In the shifting global and economic environment, business executives and government officials navigate an increasingly overlapping landscape of interest groups, stakeholders, regulations, and partnerships. Richard Haass, president of the Council on Foreign Relations, speaks about these blurring lines between government and the private sector, and how businesses can leverage the tools of their public-sector counterparts to move forward in the “new normal.” Rik Kirkland, McKinsey’s director of publishing, conducted the video interview in St. Michaels, Maryland, in April 2009.
Watch the video, or read the transcript below. [[video video]]
The Quarterly: Is this one of those break points in history where we’re really entering a new era? As a student of history and of policy making, how do you see this—particularly as applies to the role and relationship between government and business?
Richard Haass: At the end of the day, and we’re already seeing large signs of it, we will end up with a different relationship between government and business. Essentially, they will be partners more within the society. Now we’re seeing that with various forms of coownership, coinvestment. I think the regulatory pendulum will swing somewhat in the direction of greater government role rather than less. And around the world there will be partners as well, because increasingly governments will negotiate the context in which businesses will operate—whether it deals with climate change, trade, investment, health. Plus government will also be for the most part providing security.
Although, again, it’ll only be a business dimension of that, as we’re seeing with the privatization of certain security functions. So when you add all this up, the lines between what is government and what is the private sector of business will get blurred. And increasingly, rather than being at one another, they will have to work with one another.
The Quarterly: How should a company change to adapt to this new environment?
Richard Haass: Well, partially, it’s to think about government and government-related issues not as something that you have a small side office [for], some vice president for government relations who maybe calls a congressional staffer when he’s got an issue. But it’s something now much more intrinsic, and every person in the company—certainly the upper echelon of leadership—needs to take this into account, needs to think very hard about what is the proper, desirable role of government for that company. Where are there things that informally need to be worked out? What things need to be more formally worked out?
Again, it can’t simply be an afterthought, a question of lobbying or implementation. But rather, the entire issue of government, and the division of labor between the company and government, needs to be something that is thought through from the outset.
The Quarterly: Is there also a way in which governments are going to need business more? You mentioned privatization earlier. But in general, do you think they will model more businesslike behaviors in the future?
Richard Haass: I think each has something to learn from the other. In the old days, we only thought that companies were in the teaching role and that government had to learn from companies. And the whole idea was, “How could you bring business management into government?” I actually believe the opposite is also the case—that increasingly CEOs, when they get up in the morning and look out through their window or across their desk, they are dealing with a range of constituencies that looks an awful lot like what a cabinet member might look at.
You’ve got independent media. You’ve got independent workers or unionized workers. You’ve got all these NGOs who are pushing you to do X, Y, or Z. Well, this is very much a political environment. The idea that you reach these decisions in some sort of splendid profit-and-loss isolation, those days are over—if they ever really existed to begin with. So I actually think each has something to learn from the other.
The Quarterly: The world, as you’ve suggested in a number of your articles and books, remains a very complicated place. And policy making involves multiple actors. So how do we get a deal done on something like the Kyoto Treaty that’s coming up on climate change?
Richard Haass: It’s going to be more difficult to get government—say, 190-odd governments around the world—to agree to something like a convention on climate change. Developed and developing countries are going to have very different interests. Plus it’s not enough to get the 190 governments to agree, because there are energy companies that have to be brought into the mix, say.
So what we’re going to need now for global governance, as opposed to governments, are going to be arrangements. In some cases, they’re going to have a smaller number of participants. Instead of trying to get everybody under the roof, maybe we should just get the 5 or 10 or 15 countries that emit the most carbon. Or, maybe we’ll just try to deal with one part of the problem, say, deforestation.
You go through issue by issue, whether it’s in the trade realm, the climate change realm, the health realm. In every sphere of international life, you increasingly have to think about alternatives to formal institutions, just governments and everybody there. Increasingly, you have to think about coalitions of the willing or informal arrangements, selected governments, and selected entities other than governments. You don’t want to create all-or-nothing situations where, unless you get everybody agreeing to solve all aspects of a major international problem, you therefore have no progress. We can’t afford that. So what we’re going to need to think about are ways of cutting issues down to size. Now, not necessarily as a permanent alternative. It may simply be a way station. But you don’t want to get into, again, all or nothing or that you have to solve problems. Instead, you can slice off, or hive off, parts of them.
And in some cases, it makes it less difficult to manage the entire process if you only have those with a particular stake or a particular like-mindedness. To give another example, an organization like NATO has several dozen members. But when it comes to dealing with a particular challenge, essentially the organization says, “If you don’t have the interest or the capacity to get involved in this, we’re not asking you to. On the other hand, you can’t block it. Just sit aside. Sit on the sidelines. And what we’re going to do is simply involve the countries that are like-minded and have relevant capabilities to the event.”
And that’s not a bad model for international relations. It’s not a permanent solution, but it is a way of addressing immediate problems. And it creates a foundation for something perhaps broader and more lasting down the road.