The End of Power (3 page)

Dictators and party bosses, too, are finding their power diminished and their numbers depleted. In 1977, a total of eighty-nine countries were ruled by autocrats; by 2011, the number had dwindled to 22.
¹⁰
Today, more than
half the world's population lives in democracies. The tremors of the Arab Spring were felt in every corner of the world where clean elections are not held regularly and one person or ruling clique is trying to hold on to power indefinitely. Even in nondemocracies where political parties are allowed, minority parties have three times more representation now than in the 1980s. And everywhere, party bosses are back on their heels, as they contend with candidates and leaders emerging from realms outside the proverbial smoke-filled back rooms. About half of the major parties in established democracies now use primaries or some other representative method to give the rank-and-file more of a say in choosing their standard-bearers. From Chicago to Milan and New Delhi to Brasilia, the bosses of political machines will readily tell you that they have lost the ability to deliver the votes and decisions that their predecessors took for granted.

The business world is also being touched by this trend. It is indubitable that income is concentrating, the wealthy are accumulating enormous riches, and some are using money to gain political power. But that trend, as alarming as it is unacceptable, is not the only force shaping the workings of power among corporate leaders and wealthy investors.

Indeed, even the vaunted 1 percent in the United States are not immune to sudden shifts in wealth, power, and status. For all the rise in income inequality, the Great Recession also had a corrective effect, disproportionately affecting the incomes of the rich. According to Emmanuel Saez, a Berkeley economics professor, it caused a 36.3 percent drop in the incomes of the top 1 percent of earners in the United States, compared to an 11.6 percent drop for the remaining 99 percent.
¹¹
Steven Kaplan at the University of Chicago's Booth School of Business has calculated that the proportion of income accounted for by the top 1 percent fell from its peak of 23.5 percent of income in 2007 to 17.6 percent in 2009 and, as Saez's data show, it kept falling in following years. Indeed, as Robert Frank reported in the
Wall Street Journal
, “The super-high earners have the biggest crashes. The number of Americans making $1 million or more fell 40 percent between 2007 and 2009, to 236,883, while their combined incomes fell by nearly 50 percent—far greater than the less than 2 percent drop in total incomes of those making $50,000 or less, according to Internal Revenue Service figures.”
¹²
None of this, of course, means that the concentration of income and wealth in many advanced democracies, and especially the United States, has not dramatically increased. It has—and quite sharply. But this reality should not obscure the fact that some wealthy individuals and families have also been hit
by the economic crisis and as a result have experienced significant declines in their fortunes and economic power.

Moreover, personal income and wealth are not the only sources of power. The leaders at the helm of large corporations often wield more power than the “simply” rich. Corporate heads nowadays earn much more than before, but tenure at the top has become as tenuous as that of a chess champion. In 1992, a US Fortune 500 CEO had a 36 percent chance of retaining his or her job for the next five years; in 1998, that chance was down to 25 percent. By 2005, the average tenure of an American CEO had dwindled to six years. And the trend is global. In 2011, 14.4 percent of CEOs of the world's 2,500 biggest listed companies left their jobs. Even in Japan, famous for its relative corporate stasis, forced succession among the heads of large corporations quadrupled in 2008.
¹³

The same goes for the corporations themselves. In 1980, a US corporation in the top fifth of its industry had only a 10 percent risk of falling out of that tier in five years. Two decades later, that likelihood had risen to 25 percent. Now, a simple count of the US and global top five hundred companies that did not exist ten years ago shows how relative newcomers are displacing traditional corporate behemoths. In finance, banks are losing power and influence to newer and nimbler hedge funds: in the second half of 2010, in the midst of a sharp economic downturn, the top ten hedge funds—most of them unknown to the general public—earned more than the world's largest six banks combined. Even the largest of these funds, which manage unfathomable amounts of money and earn huge profits, operates with only a few hundred employees.

Meanwhile, corporations have become much more vulnerable to “brand disasters” that hit their reputations, revenues, and valuations. One study found that the five-year risk of such a disaster for companies that own the most prestigious global brands has risen in the last two decades from 20 percent to a staggering 82 percent. BP, Tiger Woods, and Rupert Murdoch's News Corporation all saw their fortunes shrink almost overnight as a result of events that scarred their reputations.

In yet another manifestation of the diffusion of power in business, members of a new species, “poor-country multinationals” (i.e., those that come from less developed countries), have displaced or taken over some of the largest companies in the world. Investments originating in developing countries went from $12 billion in 1991 to $210 billion in 2010. The world's largest steel company, ArcelorMittal, has its roots in Mittal Steel, an Indian
company created as recently as in 1989.
¹⁴
When Americans sip their iconic Budweiser, they are in fact enjoying a beer produced by a company engendered by a 2004 merger of Brazilian and Belgian breweries that in turn managed to gain control of Anheuser-Busch in 2008, thus forming the world's largest beer company. Its CEO, Carlos Brito, is from Brazil.

These trends extend beyond traditional power arenas—war, politics, business—into philanthropy, religion, culture, and the personal power of individuals. The number of new billionaires set a record in 2010, and each year some names disappear from the list while previously unknown individuals hailing from the four corners of the world take their places.

No longer the province of a few major foundations and public and international organizations, philanthropy has exploded into a constellation of small foundations and new modes of giving that in many cases directly match contributors with beneficiaries, bypassing the classic model of charities. International giving by US individuals and institutions quadrupled in the 1990s and doubled again from 1998 to 2007, when it reached $39.6 billion—a sum more than 50 percent larger than the World Bank's annual commitments. In the United States, the number of foundations increased from 40,000 in 1975 to more than 76,000 in 2012. Actors, athletes, and other A-list habitués ranging from Oprah Winfrey and Bill Clinton to Angelina Jolie and Bono have supercharged celebrity giving. And of course the new mega-foundations endowed by Bill and Melinda Gates, Warren Buffet, and George Soros are upending traditional ways of doing business in the big-foundation world. Thousands of newly wealthy technology tycoons and hedge fund managers are also entering the world of “giving” much sooner and making available larger amounts of money than had previously been the norm. “Venture philanthropy” has led to a new industry designed to advise, support, and channel such money. The United States Agency for International Development (USAID), the World Bank, and the Ford Foundation not only face more competitors who have harnessed the Internet and other technology to their advantage, but more public scrutiny and conditions from activists, recipients, and host governments.

Similarly, the long-entrenched power of the major organized religions is decaying at a remarkably rapid pace. For instance, Pentecostal churches are advancing in countries that were once strongholds for the Vatican and mainline Protestant churches. In Brazil, Pentecostals and charismatics made up only 5 percent of the population in 1960—compared to 49 percent in
2006. (They comprise 11 percent in South Korea, 23 percent in the United States, 26 percent in Nigeria, 30 percent in Chile, 34 percent in South Africa, 44 percent in the Philippines, 56 percent in Kenya, and 60 percent in Guatemala.) Pentecostal churches are typically small and tailored to local believers, but some have expanded and crossed borders; examples include Brazil's Igreja Universal do Reino de Deus (IURD), which boasts 4 million members, and Nigeria's Redeemed Christian Church of God (RCCG). One Nigerian pastor has a 40,000-member church in Kiev, Ukraine. Meanwhile, what experts call “organic churches”—that is, grassroots, hands-on, non-hierarchical churches that spring up in communities—are challenging Catholicism and the Church of England from within. And Islam, not centralized to begin with, is continuing to splinter as scholars and imams offer conflicting interpretations from televised platforms.

Add to all this the similar trends being observed in labor, education, art, science—even professional sports—and the picture fills in. It is a picture of power scattered among an increasing number of newer, smaller players from diverse and unexpected origins, much as we see in chess. And these players are using a very different playbook from the one on which traditional players have long relied.

I KNOW THAT ARGUING THAT POWER IS BECOMING MORE FRAIL AND
vulnerable goes against the widespread perception to the contrary—the perception that we are living at a time when power is becoming more concentrated and that those who have it are stronger and more entrenched than ever before. Indeed, many people think that power is like money: having it increases the chances of having even more of it. From this perspective, the self-perpetuating cycle of concentration of power and wealth can be considered a central driver of human history. And, surely, the world is full of people and institutions that have immense power and are not about to lose it. But the pages ahead will show that looking at the world through this prism hides very important aspects of the way things are changing.

As we shall see, there is much more going on than a simple shift in power from one coterie of influential players to another. The transformation of power is more total and more complicated. Power itself has become more available—and, indeed, in today's world more people have power. Yet its horizons have contracted, and once attained it has become harder to use. And there is an explanation for this.

Power becomes entrenched as a result of barriers that shield incumbents from rivals. Such barriers not only prevent new competitors from growing into significant challengers but also reinforce the dominance of entrenched players. They are inherent in everything from the rules that govern elections to the arsenals of armies and police forces, to capital, exclusive access to resources, advertising budgets, proprietary technology, alluring brands, and even the moral authority of religious leaders or the personal charisma of some politicians.

Over the course of the last three decades, however, barriers to power have weakened at a very fast pace. They are now more easily undermined, overwhelmed, and circumvented. As our discussion of domestic and international politics, business, war, religion, and other areas will show, the causes underlying this phenomenon are related not only to demographic and economic transformations and the spread of information technologies but also to political changes and profound shifts in expectations, values, and social norms. Such information technologies (including but not limited to the Internet) play a meaningful role in shaping access to power and its use. But the more
fundamental
explanation as to why barriers to power have become more feeble has to do with the transformations in such diverse factors as rapid economic growth in many poor countries, migratory patterns, medicine and healthcare, education, and even attitudes and cultural mores—in short, with changes in the scope, state, and potential of human lives.

After all, what most distinguishes our lives today from those of our ancestors is not the tools we use or the rules that govern our societies. It is the fact that we are far more numerous on the planet; we live longer; we are in better health; we are more literate and educated; an unprecedented number of us are less desperate for food and have more time and money for other pursuits; and when we are not satisfied with our present location, it is now easier and cheaper than ever to move and try somewhere else. As our proximity and density have increased along with the duration and richness of our lives, our contacts with one another have also increased, enhancing our aspirations and our opportunities. Of course, health, education, and prosperity are far from universal today. Poverty, inequality, war, disease, and social and economic suffering persist. But overall statistics regarding life spans, literacy, infant mortality, nutrition, income levels, educational attainment, and human development demonstrate a world that has profoundly
changed—along with perceptions and attitudes—in ways that directly affect the terms by which power is gained, kept, and lost.

The next three chapters will develop this idea in detail.
Chapter 2
presents a clear and practical way of thinking about power that is applicable to every field. It discusses the various ways in which power may be exercised, makes sense of the differences between aspects of power such as influence, persuasion, coercion, and authority, and shows how power takes shelter behind barriers that allow it to expand and concentrate—until those same barriers are eroded and no longer fulfill their shielding function.
Chapter 3
explains how power got big in so many different realms. Why, I ask, has power become equated in practice with the size of the organizations that back it? Why did large, hierarchical, and centralized organizations become the dominant vehicles through which power was—and still largely is—exercised? This coupling of power with the size of the organization that has it reached its apogee during the twentieth century. And it is an outlook that still dominates today's debates and conversation, even though the facts have now plainly changed.