The Dawn of Stakeholder Geopolitics

Solving global problems cooperatively while remaining competitive
Preparing for the World Economic Forum in Davos, Switzerland -Denis Balibouse / Reuters

Over the last few years, the world has experienced a gradual slide from cooperation to competition to conflict. The post–Cold War international order has been replaced, first by a period of intensifying global rivalry and then by war in Europe. In this new and unsettled era, world leaders must adapt their understanding and practice of geopolitics because time is running out to address critical global challenges. 

In a year that began with conflict and warning signs of geoeconomic fragmentation, it was remarkable that November 2022 delivered a restoration of U.S.-Chinese climate dialogue, a reaffirmation by the G-20 of the need for economic cooperation, and an agreement at the UN Climate Conference in Egypt that provided historic “loss and damage” climate adaptation funding for vulnerable countries. But such welcome news should not be taken as a sign that a retreat from geopolitical rivalry is underway or that a cooperative order can be fully restored. World powers still hold starkly different visions of what should guide global politics and are vying to shape the new world order accordingly. For this reason, current efforts at cooperation could prove fleeting, giving way to new rounds of conflict. In such a turbulent geopolitical climate, the question becomes, What can a framework for durable cooperation look like?

Dominika Zarzycka/SOPA Images/LightRocket via Getty Images

This question has gained even greater urgency against the backdrop of an ongoing pandemic, a potential global recession, heightened nuclear proliferation risks, and a “now or never” moment for addressing climate change. These challenges are cascading and creating what some analysts refer to as a global “polycrisis”—a situation in which multiple crises compound one another. Because the drivers of these crises are not confined to any one nation, addressing them requires leaders to come together to forge solutions despite the reality of broader geopolitical disagreement.

Simply put, leaders need to manage geopolitical competition in a way that preserves space to align with diverse parties on shared interests. The alternative, competing to define the era ahead but failing to untangle the knot of common challenges, will leave countries worse off in the long run.

Balancing competition and cooperation is a tall order. But there are lessons from the private sector, particularly regarding its growing embrace of stakeholder capitalism. Over the last decade, as governments were retreating from cooperation, the business community has been moving in the opposite direction—coming together to address common challenges while still competing vigorously in the marketplace.

AGE OF DISTRUST

As the unipolar, largely cooperative post–Cold War order recedes in the rearview mirror, world powers are competing to mold the era that will replace it. In the resulting mood of uncertainty, there is a danger that critical issues in need of collective action—from climate change to global economic risks to the COVID-19 pandemic—will go unaddressed. Yet this challenging geopolitical moment has also made it possible to imagine a new way of aligning interests, one that could help restore faith in global collaboration. 

For a quarter century after the end of the Cold War, global collaboration was based on mutually agreed-upon “rules” of transnational relations. Countries worked together to advance shared interests, particularly on issues related to the economy, the environment, and technology.

To be sure, there were significant episodes of disagreement. But to a large extent, countries looked to maintain stability, security, and prosperity. During this time, the share of the world’s population living in extreme poverty declined from over 35 percent to close to 11 percent. For the bottom 40 percent of global population, overall income increased by close to 50 percent. These results were largely possible thanks to a more integrated global economy.

The birth of the World Trade Organization in 1995 and China’s entry to it in 2001 were illustrative of this cooperative economic ethos. Between 1992 and 2017, trade as a proportion of world GDP rose by almost half, and as the World Economic Forum has noted, trade and capital liberalization “brought the integration of markets and cross-border expansion of value chains to a new plateau.” The coordinated global response to the 2008 financial crisis, including by central banks and G-20 countries, showcased the prevailing instinct for economic cooperation.

On climate change, a similar sentiment was evident in the 2015 Paris agreement, which committed 196 parties to advancing far-reaching climate targets and to “enhancing international cooperation for climate action.” Technology added yet another layer to the fabric of global cooperation as the Internet connected countries in new ways and enabled new forms of collaboration. In 2015, over 40 percent of the world was connected to the Internet, up from about 15 percent a decade earlier.

People set up the stage at the eve of the opening of the World Economic Forum in Davos, Switzerland, Sunday, January 15, 2023./Markus Schreiber/AP.

But by 2020, the World Economic Forum was warning that an “expansion of geopolitics” was taking place. As cooperation waned and competition intensified, domains where countries had previously cooperated—including the economy, the environment, and technology—were turning into zero-sum zones of competition. For instance, trade-restrictive measures such as tariffs reached historic highs in 2018—not just to protect domestic industries but also to challenge the very foundation of an integrated global economy.

Efforts to combat climate change have suffered from a similar cooperative breakdown. Instead of building on the momentum of the Paris agreement to accelerate climate action, many countries have sought to exploit newly accessible natural resources. And data technologies have been weaponized as never before, serving not to connect distant and diverse societies but to sow mistrust between and within them.

The challenge to cooperative systems, exemplified by the rise of nationalist political forces around the world, was born of a feeling in many societies that globalization and mechanisms of global cooperation were not solving shared problems but rather deepening inequities. The pandemic strained an already brittle global system.

As many countries turned inward and prioritized their domestic health needs—shoring up their own medical equipment and vaccine supplies—global follow-through on vaccine pledges fell short. Failure to mount a cooperative response to the pandemic only sowed additional mistrust in the global multilateral system.

A NEW KIND OF GEOPOLITICS

At a moment when global rivalry is running hot and support for globalization is cooling, a new period of cooperation in the style of the post–Cold War era is not in the offing. Still, there is room for a shared geopolitical compass that helps countries align with respect to common interests. Here, developments in the private sector are instructive.

Over the past decade, the business community has made great strides toward solving shared problems while also increasing competitiveness in the marketplace. This has largely been accomplished through the adoption of stakeholder capitalism, which measures the value of a business activity not by its short-term profit but by its impact on people and the planet. Multiple studies have shown that companies that take such an approach outperform companies that do not in terms of market capitalization.

The reason companies that adopt stakeholder capitalism perform well is that they extend the yardstick by which they measure value. Instead of chasing short-term profit, they look to generate sustainable revenue. By focusing on the long term, these companies improve their ability to withstand acute shocks and disruptions. And by taking into account the interests of their customers, employees, and communities, they generate commitment and buy-in from constituencies that are vital for boosting their overall business performance. Perhaps not surprisingly, as stakeholder capitalism has spread over the last decade, trust in business has risen across most industries, according to the Edelman Trust Barometer.

On the eve of Davos 2023, Young Socialists Switzerland activists call for a climate tax on the rich. /Fabrice Coffrini/AFP

Practicing stakeholder geopolitics would require looking past short-term power plays and toward steps that advance long-term interests. States would seek to make themselves competitive in the marketplace for influence, ideas, and investment but also emphasize addressing global challenges. Doing so would increase the odds of making meaningful progress on interconnected global challenges, thereby helping to restore faith in collaborative approaches to geopolitics. In practice, adopting stakeholder geopolitics would mean focusing on three main priorities.

The first involves looking at interests through a holistic prism. Companies assess the degree to which they embrace stakeholder capitalism by looking at their performance on a variety of environmental, social, and governance metrics. Similarly, governments could assess their commitment to stakeholder geopolitics by looking at how they factor global threats and opportunities into their strategic decision-making. The plural here is deliberate. Although governments need to address specific challenges, such as climate change or a worsening global economy, it is crucial that they do not view these issues as discrete areas of action. States should assess how their strategic actions affect global priorities and calibrate their behavior accordingly. More specifically, states should ensure that their efforts to improve their geopolitical position also advance common aims such as those delineated in the Sustainable Development Goals.

States are already factoring global challenges into their strategic planning. For instance, the National Security Strategy released by the Biden administration in October 2022 places climate action front and center on the United States’ national security agenda. China’s 14th Five-Year Plan, released in 2021, similarly made climate action a central policy priority. This is an important start. Practicing stakeholder geopolitics would entail expanding this approach to account for other global priorities such as ending poverty, protecting global commons, and advancing common frameworks for reducing cyber risks.

The second priority of stakeholder geopolitics concerns the stakeholders themselves. Just as stakeholder capitalism entails accounting for a company’s impact on employees, customers, and members of the community within which the business operates, stakeholder geopolitics means pursuing policies and positions that serve the interests of a state’s citizens, allies, and other stakeholders.

At first glance, it may seem that practicing stakeholder geopolitics would require governments to put in place protectionist policies that aim to benefit their domestic constituencies. But the opposite is true—protectionist measures often create disruptions that end up harming consumers and markets. Recently, the wave of global inflation has prompted a corresponding wave of protectionist measures, notably on food and fertilizers. But as politically appealing as these measures are, they harm almost everyone. The Declaration on Food Security made at a ministerial meeting of the World Trade Organization last June, in which leaders committed to avoiding export restrictions on food, offers a model for how governments could apply a stakeholder geopolitics lens to policymaking.

A growing number of global agreements already seek to advance the interests of diverse stakeholders. For instance, the African Continental Free Trade Area agreement includes gender equality as an objective, and the trade area’s secretariat is preparing for negotiations over a protocol on women and youth in trade. Similarly, Canada, Chile, Colombia, Mexico, New Zealand, and Peru have signed the Global Trade and Gender Arrangement, which aims to “promote mutually supportive trade and gender policies and unlock new opportunities to increase women’s participation in trade as part of broader efforts to improve gender equality and women’s economic empowerment.”

The final priority of stakeholder geopolitics is collaboration. Coinciding with the rise of stakeholder capitalism has been the formation of purpose-driven partnerships across the business community. For instance, the World Economic Forum’s Alliance of CEO Climate Leaders, founded in 2014, brings together the CEOs of over 120 companies—some of which compete directly with each other—to set ambitious climate targets and reduce their companies’ emissions. These partnerships make sense because they align parties, ensuring that actions are synchronized rather than at cross-purposes, and help promote meaningful, industrywide action.

Promising purpose-driven partnerships are taking shape on the geopolitical stage, as well. At the 2021 UN Climate Change Conference in Scotland, the World Economic Forum and U.S. President Joe Biden launched the First Movers Coalition, which includes over 65 companies that have committed to purchasing emerging clean technologies. As part of this effort, the governments of Denmark, Germany, India, Italy, Japan, Norway, Singapore, Sweden, the United Kingdom, and the United States have pledged to implement policies that will assist in commercializing these clean technologies. The coalition is a powerful example of how governments can come together to pursue common objectives.

Youth climate activist Greta Thunberg takes part in a discussion on "Treating the climate crisis like a crisis" with International Energy Agency head Fatih Birol (not pictured) on the sidelines of the World Economic Forum in Davos (WEF) in Davos, Switzerland January 19, 2023. REUTERS/Arnd Wiegmann

A WINNING FORMULA

The current moment of geopolitical uncertainty has arisen during what the UN has said must be a “decade of action” on the Sustainable Development Goals. Falling short on these goals would have dire implications, causing poverty, hunger, and disease to rise, especially in developing countries. Climate efforts are similarly pressing. According to the 2022 UN Intergovernmental Panel on Climate Change, if the necessary actions are not taken, “many key risks are projected to intensify rapidly in almost all regions of the world, causing damage to assets and infrastructure and losses to economic sectors and entailing high recovery and adaptation costs.”

Such outcomes would threaten stability and diminish prosperity, not sparing any country or economy, and they can only be prevented if leaders work together to forge solutions. But the fact that these challenges have arisen within—and in some cases because of—an already challenging geopolitical environment means that cooperation will not always be easy. Stakeholder geopolitics, which encourages countries to take a long-term view of strength and power, enables allies and adversaries alike to solve global problems cooperatively while remaining competitive. Ultimately, every country must decide for itself whether to practice stakeholder geopolitics, but doing so will yield shared progress on global priorities and, as a result, individual advantage.

 

This article was originally published by Foreign Affairs.


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