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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

A Different Kind of War
That broader conceptualization of the war against terrorism ought to begin now. During World War II, everything was naturally subordinated to winning the military contest. But even as the war was waged, a parallel effort was made by the U.S. and Great Britain to lay the groundwork for a strengthened global economy. And when the war was over, attention was turned to building what became the Bretton Woods system. More than a billion people now live in peace and prosperity on four continents because of the foresight shown by those leaders in the throes of war.

Today we are fighting a different kind of war. Although today’s world economy has not been nearly so disrupted as the 1940s economy was, the antiterrorism campaign will create a host of new and as-yet-unforeseen complications. This may well be the time for the Bush administration to take the lead in launching a rethinking of the ways that the global economy can be strengthened. In this effort, the participation of a number of America’s best CEOs ought to be central.

The case for a new model for the world economy rests in part on the reality that economic systems do not exist in a political vacuum. In the 19th century, Britain ruled the seas, and its capital markets and free-trade stance were the linchpins of the world economy. In recent years, the U.S. has been the world’s sole superpower, and it too has wielded disproportionate clout over economic globalization. But this latter system was fraying, even before September 11. Something is wrong when we have so many recurring financial crises around the world. Something is wrong when so much seems to depend on the unpredictable spending patterns of American consumers. Now, a new political alignment seems to be emerging. There may be a new recognition that America cannot always act alone. New coalitions are developing among states. New coalitions could be formed among other nonsovereign actors, too — between corporations and environmentalists, for example. An essential aspect of any rethinking of globalization is to factor in the new politics.

Other longer-term issues exist for corporate America, in particular. At a minimum, to contend with the newly recognized pressures of globalization, corporate strategy, leadership development, and management training need to be revised along the following lines:

  • Schools and businesses must focus on producing broad-gauged leaders who can run companies that are profitable and progressive agents of change.
  • Undergraduate and graduate schools must train business leaders who can understand geopolitics as well as finance and marketing.
  • Corporate governance must be reformed to become less CEO-centric, in order to manage the extraordinary and growing complexity inherent in multinational companies today.

I know that there are many views about how long and deep the American campaign against terrorism will be. Many people express skepticism that the U.S. can sustain this unprecedented kind of war. They say that we will be back to near normal in six months or a year. I don’t think so, but we are in the realm of conjecture.

Whatever happens, however, we will look at globalization through a different lens. The same channels of transportation and communication that opened the global economy to trade and investment have opened it to terrorism of different forms. We are vulnerable, and vulnerability unchecked will create uncertainty that can undermine economic progress. Unless it can be overturned, an overpowering sense of exposure impedes the spread of democracy, because societies under threat lean away from liberty toward security.

So the big issue is not whether globalization will proceed; it is too powerful to stop. The big issue is, What kind of globalization? What should be the new paradigm, because, one way or another, there will be one? Can we make it safer? Can we make it more humane and hence more attractive to a broader variety of countries? American government and American business leaders both have an enormous stake in the answers.

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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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