CEOs as Statesmen? Author Offers New Plan on ‘How To Run The World’


By Gloria McDonough-Taub

Parag Khanna was recently named by Esquire magazine one of the "75 Most Influential People of the 21st Century", Eric Schmidt, CEO of Google says, "We need to pay attention to his ideas" and Nicholas Nassim Taleb, author of "THE BLACK SWAN" says, “Parag Khanna has vision.”

His vision is none other than coming up with a new way to run the world; a world he claims is, "entering a perfect storm of calamities: a great game for scarce natural resources, financial instability, environmental stress, and failing states. In some respects, it isn’t far off from that medieval landscape of almost a millennium ago."

Welcome to the new Middle Ages!

In his new book, "HOW TO RUN THE WORLD Charting a Course to the Next Renaissance," Khanna takes a look at the current global chaos and offers up a road-map out of the "Dark Ages" into a new world where everyone, not just government leaders, serves as a diplomat.

"Diplomacy is the world's second oldest profession-but it comes as naturally to human beings as the first," Khanna writes and asks, "Why is that when it comes to running the world, we leave governments to do all the work?"

Governments can and do offer temporary help, Khanna says. But when it comes to building a strong, sustaining economy — governments can not act alone. In his book and in this Guest Author Blog for Bullish, Khanna explains how "Mega Diplomacy" led by government officials and CEO-Statesmen like Bill Gates, George Soros and others is now in the works and how this can tackle some of the greatest challenges of the 21st century.

Guest Author Blog: CEO and Statesmen of the World, Unite! by Parag Khanna author of "HOW TO RUN THE WORLD"

Every year prominent magazines flash studies and showing that of the top one hundred economic entities in the world, half are companies rather than countries, while other surveys underscore how the most powerful and influential people in the world are political and business figures in equal number.

So why is that when it comes to running the world, we leave governments to do all the work?

The question is especially relevant as we move into a world that resembles the pre-Westphalian era, that is, before the 17th century when states came to dominate politics. In the Middle Ages, thousands of autonomous players competed for influence over territory, resources and wealth—very much including the earliest corporations based in Bruges and Venice. Florence’s Medici family was the archetypical hybrid of public and private power, producing three popes, building opulent palaces, commissioning art to shape values, and intermarrying with royal families across Europe.

Today we see the Medici-like blurring of boundaries in spades: Gazprom oligarchs control the Kremlin; the billionaires Berlusconi in Italy and Thaksin in Thailand have also been heads of state; Persian Gulf royalty oversee semi-official ministries and investment funds simultaneously. Detroit’s new mass-transit rail system is being funded largely by the CEO of Penske Corporation and the owner of the Red Wings. Today the main businesses of France, Turkey, Korea, Jordan, and other countries remain in the hands of big families and a clutch of businessmen. Furthermore, family businesses and small enterprises are asserting themselves as the backbone of the world’s real economy. As investment banking shrinks, private banking and wealth management firms are growing.

From clans to corporations, all of the players active in diplomacy a millennium ago are back.

The word “diplomacy” stems from the Greek diploun, meaning “to fold,” and refers to the folded diplomas authorizing entry into foreign territories that emissaries carried inside sealed metal plates.

Today, the right business card will do. Remember that companies have always been part of “governance”: Governments alter their investment laws and other policies to become more attractive to business.

CEOs should get used to being seen as statesmen. In a world where people care as much about their cash balance as their citizenship, multinational banks are vital lifelines of dependable service. From Africa to India, the crucial infrastructure investments societies need to cross the threshold to modernity are coming from the private sector or through public-private partnerships. Indeed, the willingness to build an airport or develop a medicine comes as much or more from companies who view these as necessary for their markets and consumers as from governments. “Corporate citizenship,” once an oxymoron, is now a cliché.

What all CEO-statesmen I have researched for this book – whether Bill Gates, George Soros, Richard Branson, or Mark Moody-Stuart – have in common is a genuine level of comfort on both sides of the public-private divide. Better yet: they bridge the divide and authentically assume “public” roles they have crafted themselves. Bill Gates has pioneered a philanthropic approach to combating deadly diseases, George Soros has been a human rights crusader for decades, Richard Branson has launched a “War Room” to tackle climate change, and Mark Moody-Stuart has become the lead champion of triple-bottom-line reporting. The arc of their careers makes them so much more than just “private sector” figures—and the world is better off for it.

What I believe we will —and must— achieve is a new mega diplomacy among the world’s leading authorities, whether from the,,, or worlds. There must be a division of labor among them. Can any country —even the United States— afford interminable public-private hostility when its overall competitiveness is at risk from rising powers? Rather than speaking of boundaries between public and private, with both sides accusing the other of short-term thinking, we should assume the need for a hybrid middle ground.

Even though governments can temporarily bail out their economies, much of what the economy does —create jobs and innovate — cannot be done by governments. All emergent sectors of the twenty-first century manufacturing and services economy — clean technology, health care, education — require sensible public and private synergy to spur job creation and growth. Business and government can’t forever point to each other’s leaks.

If the boat sinks, everyone is a victim.

Chapter One: Mega-diplomacy

Breakdown and failure reveal the true nature of things. -Karl Jaspers Two millennia of experience and mountains of knowledge have not made us much more capable of managing our affairs than stone-age people. -Mahathir bin Mohamed, former prime minister of Malaysia

There is one way to run the world: with diplomacy. Yet for many people, "diplomacy" is a historical term more than anything useful. That needs to change. Until we evolve a new diplomatic design, we will fail to confront and prevent the constant stream of crises-from financial turmoil to failed states-that engulf us. We are running out of time.

Twenty-first-century diplomacy is coming to resemble that of the Middle Ages: Rising powers, multinational corporations, powerful families, humanitarians, religious radicals, universities, and mercenaries are all part of the diplomatic landscape. Technology and money, not sovereignty, determine who has authority and calls the shots. This can be a good thing if it means getting all hands on deck to manage challenges that no government or organization can tackle alone. Success in this new world of mega-diplomacy hinges on bringing the key players together-governments, businesses, and organizations- into coalitions that can quickly move global resources to solve local problems. This is not your grandfather's diplomacy, but today's Generation Y intuitively gets it.

Diplomacy Is Dead! Long Live Diplomacy!

At least once every hundred years, the world goes to war-and then tries to make lasting peace. During six intense months in Vienna in 1814, ministers of Europe's major powers-Britain's Lord Castlereagh, France's Talleyrand, Russia's czar Alexander I and Count Nesselrode, and Austria's Prince Metternich-were entrusted with redrawing Europe's political map after the defeat of Napoleonic France. Their conservative order, the "Concert of Europe," lasted essentially until World War I. When the great powers gathered again for six months in Paris in 1919, they were represented by France's Georges Clemenceau, Britain's David Lloyd George, Italy's Vittorio Orlando, and America's Woodrow Wilson. As the statesmen negotiated military disarmament, exchanges of territory, payment of reparations, and the dismantling of colonies, it seemed the whole world was in their hands-until it all fell apart again. After World War II, America's Franklin D. Roosevelt envisioned a global version of the Concert of Europe, this time with "Four Policemen"-the United States, the United Kingdom, the Soviet Union, and China-guaranteeing global stability. However, despite the growing membership of the United Nations, Cold War superpower summits reminded the world that some countries were still more equal than others.

Luckily, the Cold War ended without nuclear catastrophe, but the vacuum of the past two decades has yet to give birth to a new global architecture that reflects the rapidly changing realities of power and influence. The nineteenth-century world was run by a few key powers overseeing their colonies, and the twentieth century by power blocks. In the twenty-first century, however, manipulating world order from above won't be enough.

The past decade-from the 9/11 terrorist attacks to the global financial meltdown-has taught us the dangers of interdependence and that outsourcing leadership is a recipe for disaster. Some now fear a breakdown of our global order, but isn't it scarier to realize that the present order has already been broken for years? It's the kind of moment the philosopher Karl Popper had in mind when he argued that tearing down our existing order and constructing a new one from scratch might lead to a more workable system.

How bad is it?

Well, today the powers that are expected to keep the peace sell the most weapons, the banks that are supposed to encourage saving promote living beyond one's means, and food arrives to hungry people after they've died. We are hurtling toward a perfect storm of energy consumption, population growth, and food and water scarcity that will spare no one, rich or poor. Our ever-growing list of crises includes financial instability, HIV/AIDS, terrorism, failed states, and more. Any one of these can magnify another, creating a downward spiral for individual nations and regions. Within the next twenty years we could see proxy skirmishes escalate into major war between America and China, more weak states crumbling, conflicts over submerged oil and gas resources at sea, drought-starved refugees streaming out of central Africa, and sinking Pacific islands.

Henry Kissinger said it best: "You do not design a new world order as an emergency measure. But you need an emergency to bring about a new world order." Finally, there is a global debate under way about how to redesign the way we run the world. It's about time-and hopefully not too late. Globalization has thrust us into a chaotic era with which our leading powers and institutions only pretend they can cope. Americans believe they can lead a "multi-partner" world, Europeans think they can tame the world through "civilian power," the Chinese try to buy the world off, most others states just want status without responsibility, and the United Nations is barely spoken of anymore. They all need to seriously rethink how the world is run. The notion of a "G-2" axis between the United States and China is the latest misguided incarnation of our quest for a simple global framework-it ignores the fact that the two powers can't agree on currency, climate, censorship, or many other issues, and that few if any countries want to be dictated to by either the United States or China.

There is no doubt that we need a global redesign to confront this perfect storm-one that doesn't just react to crises but proactively prevents them. What we have right now, though, is global policy gridlock: The West demands interventions and human rights, while the East prefers sovereignty and noninterference; the North is scared of terrorism and proliferation, while the South needs food security and fair trade. Stock prices are crucial for the capital rich; commodities prices for the resource rich. Americans are suspicious of Chinese state-owned companies, while the Chinese are suspicious of American regulators. We seem as far away as ever from a new consensus.

In 2004, the British historian Anthony Sampson published the widely acclaimed book Who Runs This Place? He was motivated by the simple question "Who is accountable to whom and for what?" Inside the book are Sampson's hand-sketched Venn diagrams depicting "The Establishment," interlocking circles of power whose fuzzy relationships seem to lack an obvious purpose of public good: the prime minister, accountants, pension funds, the monarchy, corporations, lobbyists, the rich, aristocracy, diplomats, intelligence, the treasury, Parliament, academia, churches, political parties, lawyers, the military, the insurance industry, television, editors, trade unions-and that's just for Great Britain.

Sampson was worried about British democracy; in international relations there is no such thing. What we have today is a worldwide perpetual no-holds-barred contest for power and legitimacy between regimes, companies, nongovernmental organizations (NGOs), religious groups, and super-empowered individuals all pursuing their own interests. From economic nationalists to resource-hungry companies to religious fundamentalists, everyone is out for themselves. Interest groups are not a marginal sideshow to some "real" politics; they are the politics. The best term for it: mosh pit.

Ironically, our ambition often prevents us from recognizing this reality. Because issues such as the climate and economy are "systemic" in nature, meaning they have worldwide scope and impact, we reach for grand, silver-bullet remedies such as "America must take charge" or "strengthen the United Nations." But just as there is no one nation that can rule the world, there is no one institution that can run it, either. Some experts offer strategies to "fix" the world, but their utopian schemes for new international bureaucracies are as boring in theory as they are unworkable in practice. There are also countless appeals to "save" the world through a variety of "grand bargains." But running the world isn't about one-off solutions.

"Diplomacy" is the one-word answer to how to run the world-and improving our global diplomatic design holds the key to running the world better.Diplomacy is the world's second oldest profession-but it comes as naturally to human beings as the first.Among ancient Sumerian city- states, it was a means to channel the messages of deities among kings. But as we know from the fascinating Amarna letters (a set of cuneiform tablets inscribed in the second millennium b.c. in the Akkadian language), diplomacy was also a sophisticated code of conduct among merchants and ambassadors, who were often the same person: "Between kings there is brotherhood, alliance, peace and good words if there is an abundance of precious stones, silver and gold," went one Amarna adage. By the time of the Athenians, diplomacy was a robust system of trade and political dialogue, even featuring the first "Olympic truce."

The Byzantines elevated diplomatic deception to a fine art, compensating for their material weakness by quarantining foreign officials in opulent chambers to cut them off from the reality of inner decay. Such tactics staved off the empire's collapse for four hundred years.

The Venetians carried forward Byzantine practices in Europe, dispatching diplomat-spies abroad to send back coded messages that were instrumental in formulating strategies against its rival city-states Genoa and Milan, as well as the encroaching papacy. It was at the height of this turbulent period in the early sixteenth century that Machiavelli wrote The Prince, emphasizing a statecraft that blended the arts of diplomacy and war. Within a century, legendary French nobleman Cardinal Richelieu constructed the world's most extensive foreign ministry, while the Dutch and British East India companies acted as mammoth public-corporate agents of imperial expansion, forcibly creating a single international society of states, empires, and territories. The Ottoman Empire, China, Japan, and Russia were all brought into a global diplomatic web. British historian Arnold Toynbee marveled that the West's mastery of war, technology, and diplomacy had "unified the whole world in the literal sense of the whole habitable and traversable surface of the globe."1 From Vienna in 1814 to Paris in 1919, diplomacy took on the aura of a clique of white men carving up the world-a secretive parlor game played by arrogant statesman with heavy accents.

Since that time, diplomats have been charged with negotiating how to run the world. Diplomacy remains an element of everything we do. Carl von Clausewitz declared that war is the continuation of politics by other means. Diplomacy, by contrast, is supposed to play the role of "words that prevent us from reaching for our swords," according to Bosnian scholar and diplomat Drazen Pehar. Yet war and diplomacy have often been two sides of the same coin, from the time of the Babylonians through Napoléon and Stalin. Diplomacy uses war as a threat, while war uses diplomacy to buy time. American diplomacy helped build a broad coalition (even including other Arab nations) for the first Iraq war in 1990 but failed to do the same in 2003. Diplomacy, then, is even part of anti-diplomacy.

It is more important now than ever. In an age when America can't impose its will on the world but instead must negotiate with everyone, when military might wins battles but not wars, and when the scope of global challenges goes far beyond what our current institutions can tackle, we should focus on diplomacy above all else.

We all know how technology has transformed the weapons of war from bows and arrows to robots and lasers, and from field armies to insurgent networks, but we often overlook how diplomacy has been changed as well. More than two centuries ago, Thomas Jefferson mused, "For two years we have not heard from our ambassador in Spain; if we again do not hear from him this year, we should write him a letter." When Lord Palmerston received the first diplomatic cable at Whitehall in the mid-nineteenth century, he proclaimed, "This is the end of diplomacy!" In the 1970s, Canadian premier Pierre Trudeau remarked that he could replace his entire foreign ministry with a subscription to The New York Times, whose correspondents presumably provided better information than embassy cables. Today's communications technologies are doing to diplomacy what they have done to print media: demoralizing it and pushing it to the brink of extinction-while also reminding us just how important the media and diplomacy are.

Technology, capitalism, and moral agendas such as human rights have drastically multiplied the number of players in the diplomatic game. Diplomacy today takes place among anybody who's somebody. There are about two hundred countries in the world that have relations with one another, close to one hundred thousand multinational corporations that constantly negotiate with governments and one another, and at least fifty thousand transnational NGOs that consult on international laws and treaties and intervene in conflict zones to provide assistance to regimes and peoples in need. All these actors have acquired sufficient authority-whether through money, expertise, or status-to become influential. Cyberspace today is alive with virtual diplomacy: Sweden, Brazil, and other governments have opened virtual consulates in the universe of Second Life, where former U.S. undersecretary of state for public diplomacy James Glassman held debates with Egyptian bloggers. Senator John Kerry has even proposed the creation of an ambassador for cyberspace. Now that Google and the U.S. Department of Defense's research and development office DARPA (Defense Advanced Research Projects Agency) have pioneered handheld universal translation devices, everyone is a diplomat.

The who, what, when, where, why, and how of diplomacy have thus all been thrown into flux. That is a good thing. It allows us to step back and think about what kind of world it is we are trying to run. Since diplomacy is as old as history itself, history is a good place to start in understanding our new world.

The New Middle Ages

Sitting in one of the glassy towers of the United Nations on New York's East Side, the world seems very tidy. There are councils for security and human rights, commissions for social development and peace building, a division for women, a program for the environment, and an organization for global health. Name the issue, the United Nations has it covered. But how can an organization that caters to bordered states solve the problems of a borderless world? Are pandemics a health issue, a security issue, or both? Is terrorism a political issue, an economic one, or both? What about crop-killing insect infestations at higher altitudes caused by global warming- should the Food and Agriculture Organization or the UN Environment Program handle that? Surely population growth is a cause of ecosystem stress and poverty; do all three really require separate bureaus? How about the fact that there are suddenly as many environmental as political refugees? Whose problem are they? Technocrats sitting halfway around the world are often the worst placed to understand the links among these problems, and bureaucratic micro-splicing all but ensures that no issue gets enough resources to ever get solved. In fact, it's impossible to make sustained progress in any one area if the others are ignored: Disease can't be successfully tackled without considering overpopulation; inequality and state failure won't be overcome unless corruption is reigned in; and biodiversity can't be protected unless populations can afford sustainable consumption. Health, wealth, and education all track together-both upward and downward.

But most bureaucrats in international organizations are more fixated on setting targets and goals-and forming new and expensive agencies- than helping us find actual solutions. Lately they have asserted their relevance by declaring everything-food, climate, health, and poverty-a "security" issue, another fund-raising tactic that achieves nothing. Only inertia explains why some of these agencies are still around: They exist because they do, not because they do anything.

Excerpted from How to Run the World by Parag Khanna Copyright © 2011 by Parag Khanna. Excerpted by permission of Random House Group, a division of Random House, Inc. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.

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