The End of Power

PREFACE

How This Book Came About: A Personal Note

POWER MAY FEEL ABSTRACT, BUT FOR THOSE WHO ARE MOST ATTUNED TO it—namely, the powerful themselves—its flow and ebb can have a visceral edge. After all, those in positions of great power are best positioned to spot limits on their effectiveness and to feel frustration over the gap between the power they expect their rank to convey and the power they actually have. In my own small way, I experienced such constraints back in February 1989. At the time I had been named, at age thirty-six, the minister of development in the then-democratic government of my home country, Venezuela. Soon after we took office in a landslide election victory, we faced riots in Caracas—triggered by the anxiety over our plans to cut subsidies and raise fuel prices—that paralyzed the city with violence, fear, and chaos. Suddenly, and despite our victory and apparent mandate, the economic reform program that we had championed acquired a very different meaning. Instead of symbolizing hope and prosperity, it was now seen as the source of street violence, increased poverty, and deeper inequality.

But the most profound insight I had at that time was one I would not fully comprehend until years later. It dwelt in the enormous gap between the perception and the reality of my power. In principle, as one of the main economic ministers, I wielded tremendous power. But in practice, I had only a limited ability to deploy resources, to mobilize individuals and organizations, and, more generally, to make things happen. My colleagues and even the president had the same feeling, though we were loath to acknowledge that our government was a hobbled giant. I was tempted to chalk this up to Venezuela itself: surely our sense of powerlessness had to do with our country’s notoriously weak and malfunctioning institutions. Such weakness could not be universal.

Yet later I would appreciate that it was universal indeed, or nearly so, among those with the experience of power. Fernando Henrique Cardoso—the respected former president of Brazil and founding father of that country’s success—summed it up for me. “I was always surprised at how powerful people thought I was,” he told me when I interviewed him for this book. “Even well-informed, politically sophisticated individuals would come to my office and ask me to do things that showed they assumed I had far more power than I really did. I always thought to myself, if only they knew how limited the power of any president is nowadays. When I meet with other heads of state, we often share very similar recollections in this respect. The gap between our real power and what people expect from us is the source of the most difficult pressure any head of state has to manage.”

I heard something similar from Joschka Fischer, one of Germany’s most popular politicians and a former vice chancellor and foreign minister. “Since I was young, I was fascinated and allured by power,” Fischer told me. “One of my biggest shocks was the discovery that all the imposing government palaces and other trappings of government were in fact empty places. The imperial architecture of governmental palaces masks how limited the power of those who work there really is.”

Over time, I would glean similar observations not just from heads of state and government ministers but also from business leaders and the heads of foundations and major organizations in many fields. And it soon became clear that something more was going on—that it wasn’t simply that the powerful were bemoaning the gap between their perceived and actual power. Power itself was coming under attack in an unprecedented way. Every year since 1990, I have attended the World Economic Forum’s annual meeting in Davos, frequented by the world’s most powerful people in business, government, politics, the media, nongovernmental organizations, science, religion, and culture. In fact, I have been lucky enough to attend and speak at almost all of the most exclusive power-fests in the world, including the Bilderberg Conference, the annual meeting of media and entertainment tycoons in Sun Valley, and the annual meetings of the International Monetary Fund. My conversations each year with fellow participants confirmed my hunch: the powerful are experiencing increasingly greater limits on their power. The reactions to my probing always pointed in the same direction: power is becoming more feeble, transient, and constrained.

But this is not a call to feel sorry for those in power. Powerful people bemoaning their powerlessness is certainly no reason for hand-wringing in our winner-take-all world. Rather, my aim is to delineate the impact of the decay of power. In the pages ahead I explore this process of decay—its causes, manifestations, and consequences—in terms of the ways it affects not just the 1 percent at the top but, more importantly, the vast and growing middle class as well as those who seek merely to make it through another day.

Moisés Naím

March 2013

CHAPTER ONE

THE DECAY OF POWER

THIS IS A BOOK ABOUT POWER.

Specifically it is about how power—the capacity to get others to do, or to stop doing, something—is undergoing a historic and world-changing transformation.

Power is spreading, and long-established, big players are increasingly being challenged by newer and smaller ones. And those who have power are more constrained in the ways they can use it.

We often misunderstand or altogether overlook the magnitude, nature, and consequences of this transformation. It is tempting to focus exclusively on the impact of the Internet and other new technologies, on the direction of power shifts from one player to another, or on the question of whether the “soft” power of culture is displacing the “hard” power of armies. But those perspectives are incomplete. Indeed, they can obscure our understanding of the fundamental forces that are changing how power is acquired, used, kept, and lost.

We know that power is shifting from brawn to brains, from north to south and west to east, from old corporate behemoths to agile start-ups, from entrenched dictators to people in town squares and cyberspace. But to say that power is shifting from one continent or country to another, or that it is dispersing among many new players, is not enough. Power is undergoing a far more fundamental mutation that has not been sufficiently recognized and understood. Even as rival states, companies, political parties, social movements, and institutions or individual leaders fight for power as they have done throughout the ages, power itself—what they are fighting so desperately to get and keep—is slipping away.

Power is decaying.

To put it simply, power no longer buys as much as it did in the past. In the twenty-first century, power is easier to get, harder to use—and easier to lose. From boardrooms and combat zones to cyberspace, battles for power are as intense as ever, but they are yielding diminishing returns. Their fierceness masks the increasingly evanescent nature of power itself. Understanding how power is losing its value—and facing up to the hard challenges this poses—is the key to making sense of one of the most important trends reshaping the world in the twenty-first century.

This is not to say that power has disappeared or that there aren’t still people who possess it in abundance. The president of the United States or China, the CEO of J. P. Morgan or Shell Oil, the executive editor of the New York Times, the head of the International Monetary Fund, and the pope continue to wield immense power. But less so than their predecessors. The previous holders of these jobs not only dealt with fewer challengers and competitors, but they also had fewer constraints—in the form of citizen activism, global markets, and media scrutiny—on using the power they had. As a result, today’s power players often pay a steeper and more immediate price for their mistakes than did their predecessors. Their response to that new reality, in turn, is reshaping the behavior of those over whom they have power, setting in motion a chain reaction that touches every aspect of human interaction.

The decay of power is changing the world.

The goal of this book is to prove these bold assertions.

HAVE YOU HEARD OF JAMES BLACK JR.?

The forces driving the decay of power are manifold, intertwined, and unprecedented. To see why, turn your mind from Clausewitz, the Fortune 500 rankings, and the top 1 percent of the US population that accounts for a disproportionately large chunk of the nation’s income and consider the case of James Black Jr., a chess player from a working-class family in the Bedford-Stuyvesant neighborhood of Brooklyn, New York.

By the time he was twelve, Black had become a Master at chess, a ranking achieved by fewer than 2 percent of the 77,000 members of the United States Chess Federation—and only 13 of those Masters were under fourteen.¹ The year was 2011, and Black has a good shot at becoming a Grandmaster—a ranking awarded by the World Chess Federation based on the player’s performance in tournaments with titled players. Grandmaster is the highest title a chess player can attain. Once obtained, the title is held for life.²

When Black became a Master, he was following in the footsteps of America’s youngest Grandmaster ever: Ray Robson of Florida, who attained that status in October 2009, two weeks before his fifteenth birthday.³

Black taught himself the game on a cheap plastic set he bought at Kmart and quickly moved on to chess books and computer programs. His idol is Mikhail Tal, a Russian world chess champion of the 1950s. What motivates Black, in addition to his enjoyment of the game, is the way it lets him wield power. As he told a reporter: “I like to dictate what the other player has to do”—as clear a statement of the innate urge for power as one can find.⁴

But the achievements of James Black and Ray Robson are no longer exceptional. They are part of a global trend, a new phenomenon that has swept through the long-closed world of competitive chess. Players are learning the game and achieving mastery at much younger ages. There are more Grandmasters now than ever before: 1,200-plus today versus 88 in 1972. And as newcomers defeat established champions with increasing frequency, the average tenure of the world’s top players is trending down. Moreover, today’s Grandmasters hail from far more diverse backgrounds than did their predecessors. As the writer D. T. Max observed: “In 1991, the year the Soviet Union broke up, the top nine players in the world were from the U.S.S.R. By then, Soviet-trained players had held the world championship for all but three of the past forty-three years.”⁵

Not anymore. More competitors are now capable of climbing to the top of the chess leagues, and they come from a wide variety of nations and neighborhoods. But once they reach the top, they have a hard time staying there. As Mig Greengard, a chess blogger, observed: “You’ve got two hundred guys walking the planet who, with a little tailwind, are playing strongly enough to beat the world champion.”⁶ In other words, among today’s Grandmasters, power itself is no longer what it used to be.

What explains these changes in the world’s chess hierarchy? In part (but only in part): the digital revolution.

For some time now, chess players have had access to computer programs that enable them to simulate millions of games played by the world’s best players. They can also use the software to work out the implications of every possible move; for instance, competitors can replay any game, examine moves under various scenarios, and study specific players’ tendencies. Thus the Internet has both broadened the horizons of chess players around the world and—as James Black’s story attests—opened new possibilities for players of any age and socioeconomic background. Countless chess sites deliver data and competitive game opportunities to anyone with a Web connection.⁷

But this story isn’t just about technology. Take, for example, the case of the young Norwegian champion Magnus Carlsen, another chess phenom who in 2010 became the world’s No. 1 player, at age nineteen. According to D. T. Max, who profiled him for The New Yorker, Carlsen’s success had more to do with his unorthodox and surprising strategies (relying in part on his prodigious memory) than with computer-based training: “Because Carlsen has spent less time than most of his cohort training with computers, he is less prone to play the way they do. He relies more on his own judgment. This makes him tricky for opponents who have relied on software and databases for counsel.”⁸

The demolition of the power structure of world chess also stems from changes in the global economy, in politics, and in demographic and migratory patterns. Open borders and cheaper travel have given more players the chance to play tournaments anywhere in the world. Higher education standards and the spread of literacy, numeracy, and child healthcare have created a bigger pool of potential Grandmasters. And today, for the first time in history, more people live in cities than in farms—a development that, along with the prolonged period of economic growth enjoyed by many poor countries since the 1990s, has opened new possibilities for millions of families for whom the game of chess was an unaffordable or even unknown luxury. But it is not easy to become a world-class chess player if you live on an isolated farm in a poor country with no electricity, or lack a computer, or spend many hours each day procuring food—or carrying water to your home. Before the Internet can deliver its empowering magic, many other conditions must be in place.

FROM THE CHESS BOARD . . . TO EVERYTHING AROUND US

Chess is a classic metaphor for power, of course. But what has happened to chess is the erosion, and in some cases the disappearance, of barriers that previously kept the world of champions small, tight-knit, and stable. The obstacles to understanding tactics and developing mastery, as well as all the other barriers that limit access to the top, have become less forbidding.

What has happened to chess is also happening to power in general. The tumbling down of barriers is transforming local politics and geopolitics, the competition for consumers and for believers in the great religions, and the rivalries among nongovernmental organizations, intellectual institutions, ideologies, and schools of philosophical thought and science. Wherever power matters, power is also decaying.

Some signs of this transformation are breathtakingly clear; others are unearthed by expert analysis and academic research.

Let’s begin with geopolitics. Sovereign states have quadrupled in number since the 1940s; moreover, they now compete, fight, or negotiate not just with each other but also with numerous transnational and nonstate organizations. In fact, the 2011 birth of South Sudan, the world’s newest nation, was effectively midwifed by dozens of nongovernmental organizations, especially evangelical Christian groups such as Samaritan’s Purse, run by Franklin Graham, one of the sons of American mega-preacher Billy Graham.

Indeed, when nation-states go to war these days, big military power delivers less than it once did. Wars are not only increasingly asymmetric, pitting large military forces against smaller, nontraditional ones such as insurgents, separatist movements, and militias. They are also increasingly being won by the militarily weaker side. According to a remarkable Harvard study, in the asymmetric wars that broke out between 1800 and 1849, the weaker side (in terms of soldiers and weapons) achieved its strategic goals in 12 percent of cases. But in the wars that erupted between 1950 and 1998, the weak side prevailed more often: 55 percent of the time. For a variety of reasons, the outcome of modern asymmetric conflicts is more likely to be determined by the interplay of opposing political and military strategies than by blunt military force. Thus, a large, advanced army by itself no longer ensures that a country will achieve its strategic goals. One important factor behind this shift is the increasing ability of the weaker party to inflict casualties on its opponent at lower cost to itself. The use of improvised explosive devices (IEDs) in Afghanistan and Iraq is a case in point. One Marine general in Afghanistan estimated that IEDs caused 80 percent of casualties in his unit, and during some years in Iraq, IEDs were responsible for almost two-thirds of the casualties suffered by coalition forces. This level of lethality prevails despite considerable investment by the Pentagon in countermeasures, including the $17 billion it spent to purchase 50,000 radio frequency jammers aimed at neutralizing the primitive remote-controlled devices (cellphones, garage door openers) used to detonate the bombs.⁹

Dictators and party bosses, too, are finding their power diminished and their numbers depleted. In 1977, a total of eighty-nine countries were ruled by autocrats; by 2011, the number had dwindled to 22.¹⁰ Today, more than half the world’s population lives in democracies. The tremors of the Arab Spring were felt in every corner of the world where clean elections are not held regularly and one person or ruling clique is trying to hold on to power indefinitely. Even in nondemocracies where political parties are allowed, minority parties have three times more representation now than in the 1980s. And everywhere, party bosses are back on their heels, as they contend with candidates and leaders emerging from realms outside the proverbial smoke-filled back rooms. About half of the major parties in established democracies now use primaries or some other representative method to give the rank-and-file more of a say in choosing their standard-bearers. From Chicago to Milan and New Delhi to Brasilia, the bosses of political machines will readily tell you that they have lost the ability to deliver the votes and decisions that their predecessors took for granted.

The business world is also being touched by this trend. It is indubitable that income is concentrating, the wealthy are accumulating enormous riches, and some are using money to gain political power. But that trend, as alarming as it is unacceptable, is not the only force shaping the workings of power among corporate leaders and wealthy investors.

Indeed, even the vaunted 1 percent in the United States are not immune to sudden shifts in wealth, power, and status. For all the rise in income inequality, the Great Recession also had a corrective effect, disproportionately affecting the incomes of the rich. According to Emmanuel Saez, a Berkeley economics professor, it caused a 36.3 percent drop in the incomes of the top 1 percent of earners in the United States, compared to an 11.6 percent drop for the remaining 99 percent.¹¹ Steven Kaplan at the University of Chicago’s Booth School of Business has calculated that the proportion of income accounted for by the top 1 percent fell from its peak of 23.5 percent of income in 2007 to 17.6 percent in 2009 and, as Saez’s data show, it kept falling in following years. Indeed, as Robert Frank reported in the Wall Street Journal, “The super-high earners have the biggest crashes. The number of Americans making $1 million or more fell 40 percent between 2007 and 2009, to 236,883, while their combined incomes fell by nearly 50 percent—far greater than the less than 2 percent drop in total incomes of those making $50,000 or less, according to Internal Revenue Service figures.”¹² None of this, of course, means that the concentration of income and wealth in many advanced democracies, and especially the United States, has not dramatically increased. It has—and quite sharply. But this reality should not obscure the fact that some wealthy individuals and families have also been hit by the economic crisis and as a result have experienced significant declines in their fortunes and economic power.

Moreover, personal income and wealth are not the only sources of power. The leaders at the helm of large corporations often wield more power than the “simply” rich. Corporate heads nowadays earn much more than before, but tenure at the top has become as tenuous as that of a chess champion. In 1992, a US Fortune 500 CEO had a 36 percent chance of retaining his or her job for the next five years; in 1998, that chance was down to 25 percent. By 2005, the average tenure of an American CEO had dwindled to six years. And the trend is global. In 2011, 14.4 percent of CEOs of the world’s 2,500 biggest listed companies left their jobs. Even in Japan, famous for its relative corporate stasis, forced succession among the heads of large corporations quadrupled in 2008.¹³

The same goes for the corporations themselves. In 1980, a US corporation in the top fifth of its industry had only a 10 percent risk of falling out of that tier in five years. Two decades later, that likelihood had risen to 25 percent. Now, a simple count of the US and global top five hundred companies that did not exist ten years ago shows how relative newcomers are displacing traditional corporate behemoths. In finance, banks are losing power and influence to newer and nimbler hedge funds: in the second half of 2010, in the midst of a sharp economic downturn, the top ten hedge funds—most of them unknown to the general public—earned more than the world’s largest six banks combined. Even the largest of these funds, which manage unfathomable amounts of money and earn huge profits, operates with only a few hundred employees.

Meanwhile, corporations have become much more vulnerable to “brand disasters” that hit their reputations, revenues, and valuations. One study found that the five-year risk of such a disaster for companies that own the most prestigious global brands has risen in the last two decades from 20 percent to a staggering 82 percent. BP, Tiger Woods, and Rupert Murdoch’s News Corporation all saw their fortunes shrink almost overnight as a result of events that scarred their reputations.

In yet another manifestation of the diffusion of power in business, members of a new species, “poor-country multinationals” (i.e., those that come from less developed countries), have displaced or taken over some of the largest companies in the world. Investments originating in developing countries went from $12 billion in 1991 to $210 billion in 2010. The world’s largest steel company, ArcelorMittal, has its roots in Mittal Steel, an Indian company created as recently as in 1989.¹⁴ When Americans sip their iconic Budweiser, they are in fact enjoying a beer produced by a company engendered by a 2004 merger of Brazilian and Belgian breweries that in turn managed to gain control of Anheuser-Busch in 2008, thus forming the world’s largest beer company. Its CEO, Carlos Brito, is from Brazil.

These trends extend beyond traditional power arenas—war, politics, business—into philanthropy, religion, culture, and the personal power of individuals. The number of new billionaires set a record in 2010, and each year some names disappear from the list while previously unknown individuals hailing from the four corners of the world take their places.

No longer the province of a few major foundations and public and international organizations, philanthropy has exploded into a constellation of small foundations and new modes of giving that in many cases directly match contributors with beneficiaries, bypassing the classic model of charities. International giving by US individuals and institutions quadrupled in the 1990s and doubled again from 1998 to 2007, when it reached $39.6 billion—a sum more than 50 percent larger than the World Bank’s annual commitments. In the United States, the number of foundations increased from 40,000 in 1975 to more than 76,000 in 2012. Actors, athletes, and other A-list habitués ranging from Oprah Winfrey and Bill Clinton to Angelina Jolie and Bono have supercharged celebrity giving. And of course the new mega-foundations endowed by Bill and Melinda Gates, Warren Buffet, and George Soros are upending traditional ways of doing business in the big-foundation world. Thousands of newly wealthy technology tycoons and hedge fund managers are also entering the world of “giving” much sooner and making available larger amounts of money than had previously been the norm. “Venture philanthropy” has led to a new industry designed to advise, support, and channel such money. The United States Agency for International Development (USAID), the World Bank, and the Ford Foundation not only face more competitors who have harnessed the Internet and other technology to their advantage, but more public scrutiny and conditions from activists, recipients, and host governments.

Similarly, the long-entrenched power of the major organized religions is decaying at a remarkably rapid pace. For instance, Pentecostal churches are advancing in countries that were once strongholds for the Vatican and mainline Protestant churches. In Brazil, Pentecostals and charismatics made up only 5 percent of the population in 1960—compared to 49 percent in 2006. (They comprise 11 percent in South Korea, 23 percent in the United States, 26 percent in Nigeria, 30 percent in Chile, 34 percent in South Africa, 44 percent in the Philippines, 56 percent in Kenya, and 60 percent in Guatemala.) Pentecostal churches are typically small and tailored to local believers, but some have expanded and crossed borders; examples include Brazil’s Igreja Universal do Reino de Deus (IURD), which boasts 4 million members, and Nigeria’s Redeemed Christian Church of God (RCCG). One Nigerian pastor has a 40,000-member church in Kiev, Ukraine. Meanwhile, what experts call “organic churches”—that is, grassroots, hands-on, non-hierarchical churches that spring up in communities—are challenging Catholicism and the Church of England from within. And Islam, not centralized to begin with, is continuing to splinter as scholars and imams offer conflicting interpretations from televised platforms.

Add to all this the similar trends being observed in labor, education, art, science—even professional sports—and the picture fills in. It is a picture of power scattered among an increasing number of newer, smaller players from diverse and unexpected origins, much as we see in chess. And these players are using a very different playbook from the one on which traditional players have long relied.

I KNOW THAT ARGUING THAT POWER IS BECOMING MORE FRAIL AND