area of IT, in 2008, Israel attracted VC (venture capital) investments thirty times greater than did Europe, and eighty times greater than China, on a per capita basis.

What’s a Semi-State (or Ordinary Citizen) to Do? or, Coping with the Post-Sovereign Reality

The example offered by the entrepreneurial states offers only a partial answer to the question of how semi-states must adapt in order to adjust to the new realities of the radically repopulated and still rapidly changing international system. In the same way, the stories of a few big companies flexing their muscles around the world and pushing around weakened nation-states in the process only partially describes the reality of a world in which the majority of countries are now smaller or less capable than perhaps two thousand very significant independent economic and political powerhouses. Furthermore, what has changed is still changing. Globalization, the proliferation of multinationals, continuing growth, and the redefinition of the whole idea of sufficient scale for companies, new technological breakthroughs, and the inevitable strengthening of international institutions will all serve as potent solvents for sovereignty.

In this “post-sovereign” environment, in which what sovereignty remains is more concentrated among a few big actors and less meaningful for most nations, in which nations and companies will be forced to collaborate and compete in a variety of ways in a broad number of different systems to achieve the goals of constituents and shareholders alike, we can expect, however, that some of the problems hinted at in this chapter will continue to dog the system and new ones will arise.

Among the pervasive challenges most likely to arise in this emerging international environment of states, semi-states, supercitizens, and the rest of us are:

•  Inequality

    This will take various forms. The spread of free-market ideologies over the past several decades has seen both rising incomes for the poorest and worsening income inequality almost everywhere. Further, the inequalities in influence between major powers and semi-states is likely to grow, producing tensions and inequalities in markets between global megacorporations and smaller regional competitors are also likely to result in consolidations and anticompetitive pressures.

•  Corruption and abuse

    The combination of weak states, many impoverished and falling further behind, and large corporations that have the ability to evade legal consequences of their actions due to their resources or transnational status is likely to worsen corruption problems, particularly in the weakest of the semi-states.

•  Nationalism and backlash against globalization

    We are already seeing it. If the system appears to promote inequality and provide unfair benefits to foreigners, backlash is inevitable. Not only will political nationalism be embraced by populists, but in a world of growing demand for scarce commodities, resource nationalism is likely to produce further tension and possible further reversals for liberalization of global markets.

•  Alienation of multinational corporations

    If they are seen as entities without allegiance, they will increasingly be targets of populists, nationalists, and political opportunists.

•  Growing frustration with impotent national leaders

    The uprisings in the Middle East in 2011 illustrate the shape this might take, as they were, at their core, uprisings of young, economically disenfranchised people seeking opportunities that they felt their governments were keeping from them.

•  Trade conflict

    A weak trading system overburdened with cases, combined with divergent philosophies, backlash against globalization, and resource nationalism, could make the next decade one of the worst in modern memory in terms of trade conflict.

•  A continuing race to the bottom on taxes and labor costs before any hope of a rising tide

    Supercitizens will continue to play states and semi-states against one another to gain economic advantage. They will succeed, and states will see tax revenues squeezed and wages grow more slowly than expected.

•  More widespread embrace of national industrial policies and unfair competitive practices

    This goes with the trade-conflict issue. A study my company conducted for the Business Roundtable on energy and climate competition worldwide showed twenty-three of twenty-five governments actively trying to partner with corporations to produce jobs and investment flows. The United States was the outlier, rejecting too big a role for governments in the marketplace.

•  Rogueism

    Nuclear weapons were once called by Bill Clinton “North Korea’s only cash crop.” Pakistan too has gained U.S. support and attention due to a desire to support leaders who could control its nuclear stockpiles. Iran has gained international status and leverage by its mere pursuit of nuclear weapons. For marginalized semi-states with disaffected leaders, extreme bad behavior may be the only way to get attention or leverage. The easy and rapid spread of new technologies contributes to this problem, making formerly hard-to-manufacture weapons of mass destruction easier to fabricate, terrorist and black-market networks easier to support, and new tools for potential rogues, such as cyber-terrorism or warfare, increasingly available.

At the same time, states will need to constructively explore other options to enable them to better cope with this new reality, including:

•  New coalitions and alliances (including state-state and public-private)

    For weaker states, the only strength will come from numbers. Regional alliances, alliances between like-minded countries, regional groupings, ad hoc collaborations around developing threats or opportunities: all will play a key role in this regard.

•  Strengthening international organizations and international law

    Typically, political systems and systems of law arise to remedy perceived inequalities and to level the playing field. If the biggest states and companies are perceived as bending international systems to serve them at the expense of others, strengthening the weak systems that currently exist may become a more popular option. This will require a change of outlook toward global governance. It must be recognized that empowering multilateral organizations to help, as only they can, in meeting the core demands of the social contract is not “ceding sovereignty upward.” Rather, it is pooling sovereignty, sharing it in order to preserve it at the national level. Stronger global governance and government mechanisms are actually not the enemy of traditional national sovereignty on most transnational issues; they are its only hope.

•  Altering their strategic outlook, revising their worldview, adjusting structures accordingly

    Acknowledging what has changed will, of course, be an especially good first step. Most states are not organized terribly well to collaborate effectively with other states, much less with private actors. Diplomacy has in the past been seen primarily as a form of communication, and periodically of cooperation, around pressing issues. But a new era of multilateralism will require multiple layers of government—supranational, national, and local—to work seamlessly together on a daily basis. At a moment in history when many developed powers are cutting back their international resources due to fiscal burdens, careful assessments of the difference between perceived and real savings must be undertaken. International burden sharing in all its forms will be an increasingly central way to leverage limited state resources in addressing shared problems. It may also play a role in next-generation government revenue generation—global governance will require resources, some of which may demand taxes or fees that are paid on a supranational basis. Beyond this, of course, new interfaces and strategies will be needed for states to interact with private actors as they must—whether it is to effectively regulate them in the global marketplace or to collaborate with them in combating new threats or seizing new opportunities.

The Reckoning That Lies Ahead

According to the Oxford English Dictionary, the word “international” only entered common usage in English in the late eighteenth century. Originally intended to refer to the law of nations, it emerged a century and a half after Westphalia had cemented the idea of nation-states as the primary political building blocks of global society.

As the term gained popularity, it gradually came to describe the full sweep of world affairs. Most of life’s activity was contained within nations, and that which happened between them was seen primarily as the responsibility of those nations. The most significant interactions on the world stage were thus defined by the relationships among the governments representing individual countries.

Today, the term still describes a location where interactions take place—between nations—suggesting activities that cross borders on a map. But it no longer effectively describes the key players in such affairs. Even as the role of states is changing, they are being joined on the stage by new actors who will be as important as states to solving or exacerbating the problems of the century ahead.

Future developments, from how we manage the international economy to how we manage our environment, will turn on whether or not we are able to strike an appropriate balance between public and private centers of power, not just between states and businesses, but between companies that increasingly find they must meet responsibilities and address challenges once faced only by countries, and countries increasingly finding they must be as flexible and entrepreneurial as companies.

To strike such a balance will require not only new mechanisms but new attitudes and ideas—both at the supranational level and within nations. Whereas not too long ago it was thought that the answers had been found to the age-old debate about how to manage the rivalry between public and private actors—that in the wake of the cold war, the protocapitalism of late-twentieth-century and early-twenty-first-century American market fundamentalists would prevail—crisis and change now suggest a different outcome.

A reckoning is on the horizon. Alternative approaches are gaining adherents and even a degree of coherence. While virtually all nations are offering variations on the capitalist theme, important distinctions between approaches remain, and those providing a more active role for government and private actors from outside the business world seem to be gaining the upper hand in both popularity and performance over the now doubted and discredited American model.

The final chapter of this book will briefly consider just how that reckoning is likely to come to pass.