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The New World Order Is Ruled By Global Corporations And Megacities—Not Countries

As cities and companies gain in influence and the power of nation-states decreases, the world is undergoing a seismic transformation.

The New World Order Is Ruled By Global Corporations And Megacities—Not Countries

Photo: bluehand via Shutterstock

Ask yourself, honestly: If Uruguay or Guinea-Bissau disappeared off the face of the Earth, would you really notice? Now what about if Google disappeared from your Internet browser or Coca-Cola from your grocery store shelves?

We all know that quite a few corporations or terrorist groups have more influence in the world than many states do, but have yet to place them all in a single framework that measures them according to their reach and relevance. And yet such a "Mindshare Matrix" is precisely what we need to properly understand the 21st century landscape of power. Rather than comparing only apples to apples (countries to countries, companies to companies) in silos—as all existing rankings of power, wealth, brand recognition, or other assets do—this matrix would place countries, cities, companies, cyber-communities, and other contenders on the same playing field.

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Consider how an American or French citizen can kill in the name ISIS, a non-state terrorist regime in Syria where the civil war it stokes has caused a refugee wave of more than one million migrants into Europe alone, shaking the world’s wealthiest nations’ domestic and foreign policies. Or how Argentines have been using the cryptocurrency Bitcoin to evade their government’s capital controls, undermining a once hot emerging market’s credibility in global financial markets. Whether acting as a state or serving as the conduit to evade one, ISIS and Bitcoin—or Anonymous and Telegram—blur the traditional boundaries between domestic and international, physical and virtual. They are perfectly at home though in the Mindshare Matrix, where loyalty is up for grabs.

The following is an excerpt from the a new book, Connectography: Mapping the Future of Global Civilization, by Parag Khanna, a senior research fellow at the Center on Asia and Globalization at the Lee Kuan Yew School of Public Policy in Singapore.

The 5 "Cs" of a Complex World

A simple typology helps us to understand the range of players competing in the Mindshare Matrix. These are roughly the 5 "Cs": countries, cities, commonwealths, companies, and communities. What matters more than their latent power—nuclear weapons or cash piles—is their ability to deploy resources to build leverage within the system. Power, then, is a function of connectivity—only the most connected powers can win.

Let’s start with countries. There are only a handful of "systemically relevant" countries on the global stage, to borrow a phrase from the global financial regulatory lexicon. The U.S. and China stand out as superpowers, with the U.S. leading in military and monetary terms and China edging ahead in trade and outbound infrastructure investment. China is now the largest trade partner of 124 countries, more than twice as many as the U.S. (52).

Meanwhile, second-tier states such as Russia, India, and Brazil are as fragile as they are ambitious. Emerging powers from Nigeria to Iran to Indonesia are, at most, regionally influential. As for the remaining mostly postcolonial states created since World War II, more than one hundred of them together represent less than 3% of global GDP and an even lower share of world trade—they lack both economic mass and international connectivity. What Adam Smith mused about 18th century China applies to them in spades: If it were "swallowed up by an earthquake," even civilized observers would make little more than "melancholy reflections" and express "humane sentiments," but ultimately would return to their business or pleasure "with the same ease and tranquility, as if no such accident had happened." In other words, they just don’t occupy much mindshare. For better or worse, if half the countries in the world sunk into the sea, as is happening to the Maldives and Kiribati, it’s not likely it would be covered on the evening news in America (and certainly not during an election year)—unless Madonna or Angelina Jolie were on holiday or adopting a child there.

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There are quite a few more systemically relevant companies than there are countries. More than 30 financial institutions have consolidated assets greater than $50 billion each—meaning each has more assets than two-thirds of the world’s countries produce in annual GDP. For hundreds of millions of customers around the world today, bank accounts are a lifeline as or more important than citizenship. Looking beyond banks, there are fewer than five countries in the world whose GDP is larger than the more than $200 billion of liquid cash Apple holds in securities worldwide, meaning Apple could buy many countries’ combined output (minus their debt). Having sold almost 2 billion products to more than one billion people, Apple not only has more money but also occupies greater mindshare than most nations as well.

Importantly, many of the world’s largest and most powerful private companies are no longer (if they ever were) agents of their "home" countries; they are becoming stateless superpowers in their own right. America’s consistent soft power appeal is rooted to some degree in the appeal of it brands: From Microsoft to McDonald’s, American companies dominate the advertising giant WPP’s brand index in visibility and reputation. But many of these companies are not so much American as "American." Their brands transcend their national origin—as do their commercial ambitions. Whereas countries need companies as ambassadors, the reverse is far less true. It is no surprise then that Facebook or Coca-Cola can enjoy such success worldwide irrespective of foreign publics’ sentiment toward the U.S. The high-profile cases of American corporations using transfer pricing and inversions to create conglomerates domiciled in low-tax jurisdictions to evade U.S. corporate taxes are further evidence that companies increasingly view countries not as sovereign masters to be obeyed but jurisdictions to be negotiated. Just ask Halliburton—but make sure you call during daylight hours in Dubai, to which it has shifted its global headquarters.

Because foreign investment dwarfs official aid flows, and brings with it jobs, skills, and technology, companies hold growing leverage over where to locate their operations. Governments have become what early political economist Susan Strange called "supplicants" engaged in a "triangular diplomacy" with firms to attract their catalytic benefits. The first thing new Kenyan president Uhuru Kenyatta said (as do so many other leaders desperate to reassure markets) upon taking office in 2013 was that his country is "open for business."

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Small and weak countries in Africa and Southeast Asia are learning that the only way to have influence in a Matrix that cares more about connectivity than sovereignty is to lash together into currency and customs unions, free trade areas, or infrastructure-sharing agglomerations—anything to make them appear a larger market to invest in or to increase their bargaining power in negotiations. The Caribbean CARICOM, East African Community (EAC), and Southeast Asian ASEAN group all strive to be low-grade versions of the European Union, the archetype of the third "C": commonwealths. The world is becoming a collection of these internally borderless mega-regional groupings—including even the South American Union and eventually, as the successor to NAFTA, a North American Union.

These commonwealths are far more relevant players than the civilizations hypothesized by the late Harvard professor Samuel Huntington. Neither Christianity nor Islam (nor any other religion) has the coherence that these regional groupings are acquiring. The European Union, for example, remains the largest economic block in the world, and the 600 million citizens of ASEAN represent a larger GDP than India and attract more FDI than China. These regional confederations are much more the building blocks of the future world order than countries.

So too are cities (the fourth "C"). Germany may be a more important country in the world than the U.K., but London is a far more connected and influential city than any other in Europe. All cities belong to some state or the other, but in the Matrix, many cities matter as much to the world as to their home country—which is often a mere hinterland to the city. That is certainly the case in London, whose financial industry and real estate market are global centers of gravity while the city sucks all the talent from the rest of the U.K. In emerging markets, Sao Paulo, Lagos, Moscow, Johannesburg, and many other cities represent one-third to one-half of their national GDP. Developing-world megacities from Cairo to Mumbai to Manila have populations so large, and expanding geography so vast, that they have become urban archipelagos unto themselves whose orbit most "city-zens" will never actually leave. Not surprisingly, the popularity of mayors from Buenos Aires to Istanbul to Jakarta has propelled them to become heads of state in record numbers.

The 5th "C"—communities—is the ultimate expression of a Matrix world in which mindshare constitutes a discreet form of authority on par with national sovereignty. Diasporas and religious groups, to the extent they can congeal into meaningful associations, belong in this trans-territorial category. The Chinese, Indian, and Jewish diasporas, for example, are rich cultural and financial zones spanning every continent contributing to the $540 billion in remittances logged in 2014.

These are the largest of the "cloud communities" whose overall number and size are growing thanks to the Internet, which Wikileaks founder Julian Assange credits with enabling connected groups to anneal into empowered collectives. Nearly universal digital utilities such as Facebook are expected to run themselves as pro-member communities with greater, almost Constitution-like transparency within as they pursue their state-like agendas to expand connectivity worldwide to increase their user base (or membership). But social networks don’t hold sovereign territory and neither do citizens in any traditional or legal sense—rather they provide the tools for people to shape their welfare in an era where ever more of our personal, professional, and commercial life is mediated online. These ties can be used to motivate and crowd-finance virtual and real-world activities using cryptocurrencies.

Hacker groups such as Anonymous, the digital recruiting militants of ISIS, the recently terminated online drug bazaar Silk Road, the Facebook groups that helped self-organize the young revolutionaries of the Arab Spring, and many other cyber networks don’t exist just to challenge states but to serve their own agendas—often against each other. North Korean hackers steal data from Hollywood studios, Al Qaeda and ISIS compete for turf in Africa, Anonymous declares war on ISIS. If nations are merely "imagined communities" as the late Benedict Anderson famously termed it, then Facebook groups and other cloud communities can seem just as real.

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From Followers to Believers

Assessing the wide spectrum of the 5 Cs together rather than separately helps us to appreciate today’s bewildering complexity. Indeed, the most fundamental attribute of our emergent global system isn’t the shift from unipolarity to multipolarity (structural change), but rather the shift from a state-centric order to a multi-actor arena (systems change). Structural change happens every few decades; systems change only every few centuries. Structural change makes the world complicated; systems change makes it complex. The forces of capital and technology, which are accelerating the rise of non-state authorities, cannot be put back in the bottle by any hegemon, whether America or China.

Have we reached the tipping point where loyalty to horizontal or digital tribes truly supersedes the sense of belonging to vertical nation-states?

The recently published Global Trends 2030 report of the National Intelligence Council titled "Alternative Worlds" includes a very plausible scenario in which urbanization, technological advance, and capital accumulation accelerate the rise of private entities who effectively govern far-flung populations through supply chains and special economic zones (SEZs). "It is as if the central government acknowledges its own inability to forge reforms and then subcontracts out responsibility to a second party. In these enclaves, the very laws, including taxation, are set by somebody from the outside. Many believe that outside parties have a better chance of getting the economies in these designated areas up and going, eventually setting an example for the rest of the country." My only quibble with this fine analysis is that it describes the world of 2013, not 2030.

The scenario is illustrative of how supply chain operators have already begun to command loyalty. As Western governments cut public payrolls, millions of citizens have been left to fend for themselves amidst fewer benefits and higher taxes. Especially among youth, the future will be one of self-sufficiency rather than entitlement. National welfare, then, increasingly depends on the provision of employment by companies, and the economic activity and tax revenue they generate. In countries such as Greece, the lucky employed ask themselves: How much time does one spend as an engaged citizen in the public sphere, versus just getting by however one can?

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For those in the developing world not fortunate to leave home, de facto loyalty shifted from state to firm long ago. From the city of Jamshedpur in India, whose company-run services make it effectively a wholly owned subsidiary of Tata Steel, to FoxConn’s assembly plants across China, major corporations are not only a source of employment, but also skills training and thus relevance in the global economy. Whereas a half-century ago, there were only a half-dozen such SEZs. Today there are more than four thousand, making these new-age factory towns the world’s most rapidly spreading urban form.

The rise of thousands of pop-up cities is a major indication of the shift toward a hybrid public-private Matrix world. So too is the movement of people to them, both within and across borders. Migration provides very tangible evidence of the unmooring of nationality as the sole anchor of actionable loyalty. There are now more migrants than ever in history, nearly 300 million, with a sizeable proportion potentially never returning "home." These hundreds of millions of expats occupy every rung of the value chain from corporate executives in Asia to third-world guest workers in the Middle East. The highest number of Americans ever recorded, more than 9 million, now live abroad, with a record number—more than 4,000—giving up their U.S. citizenship each year. Despite the high-profile efforts of Facebook to lobby for larger visa quotas to recruit programmers to the U.S., most Silicon Valley technology companies are devoting their efforts in the opposite direction: Building their presence in fast-growing emerging markets. Will America experience brain drain as the quality of life in high-growth markets improves even more?

Furthermore, the more spending power Brazilians, Nigerians, Emiratis, Russians, Indians, and Chinese accrue, the more their passports are welcome visa-free in the West. At the same time, the automatic privileges of Western passports may erode given security concerns that Canadians, Americans, Swedes, British, and French citizens could also be ISIS members. The likely solution: A blockchain-based passport system linked to individual credentials rather than national identity. Your human right to mobility will be linked more to who you are today than the incidental fact of where you were born. This is not only a wonderful potential evolution on centuries of institutional prejudice, it also implies a world full of individuals for whom geographical roots are secondary to connectedness and access. Talk of "global citizens" won’t just be reserved for idealistic Model UN conferences.

One place is already becoming a stateless melting pot: Dubai. The world’s fastest-growing city, Dubai is already populated more than 90% by foreigners and allowing in on average more than 1 million people each decade with ambitious plans to colonize the desert. The millions of foreigners in Dubai will likely never become citizens of the United Arab Emirates, yet they are increasingly loyal to the place that allows them tax-free living and nonstop global connectivity. You can measure mindshare by seeing how people vote—with their feet.

The more mobility people have—physical and virtual—the more their loyalty will pass to whomever provides them with security and skills. This is how companies excel where governments have failed. Some companies spend more on upgrading employee skills than than entire countries do on education. WPP, whose annual profits hover around $16 billion, invests nearly $100 million per year on the training and well-being of its staff of 158,000, with greater numbers in the BRIC countries than the U.S. and U.K. combined. PWC conducts constant "re-skilling" of workers to transition to higher growth client sectors. DHL and Unilever, the world’s most extensive supply chain operators who can reach geographies that the Internet still hasn’t, sponsor frequent staff relocations to experience life with clients and counterparts in diverse markets.

Virtual connectivity is also building new and more stable loyalties. In a world that is more geodesic than geographic, the "where" becomes much less important than the "what." Facebook’s 1 billion members therefore don’t compete with nations, they transcend them. Facebook is not a country but a conduit for generating flash mobs of allegiance. China and other countries may seek to impose an oxymoronic "network sovereignty" on free access to information within their geographic borders, but this ultimately won’t stop the flows of data that make the Internet as a whole a universe of association and competition for mindshare.

Countries run by supply chains, cities that run themselves, communities that know no borders, and companies with more power than governments—all are evidence of the shift toward a new kind of pluralistic world system. The ranks of such global authorities that belong in a holistic Mindshare Matrix are rapidly growing.

From the book Connectography: Mapping the Future of Global Civilization by Parag Khanna. Copyright © 2016 by Parag Khanna. Reprinted by arrangement with Random House, a division of Penguin Random House, Inc. All rights reserved.

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