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 / First Quarter 2002 / Issue 26(originally published by Booz & Company)


From New Economy to Siege Economy: Globalization, Foreign Policy, and the CEO Agenda

The old order of multinational business has disappeared. Today, companies must discover a different way to work with government.

From New Economy to Siege Economy
Illustration by David Plunkert

We tend to think of United States foreign policy as the result of a formal process — the product of diplomatic rounds, bilateral discussions, and official negotiations. But a substantial part of U.S. foreign policy always rests on the overall milieu in Washington at the time.

In the 1990s, that environment was heavily weighted toward commercial interests. There was the push for the North American Free Trade Agreement, the establishment of the World Trade Organization, a blizzard of other trade agreements, an emphasis on strengthening relationships with emerging markets, and a vigorous effort to prevent financial crises from spreading beyond local economies. Most of Washington’s economic assistance to other nations was designed to bring about liberalizing economic reform. In short, the U.S. had created a global, outward-looking foreign policy environment.

This liberating spirit became synonymous with the term globalization, and U.S. multinational companies were partners with Washington in promoting this variant of globalization. Corporate leaders sided with the administrations of George Bush (the senior) and Bill Clinton. Backed by a majority of the U.S. Congress, they fought together to level the playing field for global business, waging successful campaigns for greater liberalization of trade and finance, more deregulation, and increased privatization of state-owned enterprises.

Now, the fight against terrorism will dominate American foreign relations for the rest of the Bush administration, and probably beyond. It will influence everything from domestic civil liberties to economic policy to our choices for allies abroad. This new focus represents a sharp discontinuity from the outlook of the last decade. Washington will likely back a different kind of globalization — one focused less on the opportunities for expanded commerce than on addressing the many holes and vulnerabilities in an open economic system. Instead of knocking down barriers, our new war, of necessity, will place more controls on banking, movement of people, and technology exports. The emphasis will be not on reducing the control of government, but on enhancing it in a wide variety of ways. “Homeland security” says it all — domestic-oriented, restricted, more closed than at any time since World War II. In place of an ethos of liberation will be a philosophy of control. In place of a spirit of opportunity will be a feeling of vulnerability. Not long ago we talked about a New Economy. Now we are looking at the possibility of a Siege Economy.

The geopolitics of antiterrorism will substantially alter the prospects and paths of American corporations. For most chief executives of American companies, the new crisis presents issues never before faced: a halt to the headlong, liberating globalization of the past two decades; more regulation of company activities, at home and abroad; and the reintroduction of military and other noncommercial considerations into American foreign policy.

Chief executives of American multinationals would seem to be perfectly placed to team with Washington and the other governments of the free world in reinventing globalization to address the challenges ahead. Within their own organizations, they have had to address many of the social, economic, and geopolitical issues that we used to relegate to government. Their companies have been increasingly reliant on diverse, global work forces. Their profits depend less on extracting raw materials than on mining and sharing knowledge among educated populations of workers and consumers. Understanding the limits of command-and-control management in decentralized organizations, corporate leaders would appear well positioned to become the kind of “business diplomats” the world now needs, as it seeks to develop coalitions to fight a war that takes place on a myriad of physical and virtual fronts.

Unfortunately, CEOs of American multinationals have shown themselves unwilling and unable to shoulder these new responsibilities. In interviewing some 40 chief executives for my recent book, The Mind of the CEO, I discovered that while most of them wanted to play a more statesmanlike role, they felt they had neither the time nor the mandate to do so to any great extent. They felt under too much pressure to meet quarterly earnings targets to do much besides focus on their knitting. Now, however, they have no choice. September 11 — and ensuing events — are rebalancing the relationship between the public and private sectors, forcing a negotiation of interests unlike any seen since World War II. Having spent the last decade and more attempting to make the world safe for globalization, multinational CEOs must now participate in a broad, ongoing effort to make globalization safe for the world.

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  1. Joel Kurtzman, “An Interview with Rosabeth Moss Kanter,” s+b, Third Quarter 1999; Click here.
  2. John Micklethwait and Adrian Wooldridge, “Globalization Is No Fait Accompli,” s+b, Third Quarter 2000; Click here.
  3. Randall Rothenberg, “Jeffrey E. Garten: The Thought Leader Interview,” s+b, First Quarter 2001; Click here.
  4. Jeffrey E. Garten, The Mind of the CEO (Perseus Books/Basic Books, 2001)
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