Nader Mousavizadeh provides a framework to help directors understand a new world order of fragmentation and divergence. Zilla Efrat reports.
If you are battling with making business decisions in an uncertain world, you had better get used to it!
That was the message from Nader Mousavizadeh, co-founder and partner at UK-based Macro Advisory Partners, when addressing Company Directors’ annual conference on Hamilton Island in May.
“Uncertainty is here to stay and organisations and their leaders will have to focus on resilience, adaptability and nimbleness going forward,” he said. “Having set expectations will get most people into trouble.”
But Mousavizadeh did try to cut through that uncertainty by painting a picture of the world directors could expect to operate in and the factors that would influence it.
One was the growing trend for macro drivers, such as the growth in China and post-GFC regulation, to “swamp everything” and determine what happened at the individual company level and in markets.
Mousavizadeh said the state was playing a much bigger role in shaping the business landscape, not only in developing countries such as China, Brazil and Russia, but also in developed economies. This meant directors could no longer separate politics and economics in their decision-making or examine one without the other.
“We are in the age of the political economy and China is an example of this,” he said. “Its economic management is so infused with questions of power and political leadership stability.”
While capitalism had won as a model for economic growth and innovation, Mousavizadeh believed that in many countries, the state was increasingly playing a central role in regulating assets and shaping the environment that provided predictability, accountability and the rule of law. “We will see a stronger role for the state co-existing with a capitalist model, more states integrating government and private interests and more economies asking the state to back big industries,” he said.
He added that the global environment was now characterised as much by divergence and fragmentation as it was by convergence. We had, he said, moved on from author Thomas L. Friedman’s view of a flat world or level playing field where all competitors had equal opportunity and where historical and geographical divisions had become increasingly irrelevant.
He said Version 1.0 of globalisation had seen the rise of the British Empire. Version 2.0, spearheaded by the US after World War II, saw a push towards global institutions and free markets. “We are entering Version 3.0 now and it looks very different from the first two,” he said. “It is one that is restoring fragmentation and divergence – a map of the world that does not look flat or like it is converging into one model. It’s much more like an archipelago: a series of islands of economic and value systems, human rights standards and models of political and economic governance.”
Co-existing alongside each other would be different forms of economic management defined by different ideas about the role of the state and the importance of social equity.
“Trade will no longer be negotiated under one agreement, but increasingly through bilateral agreements and regional arrangements,” said Mousavizadeh.
He also pointed to countries like Russia and China creating their own separate banking or payment systems, internets or energy markets to retain control and avoid sanctions.
“This is not the globalism we grew up with,” said Mousavizadeh. “It is not the globalism that seemed like one long and winding road to the US model. But it is one that puts a premium on our ability to think in the shoes of a business or government leader in Vietnam, Indonesia, Columbia or Brazil to gauge how they are trying to marry their new economic strengths with fundamentally different views on how their economies should be governed and how politics should be conducted.”
He added: “The world has been remarkably free of large interstate conflict for about 25 years, but conflict has not gone away. What we see in Russia and the Ukraine today is a reminder of this.”
He identified three types of conflicts we were likely to see more of in the 21st century:
- A regionalisation of great power politics with China focusing its geo-political interests on the Asia Pacific region, Russia behaving more like it has recently in the Ukraine and the US looking more to the Americas.
- A greater use of cyber-attacks, drones and Special Forces. Cyber-attacks were already being used in conflicts between nations and against the private sector.
- A rise of actors like the Taliban or Boko Haram in Nigeria who operated outside any kind of national interests, but were a major threat.
Mousavizadeh said the Arab Spring had shown that to survive, political leaders of the future would need to have legitimacy of power and accountability for this power. So would business leaders.
“A CEO’s power cannot be assumed or be won simply by providing higher returns and great profits year in and year out,” he said.
“There is a broader set of questions and demands that today makes power increasingly fragile, more open to questioning and places a higher demand on leaders to demonstrate that the power they have has been legitimately earned and that they are willing to hold themselves and those around them accountable for their actions.”
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