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The transience of power

2013-03-21 13:41:55

The powerful do not stay that way for long

Mar 16th 2013 |From the print edition

IF PARTISANS on the left and right agree on anything, it is that power is

becoming more concentrated. Occupy Wall Street types protest against the

all-powerful 1%. Tea-partiers rage against the cosmopolitan elite. Al Gore s

presidential campaign in 2000 may have been inept, but his campaign slogan the

people versus the powerful is defining the politics of the 21st century.

It is easy to see why. During the financial crisis governments used oceans of

public money to rescue banks from the consequences of their own folly and

greed. Bankers quickly went back to paying themselves fat bonuses. Inequality

is growing in many countries. Plutocrats wax richer as the middle class is

squeezed and the poor are trodden underfoot. Hedge-fund moguls and casino kings

spend fortunes to sway American elections and the Supreme Court tells them to

carry on spending.

Such is the popular view of power. Mois s Na m says it is bunk. In The End of

Power Mr Na m, a former Venezuelan cabinet minister now ensconced at the

Carnegie Endowment for International Peace, a think-tank, argues forcefully

that rigid pyramids of power are collapsing. Micropowers are learning how to

frustrate macropowers. Bigwigs are finding it harder to wield power and harder

to hold on to it. The barriers that used to protect insiders, such as economies

of scale and long-established relationships, are crumbling.

In the 1950s and 1960s the corporate world was ruled by cabals of giants by the

Big Three in American cars and broadcasting and the Seven Sisters in global

oil. C. Wright Mills, a sociologist, complained that America was ruled by a

tiny elite. J.K. Galbraith, an economist, argued that there was not much

difference between state planning as practised by the Russians and corporate

planning as practised by General Motors.

Today s corporate world could hardly be more different. Time is being

compressed: Google was incorporated only in 1998 but is now one of the world s

biggest companies. Geography too is being tightened: who would have guessed in

Galbraith s day that one of the world s leading aircraft-makers would be

Brazilian (Embraer) or that one of its most innovative clothes brands would be

Spanish (Zara)? In 1980 a corporation in the top fifth of its industry had only

a 10% chance of falling out of that tier in five years. Eighteen years later

that chance had risen to 25%.

Bosses, too, spend less time at the helm: the tenure of the average American

chief executive has plunged from about ten years in the 1990s to

five-and-a-half today. Those who disappoint are held to account: about 80% of

CEOs of S&P 500 companies are ousted before retirement. Bosses must confront a

growing army of critics from within the capitalist system: look at the way that

Apple s head honcho, Tim Cook, has been roasted by angry investors. They also

face a growing army of critics from outside. Even banks have been chided for

sins such as interest-rate rigging (Barclays), money-laundering (HSBC) and

illicit dealings with Iran (Standard Chartered).

The same pattern is being repeated in every walk of life. Take politics. In

2012 only four of the OECD s 34 countries had governments with an absolute

majority in parliament. The Netherlands spent four months without a government

in 2010. Belgium spent 541 days without one in 2010-11. Established parties are

ceding ground to upstarts such as the UK Independence Party or Beppe Grillo s

Five Star Movement in Italy. They are also constrained by rival power centres,

both transnational and provincial. Or take organised labour. In America big

labour s clout is waning faster than that of big business. Unionisation in the

private sector has fallen from 40% in 1950 to less than 7% today. Old labour

baronies such as the AFL-CIO have been challenged by upstarts such as the

Service Employees International Union.

Why is power becoming more evanescent? Mr Na m is reluctant too reluctant to

credit the internet, which is surely the most obvious force undermining

hierarchy. He points instead to three revolutions: more , mobility and

mentality . Global GDP has grown fivefold since 1950, so more people have

access to more things than ever before. People are more mobile; the UN

estimates that there are 214m migrants in the world, 37% more than two decades

ago. People are also more self-directed (or egotistic). Even in Saudi Arabia

20% of marriages end in divorce.

There are obvious objections to Mr Na m s argument. The supposedly anarchic

internet is now ruled by five big companies (except in China, where the state

calls the shots). Among banks and accountancy firms, power is more concentrated

than it was at the turn of the century. Amazon and eBay may grow more dominant

than any of the giant retailers of the 1950s.

Look on my works, ye Mighty, and despair

But Mr Na m has good objections to the objections. His argument is not that

companies are shrinking but that they are becoming more fragile. Internet

giants can no longer rely on the economies of scale that kept General Motors

and Sears on top for decades. Rather, they must constantly struggle to keep

their products innovative and their brands fashionable or fall prey to more

agile upstarts. Powerful people are less secure than they were, too. The

composition of the top 1% is constantly changing as CEOs lose their jobs and

young go-getters outpace their elders.

Mr Na m celebrates the anti-power revolution for holding the mighty to account

and providing ordinary people with opportunities. But he sees downsides, too.

The more slippery power becomes, the more the world is ruled by short-term

incentives and ever-changing fears. Politicians fail to tackle long-term

problems such as climate change. Companies think of little besides the struggle

for survival. Nonetheless, it would be worse if the populists were right and

the 1% really did rule the world.