This is a good news book. What follows is a collection of success stories gathered over several years I spent traveling around the world in search of solutions to the great problems of our day—and the leaders who figured them out. In the ten chapters ahead, I’m going to introduce them to you and take you on a tour of their laboratories, which also happen to be some of the most successful (or at least most interesting) countries on the planet. Along the way, I’ll weave in leadership lessons and practical advice on problem solving distilled from their experiences. And I’ll make an argument for hope in this time of overpowering gloom. More than anything else, this book is meant as a testament to the power of people to get things done. At a time when most of us have glumly concluded that our governments are broken and our domestic and international problems are insurmountable, I aim to show how the right individuals can overcome the most intimidating obstacles—if they follow the right strategies. This book makes a data-driven case for optimism at a moment of gathering darkness.
Before we can get to the good news, however, we need to start with the bad—as so many other conversations do these days.
We’re living, after all, in an era of unprecedented decline—or so, at least, we’re constantly being told. Open a newspaper or a magazine, browse the nonfiction titles at your bookstore, or click on cable news, and the black tide can easily overwhelm you.
Welcome, as The New Yorker’s George Packer has put it, to the great “unwinding.”
Of course, most of us don’t need anyone to tell us that things are falling apart; we feel it every day. We hear about terrorists murdering innocents and fear for our own families. We sense the trouble in our gut when we tear open our stubbornly flat paychecks. If you live in a big city like New York, as I do, you feel the dysfunction in the soles of your feet as you rumble homeward, bouncing along pitted roads or jostling for space on overcrowded subways. Once you do make it home, you confront more ill omens when your bills and bank statements arrive; according to a recent study by the Federal Reserve, 47 percent of Americans now have so little in savings that they couldn’t cover an emergency outlay of just $400. You’re reminded of the problems yet again when your kids walk in the door, having valiantly navigated their underresourced schools. And if they’re lucky enough to get into college, you’ll confront the troubles one more time when their skyrocketing tuition comes due. (Don’t count on them being able to pay you back, either; unlike previous generations, few young Americans today can reasonably expect to make more money in their lifetimes than their parents did.)
Feeling anxious? If so, you’re not alone: 72 percent of Americans still think we are in a recession, and according to a poll taken in December 2015, just a quarter of US citizens think their country is headed in the right direction. Such pessimism is not just an American phenomenon either; another recent survey found that only 47 percent of Israelis, 38 percent of Russians, 35 percent of Turks, and 20 percent of Frenchmen expect their economic outlook to improve in the next year.
What adds to our dismay is that many of us are still in shock. It wasn’t that long ago that experts and politicians were assuring us that the good times were here to stay. Remember the Aughts, that golden age of progress, progress, and more progress? Fueled by innovation, higher education, and a red-hot real-estate market, America’s economic engine—the world’s mightiest—roared ahead. So did the economies of virtually every other country; during the 1999–2008 boom years, it seemed like your economy was guaranteed to thrive so long as your president or prime minister had a pulse. By the middle of the last decade, emerging markets were growing by an average of more than 7 percent a year, and the developing world had begun to enjoy undreamt-of prosperity. Some 440 million people were lifted out of poverty in just ten years. By 2007, as the emerging-market growth rate hit a scorching 8.7 percent, the global middle class topped 1.8 billion people, and even normally staid economists began declaring that we’d entered an era of “convergence”—a long-prophesied moment when the rest would finally catch up with the wealthy West.
And then came the crash. In September 2008, Lehman Brothers vaporized and the US economy staggered. Soon Europe also caught the bug. Then, like a scene from a zombie movie, the pandemic spread to the developing world. As cash-strapped Westerners stopped buying so many foreign-made smartphones and shoes, factories from Shenzhen to Saigon to San Salvador began shuttering their doors. These closures diminished demand for raw materials—and so the world’s commodity superstores also began to sicken. With fewer goods to transport and cost-conscious drivers cutting back on fuel, the hydrocarbon giants started ailing: Russia’s economic growth rate, for example, fell from 4.5 percent in 2010 to negative territory in 2015.
As the storm spread throughout the global economy, the geopolitical forecast also darkened. The 2011 Arab Spring was soon snuffed out by icy winds as autocrats reasserted control in Egypt, Bahrain, and elsewhere. Vicious civil wars flared up from one end of the Middle East (Libya) to the other (Yemen). And none burned hotter than the one at its core, in Syria.
Then came the terrible spring and summer of 2014. Beijing stepped up its bullying in the South and East China Seas, positioning oil rigs, building airfields, and stationing troops on disputed coral reefs and narrow strips of sand. Russia surreptitiously sent commandos to join the civil war in eastern Ukraine, and then formally annexed Crimea: Europe’s first such brazen land grab since World War II. A formerly obscure offshoot of al-Qaeda known as Daesh or ISIS stormed out of the Syrian badlands and into Iraq. Its fighters erased the 1918 border, seized a third of the country—including Mosul, Iraq’s second-biggest city (along with oil fields and hundreds of millions of dollars’ worth of US-supplied military equipment)—declared themselves the Islamic State, and then began beating and beheading Iraqi and Syrian civilians into submission. In West Africa, meanwhile, Boko Haram—another Islamist death cult—slaughtered some ten thousand victims. And a virulent strain of Ebola began to spread through the region, claiming tens of thousands of victims in Liberia, Sierra Leone, Guinea, and elsewhere.
Things were supposed to get better in 2015 and 2016, if only because it was hard to imagine them getting worse. But with very few exceptions—most notably the US-Iran nuclear deal—they have gotten worse. In January, Islamist terrorists shot up a satirical Paris magazine, Charlie Hebdo. Seven years after the Great Recession, economic growth remained lower than the precrisis average in every major region of the world. Greece teetered on the edge of bankruptcy and, by revealing deep schisms within the European Union, threatened to bring down the whole European project. IS tightened its grip on its new domain, escalating its atrocities, and then, when it began to lose ground, started lashing out abroad: downing a civilian jet over Sinai in October, hitting Paris again in November, inspiring two Californians to commit mass murder in December, and killing more than thirty innocents in Brussels in March 2016. Iran and Russia increased their meddling in Syria, intensifying the savagery. Saudi Arabia and its Gulf allies blundered into Yemen’s civil war, killing thousands of innocents and allowing the local Qaeda franchise to flourish. Millions of desperate refugees fled the region—many headed for Europe, where they produced panic, nativist backlashes, and still more squabbling within the EU. And China’s worsening economic woes, along with the worldwide slump in commodity prices, took whatever shine remained off most emerging markets. Apart from India and a few other bright spots, the world seemed to be entering a dismal new era of slow growth. Between 2010 and 2015, the average emerging-market growth rate fell from 7.4 to 3.8 percent. And the whole planet seemed to be sliding toward another crisis.
All these events, in isolation, would have been frightening enough; General Martin Dempsey, a former chairman of the Joint Chiefs of Staff, captured the prevailing mood well when he called it “the most dangerous time” in his life. Yet what made these episodes even scarier was the way they seemed to expose two more alarming trends. The first was the slow-motion disintegration of Westphalian nation-states in multiple areas of the globe, including the Middle East, the Sahel, and Russia’s periphery. Second, many of these incidents seemed to underscore a growing weakness at the heart of the liberal, rules-based global order. That order was established by Washington and its allies after World War II, and was then reinforced and extended at the end of the Cold War. It has brought unparalleled prosperity and peace to the world in the years since. And yet it now seems to face more threats on more fronts than ever before.
I know I told you that this would be a good news book, and I know it doesn’t seem like that so far. But bear with me—we’ll get to the good news soon. Before we do, however, I need to say a few more things about the unhappy narrative I’ve just recounted.
One of the basic premises of this book is that while the details of all the troubles currently wracking the world vary, they share an underlying cause: the failure of politicians to lead. More specifically, most of them stem from the failure of our leaders to adequately address ten big problems—roughly half of which are political and half of which are economic—that together represent some of the toughest and most persistent challenges states have faced in the modern era. The inability of most governments to resolve them goes a long way toward explaining the mess we’re in today.
These persistent failures have also convinced many analysts that the problems themselves are unsolvable.
But I think they’re wrong, and in the ten chapters that follow, I’m going to try to prove it to you.
Before I do, however, we should delve a bit deeper into the problems themselves. Doing so will underscore the stakes, which are very high indeed—so high, in fact, that if our leaders keep failing to surmount the challenges I’m about to describe, they’ll condemn us all to even more of the hardship and tumult we’ve experienced lately. They’ll also smother the still-fragile economic recovery that the United States and a few other countries are starting to enjoy.
Understanding the problems in depth is also the first step toward understanding their solutions. For this book’s second basic premise is that, contrary to what the pessimists argue, all these problems are actually fixable. And not just in theory. The answers are already out there; as the ten following chapters will show, a tiny band of freethinking, often underrated leaders has already managed to defy all odds and expectations and figure them out. I’m going to show you how they did it—each chapter will tell the story of one government and one solution.
But before we get to them, let’s look more closely at the problems themselves.
THE TERRIBLE TEN
1. INEQUALITY
Inequality is not a new phenomenon. It is an inevitable by-product of capitalism, one that modern nations have been struggling with for about as long as there have been modern nations. But inequality is a good place to start our tour of dysfunction because of the way it has come to define our age, perhaps more than any other challenge discussed in this book—preoccupying politicians, protesters, and ordinary people alike.
Inequality is also a two-headed problem, which makes it doubly difficult to deal with. What I mean is that inequality is both a consequence of some of the other challenges on this list and a cause of or contributor to many of them. Inequality promotes corruption, perpetuates poverty, sparks popular unrest, heightens xenophobia, deepens personal despondency, and undermines public faith in democracy and free markets. New research suggests that it’s even harmful to your health: residents of unequal communities tend to have lower life expectancies than people who live in more equitable ones.
And inequality keeps getting worse. The Organization for Economic Cooperation and Development (OECD) recently predicted that if current trends continue, the global wealth gap will widen by 30 percent over the next five decades. Already the problem is provoking intense anxiety. Even before the French economist Thomas Piketty became a publishing phenomenon in 2014 (it takes a hell of a lot of public concern to turn a dense, seven-hundred-page tome on economics into a bestseller), the unease was rising fast. In the early part of this decade, protesters in New York’s Zuccotti Park and at more than nine hundred other Occupy demonstrations around the world underscored the breadth and depth of the discontent. More recently, the unrest has fueled the rise of unconventional politicians like Bernie Sanders and Spain’s Pablo Iglesias Turrión on the left and Donald Trump and France’s Marine Le Pen on the extreme right.
The agitation isn’t hard to understand. In the United States, the richest 20 percent of the population now take home half of all annual earnings, and the most affluent 10 percent own more than three-quarters of the nation’s wealth. To put it in less abstract terms, America’s 25 top hedge-fund managers collectively now earn more than the country’s 158,000 kindergarten teachers combined. And the number of Americans living in abject poverty—on $2 or less a day—has doubled in the last two decades. Globally, meanwhile, the fabled 1 percent now control more assets than the rest of the world’s population put together.
The answer to all this injustice might seem obvious: we just need to increase economic growth. This strategy worked well in the past; when countries expanded the size of their overall pie, everyone got a bigger slice. That’s what happened in the United States in the immediate postwar years, and that’s what happened in China after it embraced capitalism in the late 1970s and then pulled more than a quarter of a billion people out of poverty.
More recently, however, the formula has broken down; growth alone no longer seems to work its salubrious magic. During the height of China’s 1999–2000 boom, for example, inequality hit unprecedented levels. And something similar has happened in the United States, where precious few Americans have benefited from the country’s recent recovery. (Indeed, as noted earlier, three-quarters of Americans don’t even know we’re in a recovery.) Unemployment may have fallen dramatically, but so have many salaries, especially in service sectors like retail, restaurants, and home health care. Incredible as it sounds, the average American wage (adjusted for inflation) peaked more than four decades ago, in 1973. It’s been falling ever since.
According to the economist Robert Reich, the decline in wages has occurred because most of the recent gains in the US economy have been funneled into executive pay, corporate earnings, and the stock market. The US tax system, which heavily favors the rich through its many deductions and loopholes, also hasn’t helped.
But there are deeper explanations for the breakdown in the link between growth and equality. These range from globalization to automation to corruption to a shift in developed countries from manufacturing to financial services, an industry that disproportionately benefits the few at the top. (Finance now accounts for 41 percent of all corporate profits in America, but employs only 6 percent of the workforce.) Recent studies have also linked high inequality with low social mobility, which helps explain why the problem is proving so persistent. According to Alan Krueger, a former chairman of the US Council of Economic Advisers, the best predictor today of how much money young people will earn in their lifetime is what their parents made. That’s not the way America is supposed to work. But that’s the way it now does.
You’d think that all these worrisome trends would have inspired a serious global effort to address them by this point. But for various reasons, there’s been little progress. Despite all the evidence to the contrary, most Americans remain convinced that anyone can make it here if he or she works hard enough—and so they resist openly redistributive policies. (The financial services industry also works diligently to block tax reform and other changes.) Europeans, for their part, have traditionally been more open to social engineering—but the austerity forced by the ongoing economic crisis has made it hard for most governments in Europe to maintain their existing safety nets, let alone expand them. As for the developing world, many of the biggest attempts to attack the problem have backfired, resulting in costly boondoggles that only set back the cause even further.
In the absence of progress, the divide between rich and poor keeps growing. And people around the world keep getting angrier.
2. IMMIGRATION
In the summer of 2015, the miserable stream of refugees fleeing poverty and chaos in the Middle East and Africa suddenly became a flood—the largest such human exodus since World War II. Most of the migrants headed toward Europe—more than one million entered Germany alone—triggering ugly spasms of nativism and fierce fighting among the continent’s leaders that further frayed the EU’s already tattered fabric.
Even as this crisis was dominating the conversation, however, a related but much larger and older problem was continuing to fester: the refusal of governments throughout the developed world to deal rationally with the ordinary immigration of people who aren’t fleeing war or persecution (as refugees do) but merely want to create better lives for themselves and their children in new homelands.
The failure to deal with this sort of immigration has been highlighted most dramatically in the United States (though it is by no means the worst offender). Almost from the start, the 2016 Republican primary was dominated by an extraordinary contest to see which candidate could denounce immigration, and immigrants, in the harshest terms. Long before Donald Trump began using the 2015 terror attacks in the West as a pretext to vent his spleen at Muslims, he set the tone for the race by throwing casual barbs at blacks, Jews, Mexicans, and Asians; by promising to build a huge wall along America’s southern border; by pledging to deport all undocumented migrants; and by vowing to revoke the Constitution’s birthright provision (which grants citizenship to anyone born in the United States). Desperate to tap the same rich vein of white male anxiety and bigotry, many of his supposedly more mature adversaries soon followed suit. While none quite matched his rhetorical extremes, most were all too ready to echo his xenophobia in more polite language.
Not only was this spectacle dispiriting, craven, and utterly un-American; it was also bizarre. Notwithstanding the fears caused by economic turmoil and terrorism, attacking immigrants and immigration is political suicide in a country where you can’t win the Oval Office without minority support. It’s also hard to find another issue where the need for reform is so pressing—and where the benefits of change would be so profound.
That’s because, for starters, the current American system is already cruel: under the existing rules, the federal government has deported almost three million undocumented immigrants—or about eleven hundred people a day—since 2008.*
It’s also irrational. Today American universities educate many of the globe’s best young students, yet the US government then sends them home to start businesses and create jobs elsewhere. As a policy, that’s simply nuts, given that 60 percent of the top tech companies in Silicon Valley are run by first- or second-generation immigrants. America’s top CEOs understand the problem; led by Facebook’s Mark Zuckerberg, a number of them have formed a super PAC to fight for reform. Ordinary Americans also get it: according to recent polls, more than 70 percent of them support liberalizing the nation’s immigration laws.
Changing the system would have an enormous material payoff. Most immigrants are ambitious and hardworking—you’d have to be to uproot yourself and your family and transport them halfway around the world. Contrary to conventional wisdom, immigrants don’t steal jobs or depress wages, either. Nor do they increase lawlessness; a September 2015 report by the National Academies of Sciences, Engineering, and Medicine found that in the United States immigrant men between the ages of eighteen and thirty-nine are incarcerated at a rate one-fourth that of native-born citizens, and research conducted in numerous other countries has found similar results. Immigrants are also more likely to start new businesses. Were the United States to merely formalize the status of the undocumented workers already in the country, another recent study calculated, their higher earning power would increase net personal income by $30 billion to $36 billion in just three years. All that cash would also generate up to $5.4 billion in new tax revenues, and enough new consumer spending to support 750,000 to 900,000 new jobs.
In case these economic and humanitarian arguments somehow fail to convince you, one other growing problem should make the case for change a no-brainer, and not just in the United States. Most advanced industrialized democracies are aging fast, and few are producing enough children to support their rapidly graying populations. Unless they find an effective way to admit large numbers of outsiders, countries ranging from France to Japan (where the population is already shrinking) will face economic collapse. And I mean really large numbers; the OECD estimates that to maintain a fairly modest 3 percent growth rate over the next fifty years, the United States and Europe will need to absorb fifty million immigrants—each.
It’s true that a few rich countries already have relatively permissive entry policies. But because of the way most of these are structured, they create as many problems as they solve. Germany, for example, has been extraordinarily generous when it comes to accepting refugees (unlike the United States). But for many years, Germany also made it almost impossible for its legal immigrants to obtain citizenship. This created a large, resentful minority underclass. The failure to properly integrate these residents—a mistake made by many other northern European countries and the United Kingdom as well—has led to their radicalization and produced ugly backlashes among the rest of the populace. Germany alone suffered more than two hundred attacks on immigrants and migration facilities in the first half of 2015. Arsonists burned down three mosques in Sweden around the same time, and an anti-immigrant party shot to the top of the polls. (Something similar has happened in Denmark.)
Yet rather than fight such bigotry, most of Europe’s politicians have pandered to it. In May 2015 Prime Minister David Cameron, despite having just won reelection, promised to tighten Britain’s already stingy entry quotas. And the rhetoric in the United States keeps getting more absurd. If it weren’t so tragic and self-defeating, the Republican Party’s terror of even mentioning the words “immigration reform” would be funny. In 2014, for example, conservative members of Congress rejected a bill that would have let Canadian retirees spend a little more time in Florida each winter.
Forget about Trump and his quasi-fascist race-baiting for a second. You know you’re in trouble when the specter of a few white-haired and wealthy snowbirds sunning themselves on the Sarasota sand is enough to send your political leaders scurrying for cover.
3. ISLAMIC EXTREMISM
When the fighting in Syria started in 2011, a lot of foreign policy analysts (myself among them) argued that one important reason the United States and its allies should intervene was to prevent the radicalization of what had long been one of the Middle East’s most secular populations. If the West didn’t help the rebels, we argued, those rebels would soon find help elsewhere—and we wouldn’t like the consequences.
That, of course, is exactly what happened. While the West dithered, Qatar, Saudi Arabia, and Turkey stepped in and provided the more extreme Islamist insurgents with billions of dollars in aid, arms, and training. Forced to fend more or less for themselves, the moderate rebels were soon crushed between Assad’s army and the radicals. At the same time, many Sunni Muslims from outside the region began flocking into Syria to enlist in the jihad. By December 2015 an estimated thirty thousand of them from eighty-six countries—more foreigners than had fought with the Afghans during their nine-year war against the Soviets—had joined the struggle.
The Islamic State—which offers recruits high wages, sex slaves, and the prospect of helping to create a new caliphate—has proved the most powerful draw for these aspiring holy warriors. While the group may have have grabbed most of the attention with its barbarism on the battlefield, however, that’s far from the only danger it poses. IS affiliates downed a Russian jet over the Sinai in October 2015, killing 224 people, murdered another 130 in Paris in November, and killed 35 more in Brussels in March 2016. The group now claims to have franchises in Afghanistan, Algeria, Libya, Nigeria, Saudi Arabia, Somalia, and Yemen. And it has become a powerful source of inspiration for disturbed lone wolves, as the tragic December 2 events in San Bernardino showed. Meanwhile al-Qaeda also remains a real threat, fully capable of carrying out and inspiring attacks of its own. And according to Seth Jones of the Rand Corporation, the number of jihadi groups worldwide has exploded in recent years, growing by 58 percent between 2010 and 2013 (and increasing still more since then). In 2014 (the last year for which figures are available) the world suffered 39 percent more terrorist attacks than in the previous year, and 83 percent more fatalities. Countries as far afield as Bangladesh and Thailand have also been targeted.
What’s happening? Weren’t the killing of Osama bin Laden and Washington’s drone campaign supposed to have decimated the global jihadist movement?
Three factors explain its resurgence. First, as mentioned earlier, Syria and northern Iraq have become powerful incubators for would-be terrorists from around the world. Second, although al-Qaeda Central has indeed been grievously weakened by the sustained American assault, the group has splintered, allowing autonomous cadres fueled by local grievances to take up the cause. (Remember that this is how IS got its start.) Finally, though radical Islam as an ideology suffered a setback during the early months of the Arab Spring—when peaceful, popular revolutions seemed to offer a bloodless alternative both to extremist groups and to the Muslim world’s repressive regimes—the ironfisted authoritarian backlashes that followed (which the West either tacitly supported or just ignored) inspired a whole new generation of violent jihadists.
4. CIVIL WAR
The author Steven Pinker has famously argued that despite the bloody images we see on the news every day, the world has actually been growing steadily more peaceful ever since 1945. Among other evidence, he cites the fact that western Europe—which started two wars a year during most of the last six centuries—hasn’t fought a single one in seven decades now, and he points out that the number of people killed in armed conflicts each year has declined.
At least, it was declining. While Pinker’s claim may have been supportable a few years ago, it’s recently become much harder to believe. Wars between states may still be exceedingly rare, but wars within them are proliferating.
Unlikely as it may sometimes seem, however, even these new wars will eventually end. In fact, as the scholar Kristian Skrede Gleditsch has shown, civil conflicts now burn out faster than ever before; since 1991, he’s found, the average length of such wars has dropped by 20 percent. That means that for every ongoing war, like those in Libya, Syria, and Ukraine, there will be a Sri Lanka, which finally stopped fighting in 2009. And it means that even Libya, Syria, and Ukraine will eventually achieve some sort of peace.
The problem is that for all of humankind’s experience with conflict, we’re still not good at making sure that the cease-fires hold and the fractures heal once the fighters lower their guns.
No current crisis makes that clearer than the one in Iraq, which US combat troops left in 2011. Despite Washington’s gargantuan investment, Iraq today is a basket case. Nuri al-Maliki—who served, with US support, as prime minister from 2006 to 2014—thoroughly trashed the place, reinforcing sectarian divisions, encouraging corruption, and gutting the Iraqi state and its army (as IS’s 2014 blitzkrieg made plain). He left his successor, Haider al-Abadi, a government that controls a mere fraction of Iraq’s territory and is utterly dependent on outside help—including from Iran and from the American forces that have recently returned to the country. All that makes it very difficult to imagine how Abadi or anyone else will ever put the country back together.
These events have Washington worried, and rightly so. The mayhem in Iraq not only directly threatens a critical region but also has alarming implications for Afghanistan, which US troops are also supposed to exit sometime soon (although the date keeps getting pushed back). Afghanistan has been in a state of constant war since 1979. Its ethnic and sectarian divisions are just as bitter as Iraq’s, and even more numerous and complicated. Absent a credible mechanism for reconstituting the nation, what chance does it have of surviving on its own?
And what about Syria, whose civil war has split it into at least three fortified ministates? Or the Central African Republic, the Democratic Republic of the Congo, Côte d’Ivoire, Mali, or South Sudan—barely functional countries that recently emerged from civil wars of their own? Without some sort of system or formula for healing these places, it’s unlikely they’ll manage to stay peaceful for long. Especially since help from the divided, cash-strapped, and war-weary West is getting harder and harder to come by.
5. CORRUPTION
Like inequality, corruption is a two-headed challenge, both a cause and a consequence of many other problems on this list.
Westerners often think of corruption—at least the large-scale variety—as a poor-country pathology, the product of desperation, unscrupulous rulers, rudimentary education, and a lack of shared values. Few rich-country dwellers are surprised when they read stories like the one about Otto Pérez Molina, the former president of Guatemala (per capita GDP: $3,667), who was forced out of office by a corruption scandal in the summer of 2015. Or of Zine el-Abidine Ben Ali, the last dictator of Tunisia (per capita GDP: $4,316), who was recently discovered to have stolen up to $2.6 billion from the state before his ouster. Or that the family of Wen Jiabao, the former premier of China (per capita GDP: $7,594), amassed close to $2.7 billion in assets during his tenure.
The truth, however, is that corruption is an equal-opportunity illness, one that infects rich and poor nations alike (although the scale may differ). In May 2015, for example, Ehud Olmert, a former prime minister of Israel (per capita GDP: $37,032), was sentenced to eight months in prison for taking bribes—making him the latest in a long string of Israeli leaders to face similar charges. Around the same time, prosecutors in the United States (per capita GDP: $54,629) accused New Jersey senator Robert Menendez of influence-peddling, and a grand jury indicted Sheldon Silver, the former speaker of the New York State Assembly, on similar charges. No nation is immune: a few years ago, even squeaky-clean Canada (per capita GDP: $50,271) was rocked by scandal after a number of its senators were caught fiddling with their expense accounts—in an uncanny echo of a similar episode in Britain’s House of Lords several years before that.
Watching powerful men and women brought down can be entertaining (in a guilty sort of way, like eating junk food). But such episodes aren’t so amusing when you happen to live in the neighborhood. For corruption in all its forms wreaks terrible damage, impoverishing individuals and societies alike. Worldwide, ordinary people are forced to pay an estimated $1 trillion in bribes each year, and corruption is thought to leach about 5 percent out of the global GDP. Corruption can even kill: child-mortality rates in highly corrupt states are a third higher than in less crooked places.
Corruption also corrodes the machinery of government and undermines citizens’ confidence in their leaders and systems of rule. It’s hard to have faith in your politicians when you have to grease some official’s palm to get anything done, or when you realize the reason you still lack running water or dependable electricity is that your leaders have lined their pockets with your tax contributions. Corruption means your roads are broken, your bridges fall down, and your teachers are lousy. It makes your life more difficult in countless ways. Like a fast-acting toxin, it poisons everything it touches.
And all the evidence shows that it keeps getting worse.
6. THE RESOURCE CURSE
In the next few years, large swaths of the developing world are set to experience an economic shift on a seismic scale. The epicenter of this upheaval will be Africa. And the change will be driven by massive new discoveries of underground oil and gas.
Africa is no stranger to resource wealth; parts of the continent, such as Sudan and Nigeria, have enjoyed big petroleum profits for years. But the recently discovered hydrocarbon deposits dwarf anything the region has ever seen. The resulting windfalls could total trillions of dollars, even if energy prices stay low for some time. And a long list of countries stands to benefit, including Ethiopia, Kenya, Liberia, Malawi, Mauritius, Niger, Sierra Leone, Tanzania, and Uganda—some of the world’s poorest nations.
While the changes there will be the most widespread, several other underdeveloped regions farther afield are also about to experience similar resource bonanzas. Experts predict that Papua New Guinea could soon increase its natural gas sales sixfold. Vast, scantly populated Mongolia has discovered new mineral reserves that could earn it more than $1 trillion. And war-racked Afghanistan has found underground stores of gold and other minerals that experts value at three times that amount.
It all sounds like wonderful news for a group of countries that could badly use some happy tidings. And it’s true that resources on this scale could indeed transform all these places. The McKinsey Global Institute has calculated that the extra cash—if used wisely—could lift half the world’s poor out of poverty.
Unfortunately, such riches almost never are used wisely.
Instead, due to a counterintuitive phenomenon economists call the Resource Curse, sudden mineral windfalls usually further immiserate already poor countries. The number of states that have managed such earnings well—or even adequately—is tiny. (Places like Canada and Norway have but don’t count because they started out with so many other advantages.)
The reason is that resource wealth almost invariably produces a witches’ brew of pathologies. First among them is corruption. It’s not hard to see why: when money starts gushing into poor, fragile states, the temptation to skim some of it can feel irresistible. The theft usually starts at the top, which then signals to the rest of the population that they might as well grab what they can. During the mid-1990s, for example, when Nigeria’s then dictator, Sani Abacha, and his cronies started socking away about $3 billion in stolen oil revenues, it didn’t take long for lower-ranked officials to get in on the game.
What they don’t steal outright, resource-rich governments tend to blow on expensive and unnecessary trophy projects: airports, stadiums, or shiny new capitals in the middle of nowhere. At the same time, they rarely invest in things that actually matter, like education. Why bother with school when you can get rich by digging in the dirt?
The problems don’t end there. Resource wealth also drives up the value of local currencies, which makes imports cheaper but exports less competitive. Commodity-rich countries thus generally neglect the nonextractive sectors of their economies, such as agriculture and manufacturing. Once these industries die off, the states in question are left reliant on resource sales to sustain themselves—a dangerous proposition, given how volatile commodity prices can be.
As always, the least powerful citizens suffer the most. In the years since Zambia and Nigeria became major resource exporters, for example, poverty has increased significantly in both places. Things are even worse in oil-rich Equatorial Guinea. In 2014 this tiny country had a per capita GDP higher than Poland’s. Yet more than three-quarters of its eight hundred thousand citizens live in bitter poverty, scraping by on less than $2 a day. Now, Equatorial Guinea may be an extreme case, but slightly less dramatic versions of its story are common. As the economists Jeffrey Sachs and Andrew Warner first documented, the economies of major resource-exporting nations tend to grow significantly slower than those of ordinary countries. Indeed, in the last several decades, 80 percent of resource-rich states have underperformed the global average.
The challenges aren’t just economic: mineral wealth also undermines good government. Diamonds have underwritten Robert Mugabe’s vicious mismanagement of Zimbabwe, just as oil sales enabled Muammar Gadhafi’s bizarre and brutal reign in Libya. And these aren’t exceptions: according to the academic Michael Ross, resource-rich countries are 50 percent more likely to be led by dictators than are regular states. The reason for this is simple: it’s all too easy to ignore your citizens’ desires when you can buy their acquiescence with cash. It’s no coincidence that of all the governments hit by protests during the Arab Spring, only one of those that subsequently fell (Libya) had much resource wealth. Saudi Arabia and its fellow Gulf monarchies staved off that fate the same way they’ve avoided unrest in the past: by lavishing handouts and other perks on their citizens.
Finally, much like the golden apple that kicked off the Trojan War, the sudden appearance of underground riches often induces bloody battles for control. Numerous studies have found that countries rich in commodities are twice as likely to suffer civil wars as those lacking such wealth. Think of Angola and Sierra Leone and their blood diamonds and you’ll get the picture.
Mineral booms and busts have been wreaking havoc ever since Australia’s gold rush in the 1850s. But the sheer size of the new discoveries in Africa, Afghanistan, and elsewhere suggests that the fallout is about to get exponentially worse—making the search for a solution more pressing than ever before.
7. ENERGY
Natural resources don’t just start fights within states—they also seed conflicts between them. That doesn’t mean that resources are always a curse, however. Far from it. Just look at what’s happened in the United States.
Despite the intense paralysis that’s gripped Washington politics in the last few years, the US economy has refused to stagnate, as one might expect it to. Instead, it’s enjoyed a steady recovery, averaging more than 2 percent growth each year since 2010. Of all the forces that have powered this revival, one of the biggest was also the most unexpected: the shale revolution.
The size of this boom has exceeded almost everyone’s imagining and will benefit Americans for years to come. Yet it will still fall short in one sense: massive as it is, even it won’t be enough to slake the rest of the world’s growing thirst for fuel. In the coming decades, energy consumption in India alone will grow by 132 percent. Despite its slowdown, China, already the world’s largest fossil fuel user, will see its appetite grow by 71 percent. No matter how many new wells it drills, the United States just won’t be able to fill those needs.
But it shouldn’t have to. The real potential for shale to transform the world lies not in North America’s legendary Bakken Formation or the other giant US fields. For the United States sits on only about 15 percent of the world’s total recoverable shale reserves. The rest lurks far afield in places such as Argentina, China, France, and Poland. Unlocking those reservoirs would have enormous benefits: doing so could reinvigorate the global economy, slow climate change (since gas burns much cleaner than coal), and even reduce international conflict.
Yet none of the countries I’ve just mentioned are likely to tap their riches anytime soon. Thanks to the dominance of slow-moving state-owned energy companies, various structural problems, misguided policies, unfriendly legal regimes, the absence of the right kind of capital markets, and popular opposition to drilling, no other nation is likely to replicate America’s energy revolution, or even come close, in the foreseeable future. And that’s even if energy prices do start climbing again soon. Too many problems stand in the way.
The great irony is that all of them are man-made and have nothing to do with actual resources or raw materials. Yet that may make them even harder to deal with.
8. THE MIDDLE-INCOME TRAP
Otto von Bismarck is said to have remarked that God has a “special providence for drunkards, fools, and the United States of America.” The sudden US energy revolution suggests that the old Prussian knew what he was talking about.
Few other countries can rely on natural resources—or divine providence—to drive their economies, however. They need to find other ways to generate growth and to keep it going.
Unhappily for them, sustaining growth over long periods turns out to be fiendishly difficult. If you were to do a quick survey of the last century, you’d find that while many states managed to make it into the middle-income bracket—defined by a per capita GDP of about $10,000 in current US dollars—the vast majority then got stuck in what economists call the Middle-Income Trap.
The odds of escaping that trap are long. Of the dozens of states that made it into the middle tier in the last one hundred years, most then slowed down dramatically in the subsequent decade; one economic historian has pegged the average decline at 2.8 percent, and others think the drop-off is even sharper. Whatever the exact number, the consequences are stark. Only thirteen states that qualified as middle income in 1960 have since made it into the ranks of rich countries and stayed there. Only thirty-four countries—representing just 18 percent of the world’s population—belong to that exclusive club today.
The reason, as the rest have discovered, is that while climbing up through the early stages of development is fairly straightforward—you just need to establish basic infrastructure, shift your workers into low-cost manufacturing, and then start selling their products overseas—the path then suddenly gets a lot steeper. Pools of underemployed rural workers dry up, which causes wages and other costs to rise. That makes your exports more expensive and hence less competitive. To surmount those challenges, countries must adopt a whole new strategy. Ruchir Sharma, who runs Morgan Stanley’s emerging-markets portfolio, argues that this formula must include measures to boost productivity, to increase human capital through education, and to move up the value chain. Countries also need to cut red tape and regulations to promote competition, build reliable courts to protect physical and intellectual property rights, and help direct investment toward start-ups and other creative ventures.
None of those steps may sound especially difficult. But most governments find it impossible to take enough of them—and to keep taking them year after year. Vested interests oppose disruptive changes, and politicians quickly lose their stomach for the fight. Thus most leaders start to ease off the gas pedal as soon as their countries achieve a modicum of growth.
That’s despite the fact that the middle tier is not such a great place for countries to linger. Sure, it beats dollar-a-day poverty. But don’t be fooled by the name: it’s not like middle-income countries are filled with middle-class citizens (at least not in the Western sense). Take China. In 2012 its per capita GDP was about $6,000. While that may sound pretty good, it doesn’t mean that most Chinese actually earned that much, for the figure was calculated by taking China’s total economic output and dividing it by the number of its citizens. The actual income that an average Chinese family earned that year (the last for which statistics are available) was just $2,100. Translation: being a middle-income country means that most of your citizens remain hard up, and that your government lacks the resources for a lot of important priorities.
So escaping the trap is critical for developing nations everywhere. All of them know what’s required to do so—in theory. But putting that knowledge into practice is a whole different story.
9. GRIDLOCK I
All of the problems we’ve looked at so far are hard enough for countries to deal with when their governments work the way they’re supposed to: when their leaders lead, their legislators legislate, and their judges judge. When governments get jammed up by partisanship, personal rivalries, and special interests and stop performing those functions, the challenges become insurmountable.
Consider the case of Mexico, a country that features prominently in this book (see chapter 9). For most of the years following its transition to democracy in 2000, legislative warfare between its three major parties kept Mexico from deregulating its economy, breaking up its smothering monopolies, or forcing open its inefficient state-dominated oil sector. In Italy, meanwhile, infighting has produced forty-one prime ministers and sixty-three governments in seventy years, allowing problems like corruption, inefficiency, and excessive debt to molder. In Lebanon, the decay has been literal: political rivalries kept Parliament from agreeing on a new president for more than a year, which (among other things) prevented trash from being collected in Beirut in the hot summer of 2015. Things are almost as bad (if less malodorous) next door in Israel, where fractious coalition politics and razor-thin parliamentary majorities have kept the country from advancing the peace process or from making much-needed social reforms.
Gridlock isn’t limited to the West. Japan still boasts the world’s third-largest economy, and since the 2012 election of Shinzo Abe, that economy has started to rouse itself from its decades-long slumber. But Japan’s recovery remains uneven—in large part because Abe hasn’t yet pushed through the toughest but most needed reforms on his agenda. And that’s because of bitter splits in Japan’s National Diet and within Abe’s Liberal Democratic Party.
Things may be even worse, finally, in the world’s largest democracy. During much of the previous decade, India’s economy grew so fast that many analysts started predicting it would soon overtake its giant northeastern neighbor and become a more congenial superpower that could balance Beijing. Instead of locking in growth by extending Prime Minister Manmohan Singh’s reforms, however, petty power brokers within the ruling Congress Party and its small-minded coalition partners spent most of Singh’s second term fighting with him and one another. The results were predictable: India’s boom deflated, with its growth rate falling by half between 2010 and 2012. Things got so bad that in May 2014 angry voters threw Singh out and replaced him with Narendra Modi, who had overseen the economic revitalization of the state of Gujarat and was known as a man who could get things done.
Since Modi’s election, India’s growth has started edging up again. But the prime minister is finding it exponentially harder to do business in New Delhi than it was in Gandhinagar (Gujarat’s capital). Having captured a mere 31 percent of the popular vote, he hasn’t ruled like a strongman, as many feared he would. Instead, he’s seemed surprisingly timid, talking big but doing little. He needs to restructure India’s banks and its bloated state-owned enterprises; so far, he’s barely touched them. Meanwhile, the Congress Party—which, with its allies, still controls the upper house of Parliament—has managed to block his vital tax and land reforms. Like Singh before him, Modi is rapidly learning a frustrating lesson: gridlock means ineffective leadership. Gridlock means no problem solving. Gridlock means no progress.
10. GRIDLOCK II
Partisan paralysis is so hard to deal with, and amplifies so many other problems, that it gets two chapters in this book: one focused on gridlock abroad, and one that grapples with the challenge in the United States. The stalemate here has grown so profound that a whole chapter is needed to encompass it.
From the moment Barack Obama was first elected president in 2008 on promises that he’d bring the country back together (remember those inspiring words about there not being “a liberal America and a conservative America” but a “United States of America”?), the divisions have steadily widened, and the business of American government has ground to a virtual halt.
Neither party is guiltless. Obama has shown little interest in reaching out to members of Congress (of either party). And Ray LaHood, a GOP congressman who served in his cabinet, has complained that “the White House [never] committed fully to a genuine bipartisan approach to policy making, despite the president’s words to the contrary.”
Still, the Republicans bear the most blame. Ever since Mitch McConnell, the Senate majority leader, said in 2010 that “the single most important thing we want to achieve is for President Obama to be a one-term president,” the GOP has blocked government action on a startling range of issues. (The diehards also toppled one House Speaker and scared away most of his potential replacements.) Obama has, despite the near-constant obstruction, nonetheless managed to forge ahead on health care, the Iran deal, and climate change. But these cases only illuminate the depths of the problem—for the first two measures were passed with no Republican votes, and the last required executive action. Apart from these and a few other accomplishments (like the passage of fast-track trade authority), the last several years have been among the least productive in Washington’s history.
Just consider some of the things the US government hasn’t accomplished. Immigration reform has foundered. Congress has blocked the appropriation of money to rebuild the nation’s crumbling infrastructure. Congressional Republicans have also repeatedly refused to pass a budget, have shut down the entire government over minor disputes, and have repeatedly balked at extending the debt ceiling—nearly ruining the country’s credit rating in the process. They have let desperately needed long-term unemployment benefits expire, declined to pass housing finance reform, stalled the passage of agriculture bills (in the hope of eliminating food stamps), and refused to even consider most new gun limits, despite the ongoing epidemic of firearm deaths. Ben Bernanke, a former chairman of the US Federal Reserve, has complained that “far from helping the economy,” Congress has often “appeared to be actively working to hinder it.” And when I asked Secretary of Defense Ashton Carter about the problem in 2015, he said that partisan warfare “gives a misleadingly diminished picture of America around the world, suggesting that we can’t get our act together.”
In 2014 Republicans won control of both houses of Congress for the first time in eight years and party leaders promised action. But those pledges have come to nothing (not even Pope Francis’s personal intercession in the summer of 2015 made a difference). Not only has Congress continued refusing to legislate, tax, or spend; it’s even abandoned its constitutional duty to approve the president’s appointees. The problem goes way beyond the Supreme Court. Senate Republicans have filibustered more executive branch nominees during Obama’s tenure than under all other presidents combined. Congress took almost six months to confirm Loretta Lynch as attorney general, and it confirmed fewer federal judges in the first half of 2015 than in any year since 1969. There are now so many vacancies on the federal bench that more than twenty-four US courts have declared “judicial emergencies.”
Make no mistake: Americans have noticed, and they’re mad as hell. Surveys show that trust in the federal government has reached its lowest level on record, and the two parties are as unpopular as they’ve ever been. Congress’s polling now hovers in the single digits—hitting figures so low that, as John McCain likes to joke, the only people still supporting the institution are blood relatives and paid staffers.
The only mystery is why they too haven’t given up on it.
Abandoning hope certainly is tempting—especially at a moment when so many things seem to be going wrong with the world.
The problem with despair, however, is that it’s unproductive. And that makes it a dangerous indulgence at times like these.
Fortunately for us, it’s also unnecessary. As the following chapters will show, none of these challenges (bad as they look) are actually insurmountable. The solution to gridlock—and to all the other problems we’ve just reviewed—is already out there.
You just have to know where to look for the fix.
* In 2014 and 2015, the Obama administartion tried to bring these numbers down somewhat, but with limited success.