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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

Competitiveness against corporate rivals from other nations with less foreign policy baggage could be further hindered if the U.S. imposes economic sanctions on other governments based on the needs of its antiterrorism campaign. American companies could, for example, be prevented from operating in certain markets, or they might find trade in certain goods and services curtailed. Conversely, companies might be pressured by Washington to help with the economic dimension of building up weak states that breed terrorism — an activity that companies have shied away from, since they see few commercial benefits.

Crisis-Bred Opportunities
Lest the commercial consequences of the war on terrorism seem unduly dire, remember that crises can be catalysts for positive changes. Chief among them are the opportunities corporate America and Washington now have to build a stronger global system. These opportunities arise from a number of sources.

In contrast to the way he started his administration, President Bush has now made foreign policy a priority. Indeed, he seems to have matured greatly — and remarkably quickly — in the substance and style of being a president. As part of this transformation, the administration has been forced to reverse its knee-jerk antipathy toward multilateral cooperation. It seems to be taking the United Nations more seriously. It understands that it must moderate its earlier peremptory treatment of major countries like Russia, Pakistan, and Iran, and deal as well with weak or failed states, such as Afghanistan and Uzbekistan. All are countries whose cooperation the administration will need for a long time.

The new engagement could be a chance to integrate some of these countries, particularly Russia, further into the world economy. More optimistically, if George W. Bush’s antiterrorist campaign evolves in a manner that is seen abroad to be calibrated, proportionate, and effective — that is, if it really succeeds in rooting out terrorists without creating enormous political fallout — then he and his administration will be in a very strong position to lead the world in other, nonmilitary endeavors.

Put another way, there is a chance that the depth of military and political collaboration potentially in the making can be translated into stronger international economic cooperation. As of October, the multicountry coalition being forged was still shallow and precarious, with the notable exception of the U.K.’s participation. But to increase the odds that broad and permanent benefits will come out of the efforts to build an antiterrorist confederation, we need to identify and work toward an end game that both meets and transcends the goal of physical security.

Business and government should collaborate on ways to reenergize global trade negotiations, taking advantage of the new spirit of cooperation between the U.S. and the European Union, the two largest and most powerful trading areas, which can make or break the talks. It was heartening to see the beginning of world trade talks in mid-November 2001. But starting them was the relatively easy part. Making them succeed is another matter.

Surely, this is a time for a trade round that is aimed foremost at integrating developing countries into the global system. These negotiations must be mounted quickly, have a simple agenda, and work on a tight timetable. Now is the time for concrete progress that will boost the world economy, not a five-year marathon.

Even if steps toward extending the benefits of an open global economy into the developing world prove hard to accomplish, American multinationals are so enmeshed in the global marketplace that they have a great stake in working to prevent a rollback of the economic liberalization that has been achieved in the last 10 years. Perhaps the current crisis can be a wake-up call for those who grew complacent during these last several years of prosperity, thinking they need do little more than ride the waves of globalization.

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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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