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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.