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(originally published by Booz & Company)


The Next Empire

What can the U.S. do to maintain its competitive position against the E.U. and China? Foreign policy scholar Parag Khanna believes the answer lies right under our noses.

Only 30 years old, Parag Khanna has spent more than two years traveling to more than 100 countries, hoping to see firsthand the flash points of geopolitics and globalization. From his observations emerged a book, the recently published The Second World: Empires and Influence in the New Global Order (Random House, 2008), a thought-provoking look at the future of global competition. Khanna posits that the struggle for global economic and diplomatic influence over the coming decades will pit three empires — the United States, the European Union, and China — against one another on a battleground that he calls the “Second World.” This group comprises countries in five critical regions — Asia outside China, Central Asia, the Middle East, Eastern Europe, and Latin America — that hope to achieve full industrial development through economic and strategic alliances with one or more of the three major blocs.

In the future envisioned by Khanna, the empires’ power — and, thus, their leverage over Second World nations — will be based not solely on military strength but rather on a broader set of variables: “economic productivity, global market share, technological innovation, natural resource endowments, and population size, as well as intangible factors such as national willpower and diplomatic skill.” According to Khanna, the empires use their power in very different ways. The U.S. works on a “coalition” model, building alliances on an issue-by-issue basis — counterterrorism, democratization, economic liberalization. The E.U. employs a “consensus” model, slowly working toward agreement on domestic issues, then using its huge market and attractive economic and social policies to draw countries into its orbit. And China uses a “consultative” model, depending on other nations’ belief that doing business with China is advantageous economically and politically, and that it is necessary to put off other, more controversial issues involving labor rights, the environment, and governmental transparency.

For Khanna, a senior research fellow at the Washington, D.C.–based New America Foundation, the variables from which the empires gain power are of great consequence to the U.S. as it adapts its coalition model to meet changing conditions. Can America overcome its tendency to practice self-interested foreign relations and economic policies, a tendency that significantly hampers its ability to make friends overseas? Can the U.S. tie its foreign policy more closely to the needs of domestic corporations operating in a highly competitive global environment? Where, exactly, do America’s global interests lie? Khanna recently sat down with strategy+business to discuss his view of the world as it applies to the role of U.S. multinationals and the future of American competitiveness.

S+B: One of the ideas we often used to hear concerning globalization is that it helped spread American values, media, and ideas. Is that still a fair description?
KHANNA: Not really. In the 1990s, we believed that all globalization was good because it was American: Hollywood and Coca-Cola and McDonald’s. But as it turns out, nothing has brought about the decline of American power faster than globalization. Globalization means you can get what you want from wherever you want. And what I find is not that globalization has advanced American culture, but that it has advanced numerous other cultures. So the idea that globalization is American simply reflects our blindness to what’s going on outside our borders — blindness to what Chinese globalization looks like, and what Europeans’ and Indians’ and everyone else’s globalization looks like. It’s a cardinal mental error in thinking about the world of the 21st century.

The U.S. now must face a world in which its power is declining, in which it is just one of several competing brands. You can see that in how often America must go it alone, militarily or economically, whether it wants to or not. In that sense, the world is really becoming not anti-American but simply non-American.

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  1. Sven Behrendt and Parag Khanna, “Risky Business: Geopolitics and the Global Corporation,” s+b, Fall 2003: On the risks of doing business in an increasingly unstable world.
  2. Parag Khanna, The Second World: Empires and Influence in the New Global Order (Random House, 2008): Khanna offers his theory of competition, imperial overstretch, and winning friends while influencing allies in the freshly evolving international landscape.
  3. Art Kleiner, “Pankaj Ghemawat: The Thought Leader Interview,” s+b, Spring 2008: Ghemawat presents a somewhat different view than Khanna — that the world isn’t so flat and that companies’ global strategies should be developed with that in mind.
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