How to Run the World

by Parag Khanna

  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.

  The United Nations is not a definitive superstructure hovering above the earth—it is at best a set of small pebbles attempting to hold the world in place, or prevent it from rolling off into an abyss. Like the Soviet Union, the international system today is collapsing not physically, but organizationally. According to the U.S. National Intelligence Council, by 2025 the very notion of a single “international community” will seem quaint and anachronistic. There will be no universal Leviathan, no global parliament of all mankind, no American hegemony. Instead we are in for a fractured, fragmented, ungovernable, multi-polar or non-polar world. All these adjectives hint at our emerging reality: a new Middle Ages.

  It was a millennium ago—in the pre-Atlantic era—that the world was genuinely Western and Eastern at the same time. In the West, Europe was nominally ruled by the Holy Roman Empire while the vast and multiethnic Byzantine Empire centered in Constantinople faced perpetual tension with its neighbors. Yet Europe’s darkest period was the era of Chinese and Indian glory. The Song, Yuan, and post-Mongol Ming dynasties represented the zenith of Chinese culture and exploration, and India under the Mughal Empire dominated southern and central Asia while its trade links flourished with East Africa. Furthermore, between the Umayyad and Abbasid caliphates, Islam reached its apogee, ruling lands from Andalusia to Persia and rivaling Christianity in prestige.

  During the Middle Ages, Europeans, the Chinese, and the peoples in between all came into direct, sustained contact with one another in history’s first world system. In the aftermath of the Crusades, explorers including the Arab Ibn Battuta and the Venetian Marco Polo traversed Eurasia’s Silk Road and made civilizations more cognizant of one another’s grandeur. The eager trade delegations of today, from Arab traders in China’s Wuxi to Chinese businessmen across Africa, are reminiscent of the grand caravans and bazaars of thirteenth-century Champagne and Samarqand. Furthermore, the past decade’s efforts on interfaith reconciliation have their roots in English philosopher Roger Bacon’s thirteenth-century recognition of the importance of Islamic scholarship on Western thought and appeals to the pope to pursue global learning rather than crusades. Remember: Empires have soft borders, not hard ones. The more powers that rise, the more open the world becomes.

  What does this mean for an America that no longer controls globalization? Rather than the usual comparisons to ancient Rome or nineteenth-century Prussia, a medieval analogy to the Byzantine Empire is more apt. Byzantium staved off decline throughout the entire Middle Ages until the fifteenth century, extending its influence through espionage, bribery, and alliances. Even when Constantinople wasn’t able to impose its will on the chaotic medieval world, it remained relevant as a powerful military, economic, and cultural force.

  After a decade of unnecessarily damaging American-led interventions, it’s hard to see how the United States will regain either its post–World War II or post–Cold War stature. America’s visibility may be global, but its influence actually boils down to very specific factors: Is the military active somewhere? Where are its companies investing? Which lobbies are shaping policy toward a country? Asking such questions—not rhetoric about the “indispensable nation”—is the right way to think about a diminished America in a complicated world.

  Balancing East and West in the twenty-first century would be hard enough—but that isn’t even half the picture. The post–Cold War era will be remembered for the rapid emergence of a postmodern Middle Ages—a world without any single power in control. The East will not replace the West, China will not replace America, the Pacific will not displace the Atlantic—all of these power centers and geographies will coexist in a hyper-complex ecosystem. In the Middle Ages, empires, cities, corporations, churches, tribal hordes, and mercenaries overlapped—all competing to rule territory, control resources, win trade and investment, and seduce hearts and minds. The same tableau is unfolding again. By empowering transnational terrorist networks, organized criminals, and drug traffickers, globalization has made some weak states even weaker, while multinational firms and NGOs have grown in power and stature. The number of meaningful communities is proliferating rapidly: Our maps of the world no longer reflect reality on the ground.

  Power in such a complicated landscape is not fixed but fluid. Armies and nuclear arsenals don’t matter in absolute terms but only in specific contexts such as deterrence, occupations, and interventions. Resource power and ideological power are as important as military and financial might. If the power you have is the wrong sort to get you what you want, then it is useless. The only correct answer, then, to the question of how much power someone has is “Over what?” Even under the nominal reign of Emperor Charlemagne in the late eighth century, bishops recruited their own vassals and knights, monasteries built up fortresses and ramparts, duchies and castellanies were run by military commanders, and barons had sovereignty over their manors. Today the similar fragmentation of societies from within is clear: from Miami to Bogotá to London to Bangalore, gated communities with private security are on the rise. Private military companies have sprouted in America, Russia, Germany, and South Africa not only to support U.S. operations in Iraq and Afghanistan, but to protect banks, ships, mines, and posh neighborhoods wherever people can afford them.

  The other essential question in a neo-medieval world is “Who?” The state has been the form of polity that served the industrial age best, but now we are moving into a postindustrial age. Scholars pontificate about the centrality of “the state” as if it were one uniform thing. But the German philosopher Georg Wilhelm Friedrich Hegel was right when he said the state is a “work of art”: No two are the same. There are states with strong nationhood (America and Brazil, for example), empires veiled as states (China), states acting as empires (Russia and Iran), empires made up of states (the European Union), natural-resource states (Qatar), market-states with more foreigners than citizens (the United Arab Emirates), quasi-states (Palestine and Kurdistan), and states that exist mostly in name (the Democratic Republic of the Congo). There is nothing natural about “the state”; some will survive while others will give way to new modes of organizing people through technology, resources, ideology, and money.

  Undoubtedly, we witnessed a strong “return of the state” in the aftermath of the 2008 financial crisis, with leading governments pumping out $3 trillion of economic stimulus—about 5 percent of global gross domestic product (GDP). Some states are also flexing their muscles in creative ways: Chinese state-owned companies are buying up natural resources across Africa; Arab sovereign wealth funds determine which countries and companies to bail out and what assets they want in return; and Russian oil czars and Saudi Aramco dictate oil prices and pipeline routes. But even strong states act in multiple, distinct ways. Saudi Arabia has two foreign policies: that of the House of Saud and that of the radical Wahhabi clerics and Islamist charities. California (itself one of the world’s ten largest economies) effectively has its own immigration, climate, and energy policies, while most Indian and Chinese provinces now have their own export promotion offices overseas. Ministers of the Canadian provinces of Ontario and Quebec, Germany’s Rhineland, and Spain’s Basque Country all travel the world to attract foreign investment to their own regions. They know better than to wait for a central government to act on their behalf.

  Rather than think of the world as run by coherent states, we should instead realize that we have more islands of governance than we have effective governments—and just as in the Middle Ages, these islands are not states but cities. Today, just forty city-regions account for
two-thirds of the world economy. Their power lies in money, knowledge, and stability. New York City’s economy alone is larger than most of sub-Saharan Africa’s. Port cities and entrepôts such as Dubai act like twenty-first-century Venice: They are “free zones” where products are efficiently re-exported without the hassles of government red tape. Such mega-cities as Rio, Istanbul, Cairo, Mumbai, Nairobi, and Manila are the leading urban centers of their countries and regions, yet each teems with hundreds of thousands of new urban squatters each year. The migrant underclass lives not in chaos and “shadow economies” but often in functional, self-organizing ecosystems, the typical physical stratification of medieval cities. Whether rich or poor, cities, more than nations, are the building blocks of global activity today. Our world is more a network of villages than it is one global village.

  Alliances of these agile cities, like the medieval Hanseatic League of the Baltic Sea, are forming. They will use their sovereign wealth funds to acquire the latest technology from the West, buy up tracts of agricultural land in Africa to grow their food, and protect their investments through private armies and intelligence services. Hamburg and Dubai have forged a partnership to boost shipping links and life sciences research, while Abu Dhabi and Singapore have developed into a new commercial axis as well. No one is waiting for permission from Washington to make deals with whomever one wants.

  Not only should we think more in terms of cities than states, but we must also distinguish between the state and the government. At a time when global commerce trumps fiscal and monetary levers, where trade barriers barely allow nations to protect jobs and industries, and where networked activists can destabilize regimes, many governments have become at most filters between domestic priorities and international demands. They are more regulatory than provisory: The best ones collect taxes widely and fairly, run efficient courts, protect property rights, defend national borders, police equitably, maintain economic stability, and provide some social safety net. How many governments can you name that do this? In many parts of the world it is increasingly civic groups, religious charities, and corporations that provide these basic goods. Very few citizens still say “It’s the government’s job” and expect the job to get done.

  In such a fragmented world, who can we count on to deliver the goods? In the fourteenth century and for hundreds of years thereafter, 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 ice hockey team. Today the main businesses of France, Turkey, Korea, Jordan, and other countries remain in the hands of big families and a clutch of businessmen who populate such guilds and clubs as the Young Presidents’ Organization. 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. Then there are the mega-billionaires-cum-philanthropists such as Bill Gates, Richard Branson, and Ratan Tata who combat deadly disease, sponsor African schools, and govern steel factory cities, respectively. They represent the interests of their companies and projects far more than their home nations as such, and millions of lives depend on their good works. They increasingly run their own borderless worlds.

  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. This isn’t new. In the Middle Ages, diverse merchant communities were a driving force of diplomacy, managing to translate languages, exchange currencies, and trade a cornucopia of goods across Eurasia. In America’s case, until the late nineteenth century its diplomacy was so sparse that National City Bank and Standard Oil both operated and deployed their own diplomatic corps extensively throughout Latin America and Asia. Worried by the dearth of American ambassadors in these regions, they helped finance the founding of Georgetown’s Edmund A. Walsh School of Foreign Service, effectively America’s first diplomatic academy, where “international business diplomacy” is a coveted major today. It’s only a matter of time before an uber-corporation issues its own passport with pre-negotiatied visa-free access to countries large and small.

  Even for large countries—Canada and India, for example—their growing business presence is their diplomatic presence: the substance of diplomacy without the ceremonial form. Corporations now have grand strategies just like countries. Weapons dealers and oil companies are just the most obvious examples of how these economic emissaries trove the planet in search of labor, fuel, food, and consumers. Of the one hundred largest economic entities in the world, half are companies. At the 2010 World Expo in Shanghai, corporations had their own pavilions alongside countries. With its network of thousands of reporters worldwide pumping data into proprietary terminals, Bloomberg is not only a media company that operationally dwarfs The New York Times and Financial Times put together, it is also effectively the world’s largest private intelligence service with super-filters that allow clients to cull from thousands of sources. All over the world, private equity funds are taking stakes in farmland, gold, and other resources in exchange for building basic services and serving as friendly intermediaries with Western governments. The writ of the state has become at best hybrid sovereignty over supply chains, special economic zones, and reconstruction projects. Governments can attempt to monitor or regulate corporations, but they cannot control them.

  At the same time, “corporate citizenship,” once an oxymoron, is now a cliché. Today 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. One of the world’s largest banks, HSBC—known for its multicultural “visual values” ads in airport Jetway ramps—has twenty thousand offices in eighty-three countries, three hundred thousand employees, and 150 million customers. In a world where people care as much about their cash balance as their citizenship, such banks are vital lifelines of dependable service. Businesses find it increasingly difficult to escape public responsibilities with the Milton Friedman–esque claim that “the business of business is business.” They are right that unprofitability is not sustainable, so they increasingly pursue the path of profitable sustainability. The UK Companies Act requires that firms report on their social and environmental impact. Market incentives and government regulation can go hand in hand, but make no mistake: The former is indispensable.

  Technology and finance have torn apart the relationship between borders and identity. In ancient Anatolia, Mesopotamian merchants embedded themselves in foreign societies to build cultural and commercial ties. Today, trade diasporas are again a key driver of economic and political links: Witness the emerging “Sinosphere” enlarged by fifty million overseas Chinese around the Pacific Rim and extending as far as Angola and Peru. China has begun to offer compelling incentives to these overseas Chinese to invest more and more in the mainland, soon potentially including even dual citizenship. The more than twenty million Indians concentrated in the Persian Gulf, East Africa, the United Kingdom, and Silicon Valley also form a “Desi” diaspora of growing ethno-political and economic weight. More than one hundred countries have external voting rights for diasporas, and eleven countries reserve seats for them in parliaments. In 2009, Lebanese political parties flew in expats from as far away as Canada to vote in parliamentary elections. Diasporas and cross-border economic depe
ndencies can create unpredictable political and social rifts. What will the politics of Arab monarchies look like if the Indian government starts demanding a political voice for its millions of guest workers who outnumber the local populations by five to one?

  In a neo-medieval world, multiple identities are possible according to your nation, profession, religion, ethnicity, or even your online avatar. The talent arbitrage of companies has become the citizenship arbitrage of countries as statelets such as Qatar try to acquire the best and brightest athletes and engineers from oversees, just as America offers fast-track citizenship to Latinos who fight in Iraq. Dubai even hires South African and Australian expats to carry out its commercial diplomacy. One of them recently asked, “Why can’t they make a global passport for people who belong everywhere, who aren’t representing just one country?”