I helped to organize a conference over the weekend in Southampton, NY under the auspices of the Atlantic Council, a Washington DC-based think tank which seeks to strengthen ties between the US and Europe. The President of the Atlantic Council, Fred Kempe, former editor of the Wall Street Journal Europe, assembled a terrific group of speakers, including Richard Holbrooke, former US Ambassador to the United Nations, Brent Scowcroft, National Security Advisor to Presidents Ford and Bush, and financier George Soros. Here are some of the highlights of the meeting:
1) There is a tremendous shift in financial resources from the developed to the developing world. Brian Henderson, Chairman, Global Public Sector at Merrill Lynch, said that of the $5.7 trillion on deposit in government central banks, 38% is in the BRIC nations (Brazil, Russia, India, China), with China holding $1.3 trillion, up 42% in the past year alone and Russia at $417 billion, up 57% in the past year. Five nations in the Middle East hold $1.7 trillion, the largest single concentration of assets. Much of the shift is attributable to commodity prices, with earnings to OPEC nations rising from $200 billion in 2002 to $600 billion in 2007. Matthew Bishop, US Editor of the Economist Magazine suggested that we have moved from a bi-polar (Cold War) to a uni-polar (post Cold War) to a multi-polar world.
2) Sovereign wealth funds such as the Kuwait Investment Authority, initially conceived as stabilization mechanisms to manage commodity price fluctuations, now are investing in commercial concerns via investment vehicles offered by Barclays Bank among others. Investment protectionism, of the type witnessed a year ago in the failed attempt by Dubai Ports to acquire assets in the US, is a serious threat to global prosperity. At present a large bank in Portugal is rebuffing efforts by the Angola State Fund to take a large share position, particularly ironic given the colonial past of those nations.
3) Asian nations and companies are particularly well positioned at present, having paid down their debt and accumulated reserves since the debt crisis of 1998, said Bob Hormats, vice chairman of Goldman Sachs. There is real risk in economic nationalism; the US has to resist the temptation to restrict trade as part of the election cycle.
4) The new model for policy-making must be networked governance, according to Ashraf Ghani, former Finance Minister of Afghanistan and now Chancellor of Kabul University. “There is a new relationship between markets, government, investors and the corporate sector. The International Monetary Fund and World Bank will not suffice in making change; government no longer holds the monopoly on information or power. We need a new social compact that also considers civil society (NGOs),” he said.
5) Climate change was a continuing topic of discussion. Sherri Goodman, former Under Secretary of Defense for Environmental Security, said that the effects, ranging from sea level change to agricultural crop pattern shift from temperature rises and rainfall could be a “threat multiplier for Africa and Asia.” She noted that India is building a fence to prevent further immigration from Bangladesh. She also said that China has now passed the US as the number one emitter of greenhouse gases, with a new coal-fired electricity plant coming on stream each week, offsetting any reduction in the rest of the world.
6) Africa will be a new focus of world attention because of its oil assets, according to Dan Yergin, President of Cambridge Energy Research Associates and General Chuck Wald, former Deputy Commander of the US European Command. Wald noted that Africa already supplies more of US oil imports that the Middle East and could represent 40% of US oil imports by 2020. A further advantage of Africa is lack of “choke points”; 25% of total oil supply goes through the Straits of Hormuz, next door to Iran.
7) We witnessed a most fascinating debate between Dick Holbrooke and Brent Scowcroft on US policy in Iraq. Holbrooke suggested that the surge in troop numbers is bound to fail, that the American public is demanding a serious draw down in our presence and that we should use the next months to find a political solution. Scowcroft wants to get American troops “out of the business of population protection” and to contain the Iraq problem by engaging its neighbors in a broader discussion of the Middle East including the Palestine issue. Scowcroft does not believe in the Biden-Gelb three region concept because it does not envisage a strong central government to divide oil revenues.
The reality for those of us in PR is that we will be managing in an ever more complex context, with more-cross border deals, cross-cultural trends and an increasing number of voices seeking to influence the debate.