The few A special report on global leaders January 22nd 2011

LeadersCOV.indd 1 05/01/2011 15:58 The Economist January 22nd 2011 A special report on global leaders 1

The few Also in this section More than Australians Taking stock of the world’s plutocrats. Page 4 Unloading the loaded Catering for the whims of the rich is big business. Page 6 The rise and rise of the cognitive Brains bring ever larger rewards. Page 7 Not for sale Cash seldom buys political power. What counts are ideas and the ability to inspire. Page 10 The world’s water•coolers Where the in‡uential people meet and talk. Page 12 In the information age, brainy people are rewarded with and in‡uence, says Robert Guest. What does this mean for everyone else? The global campus OMMY GALLAGHER was working brother•in•law wanting to borrow money The best universities now have worldwide across the street when the planes hit for the umpteenth time, someone in the reach. Page 14 T the Twin Towers. ŒAs we evacuated, we room has faced a similar problem before. Crazy•talking boˆns could see people jumping out of win• Mr Gallagher credits Tiger 21 with help• dows, he recalls. Then the †rst tower col• ing him to †nd a new purpose in life: phi• The surest way to wield in‡uence is to invent lapsed. Everyone in the street started run• lanthropy. Many other members are veter• something useful. Page 16 ning. A huge cloud of dust enveloped an givers, and advise him on how best to Tribes still matter them. Mr Gallagher could not see or support his pet cause, which is caring for breathe. He thought he was going to die. military veterans with post•traumatic How global leaders tap into diaspora net• Soon after he escaped, Mr Gallagher stress disorder. His son served as a counter• works. Page 17 was told to put his bank’s business back to• intelligence oˆcer in Afghanistan and had gether at an oˆce in uptown Manhattan. to calculate the power of roadside bombs Asia’s new aristocrats Plugging the computers in again was easy by measuring how far they threw pieces of What Indians and Chinese make of their enough, but the people in the oˆce could their victims’ bodies, so Mr Gallagher has a tycoons. Page 18 not simply be re•booted. After a month Mr personal interest in this. He is now on the Gallagher snapped. ŒA guy gave me shit. I board of Phoenix House, a mental•health They work for us threatened to beat him up. They †red me, charity, and is involved in a programme to In democracies the serve the masses. he says. stop traumatised veterans from drifting Page 20 He was 57 at the time. ŒOn Wall Street, into divorce, homelessness and suicide. you’re an old man at 50, he shrugs. He Acknowledgments could not †nd another job. Financially that The new elite Besides those mentioned in the text, the author did not matter much: he was a wealthy This special report is about global leaders, would like to thank: Paul Adamson, Andrew Belfer, man. But emotionally he was Œa basket but mostly not the sort you have heard of, Steve Braverman, Dick Costolo, Clive Crook, Sulai• case. He was embarrassed about having such as presidents and pop stars. Instead, it man al•Hattlan, Mazen Hayek, Kathrin Hille, Jona• been †red, ashamed of his behaviour and looks at the people who shape the world than Hova, Ronald Howes, Mishal Kanoo, Jonathan Kempner, Glenn Hubbard, Andrew Likierman, Iyad Œabsolutely alone. He started worrying without anyone noticing: those with Malas, Ed Merchant, Arif Naqvi, Ahmed Nassef, that the doormen at his fancy apartment enough brains, money or in‡uence to af• Sooud al•Qassemi, Jesse Scott, Michael Sonnen• must be thinking: ŒThat guy’s a loser. fect the lives of large numbers of others. feldt, Miles Varn, Evan Williams, Tarik Youssef, and Then he joined a self•help group for These three things often go hand in hand, several others who must remain nameless. rich people called Tiger 21. Only those with but not always. more than $10m of investable assets are eli• Some people are in‡uential because A list of sources is at gible for membership, so no one assumes they have compelling ideas or are skilled at Economist.com/specialreports that, just because you have truckloads of popularising other people’s. The brainy cash, your problems are trivial. Whether toilers at think•tanks in Washington, DC, An audio interview with the author is at you are worried that your kids might turn do not earn nearly enough to be admitted Economist.com/audiovideo/specialreports out like Paris Hilton, or fed up with your to Tiger 21, but they wield immense in‡u• 1 2 A special report on global leaders The Economist January 22nd 2011

2 ence over public policy. The propagandists tists in Cambridge. The report will show of citizen, urban and rural. As in South Af• of al•Qaeda live in caves, but a ect the how money, ideas and in‡uence ‡ow rica under apartheid, those on top dictate lives of people everywhere. through the world’s diaspora networks. where those at the bottom may live and Societies have always had elites. For It will also look at inequality, which has work, suppressing their wages and provid• most of history and in most countries, risen relentlessly in most rich countries ing themselves with cheap servants. This power was seized by force of arms and even as they have become more merit• cannot last. passed down from father to son. Fear and ocratic. Clever, well•educated people are As Mr Gallagher’s story shows, the rich heredity still play a role. China’s ruling increasingly marrying each other and rais• are as vulnerable as the rest of us, yet they party remains in charge because it jails and ing clever, well•educated children. The lead separate lives. In ŒRichistan, a book occasionally kills those who threaten it. children of ordinary households †nd it written before the †nancial crisis, Robert America elected two presidents named hard to compete with them. A new aristoc• Frank observed that wealthy people have George Bush and came close to electing racy of merit is emerging. That has social Œbuilt a self•contained world unto them• two Clintons. consequences for everybody. selves, complete with their own health• The big change over the past century is Serious thinkers sometimes exaggerate care system (concierge doctors), travel net• that elites are increasingly meritocratic and the clout of the few. David Rothkopf’s work (NetJets, destination clubs), separate global. The richest people in advanced book Œ: The Global Power Elite economyðand language (‘Who’s your countries are not aristocrats but entrepre• and the World They Are Making is household manager?’). neurs such as (pictured with his thoughtful and well researched, but his Rich folk a ect the rest of us in two big wife and partner in , Melinda, breathless description of how a mere ways. First, the way they spend their mon• on the previous page). The most in‡uential 6,000 politicians, chief executives and oth• ey has all kinds of ripple e ects. Their are those whose inventions change lives in er bigwigs run the world misses an impor• hunches move markets. Their consump• many countries (think of Facebook) or tant point. In democracies at least, the few tion supports a whole sub•economy of whose ideas are persuasive (think of Am• are often at the mercy of the many. Voters hoteliers, watchmakers and †nancial ad• nesty International). can get rid of politicians they dislike. Con• visers. And their philanthropy funds This special report will examine how sumers will stop buying a company’s pro• schools, pressure groups and research into in‡uence is wielded. It will look at the ducts the moment something better or tropical diseases. minds that shape , business and cheaper comes along. In a democracy with The second, and more important, way technology, and it will describe the gather• a competitive economy, power is hard to is that to become rich in the †rst place, they ings where in‡uential people swap ideas, maintain without pleasing others. typically have to do something extraordi• from the World Economic Forum in Davos In China the rules are di erent. Eco• nary. Some inherit their money, of course, to Nathan Myhrvold’s Œinvention ses• nomic growth has lifted hundreds of mil• but most build a better mousetrap, †nance sions in Seattle. lions of Chinese people out of and someone else’s good idea or at least run a The global elite are a cosmopolitan made China’s coastal cities rich. But the chain of hairdressers in a way that keeps bunch, yet they are far from rootless. Indi• Chinese elite depends too much on the co• customers coming back. And because they an tycoons forge deals with ethnic Indians ercive power of the Communist Party for are mostly self•made, today’s rich are rest• throughout the world. Chinese scientists its wealth and in‡uence. The system of hu• less, dynamic and much keener on change in Beijing collaborate with Chinese scien• kou (residence permits) creates two classes than the aristocrats of old. 7 More millionaires than Australians

Taking stock of the world’s plutocrats

OST people would describe a dollar Credit Suisse, another bank, uses a less ly through their own e orts. Only 16% of Mmillionaire as rich, yet many million• stringent (and more obvious) de†nition: a high•net•worth individuals inherited their aires would disagree. They do not compare is anyone whose net assets ex• stash, according to Capgemini. The most themselves with teachers or shop assis• ceed $1m. That includes everything: a common way to get rich is to start a busi• tants but with the other parents at their home, an art collection, even the value of ness: nearly half (47%) of the world’s children’s private schools. To count the an as•yet•inaccessible pension scheme. wealthy people are entrepreneurs. number of rich people in the world, how• The Credit Suisse ŒGlobal Wealth Report You do not have to be a genius to build a ever, an arbitrary cut•o point is needed, estimates that there were 24.2m such peo• million•dollar business, but it helps if you and $1m is as good as any. Capgemini, a ple in mid•2010, about 0.5% of the world’s are intelligent and extremely hard•work• consultancy, de†nes anyone with invest• adult population. By this measure, there ing. In their book ŒThe Millionaire Next able assets of $1m or more (excluding their are more millionaires than there are Aus• Door, Thomas Stanley and William home) as a Œhigh•net•worth individual, tralians. They control $69.2 trillion in as• Danko observed that a typical American consultant•speak for rich. By this conserva• sets, more than a third of the global total. millionaire is surprisingly ordinary. He has tive measure the planet has about 10m mil• Some 41% of them live in the United States, spent his life patiently saving and plough• lionaires, according to Capgemini and 10% in Japan and 3% in China. ing his money into a business he founded. Merrill Lynch, a bank. How did these people grow rich? Most• He does not live in the fanciest part of 1 The Economist January 22nd 2011 A special report on global leaders 3

2 town‹why waste money that you can in• He may leave medical school heavily in tive wealth rose by 19% in 2009, to $39 tril• vest? And his tastes are so plain that you debt, but after a lifetime of earning, saving lion. For the †rst time the number of rich can barely tell him apart from his neigh• and investing, he can probably amass $1m. people in Asia was much the same as in Eu• bours. He buys $40 shoes, and his car of Some people hoped that the †nancial rope: about 3m in each continent. The com• choice is a Ford. crisis would reduce the clout of the bined assets of Asia’s plutocrats, at $9.7 tril• Another 23% of the world’s millionaires wealthy. In a crude sense it did: many saw lion, actually surpassed the European got rich through paid work, estimates Cap• a big part of their wealth vaporise. Cap• total. North America’s fat cats remained a gemini. A few vault easily over the million• gemini says the number of high•net•worth whisker richer, with $10.7 trillion between dollar bar. Gregory Ma ei, the boss of Lib• individuals in the world (by their de†ni• the 3.1m of them. erty Media, an American cable•television tion) fell by 15% in 2008, to 8.6m. Their total †rm, earned $87,095,882 in 2010. The medi• wealth tumbled by nearly 20%, to a still im• More money, more say an pay for chief executives at the 456 larg• pressive $32.8 trillion, or $3.8m each. The The global wealth pyramid has a very est publicly quoted †rms in America was super•rich fared even worse: the number wide base and a sharp point. The richest 1% $7.23m, according to the Hay Group, a con• of people with assets of $30m or more fell of adults control 43% of the world’s assets; sultancy. But the vast majority are skilled by a quarter in 2008, and their assets the wealthiest 10% have 83%. The bottom professionals or managers who have been shrank by 24%. 50% have only 2%. This suggests a huge dis• careful with their money. An orthodontist Last year, however, the rich bounced parity of in‡uence. The wealthiest tenth in America makes about $200,000 a year. back. By Capgemini’s measure their collec• control the vast bulk of the world’s capital, 1

Catering to the whims of the rich Unloading the loaded is big business

HE seven•star Burj•al•Arab hotel in such qualms. One retailer there started ling their money. Creating a fortune is of• TDubai is not for those who like their el• selling Smart cars covered in Swarovski ten fun, but conserving it can be tedious, egance understated. The presidential suite crystals last year. says Charles Lowenhaupt, an adviser to is an explosion of gold, purple, marble What the rich lack is time, says a for• the wealthy. A family may have 100 mem• and opulence. Some guests prefer it to the mer personal assistant to celebrities. They bers scattered over multiple jurisdictions even more expensive royal suite (which is may decide to go for a weekend in Thai• and 150 trusts, making tax planning a tri‡e $18,000 a night), says a helpful member of land on the spur of the moment, and the complex. sta , because the decor in the royal suite is personal assistant has to make it happen. Yet the basic problems are the same even livelier. Another popular time•saver is a medical everywhere. Mr Lowenhaupt recalls an When you are seriously rich it is hard concierge service. PinnacleCare, for exam• acquaintance from China teaching him a to spend all your money, but some cre• ple, will send a doctor Œto your home, Chinese saying, Œrice paddy to rice paddy ative people will help you try. Quintes• your oˆce [or] your ski chalet, says Bruce in three generations. The acquaintance sentially, a †rm founded by Ben Elliot, a Spector, the founder. was surprised to learn that other cultures nephew of the Duchess of Cornwall, spe• Rich people also want help with hand• have similar proverbs. cialises in giving the rich whatever they want, wherever they are. Some requests‹ tea with Britain’s queen, for example‹can be a bit diˆcult, says Mr Elliot. But if a cli• ent needs a life•size edible cake costume for a birthday bash, or wants to ‡y along the Great Wall of China, his global net• work of †xers will †x it. The †nancial crisis hurt sales of luxury goods, which fell by 8% in 2009. But Bain, a consultancy, estimates that in 2010 they grew by 10% worldwide, and by an as• tounding 30% in China, where the boom barely faltered. In the West the rich have cut back on ostentatious baubles and in• stead gone for experiences, such as yoga retreats in India or personal coaches to teach them about Buddhism, says Milton Pedraza of the Luxury Institute, a consul• tancy. China’s new millionaires have no Only the little people wear seatbelts 4 A special report on global leaders The Economist January 22nd 2011

2 giving them a lot of say in funding busi• the showy sort. Global yacht sales plunged nesses, charities and politicians. The bot• The seriously rich 1 by 45% in 2009, according to Capgemini, tom 50% control hardly any capital at all. Number of $ worldwide and four out of †ve yachtmakers had to cut That said, this huge group includes peo• back or shut down. But the market for lux• 1,200 ple in quite di erent circumstances. Many US & Canada ury goods is recovering (see box, previous young people in rich countries have no as• Europe 1,000 page). And looking at the past decade as a sets and a wallet full of maxed•out credit Asia & Oceania whole, fortune has clearly smiled on for• cards. Technically, their debts make them BRICs 800 tune•builders. Total global wealth (not just Other poorer than African who have 600 that of the rich) rose by 72% between 2000 nothing. But they enjoy a much higher and 2010, to $200 trillion, says Credit standard of living and far better prospects. 400 Suisse. Nearly half of this was due to the In Denmark and Sweden a startling 30% of 200 dollar’s fall against other currencies, but the population say their debts exceed their the rest came from economic growth and a assets, but few go hungry. Many have sim• 0 rising population. As the number of adults 199697 98 99 2000 01 02 03 04 05 06 07 08 09 10 ply taken out large student loans which an in the world rose from 3.6 billion to 4.4 bil• Source: Forbes indulgent government allows them to re• lion, the average wealth per person rose pay very gradually. from $30,700 to $43,800. At the apex of the pyramid there are †xed•income investments rose from 21% in Tracking the rise in rich people’s assets 81,000 people with assets of more than 2006 to 31% in 2010, says Capgemini. They is not easy. Unlike income, wealth does not $50m. Of these, some 30,000 have more also tended to pull back from unfamiliar have to be declared to the tax authorities. than $100m and 2,800 have more than environments. Europeans put more of But there is plenty of evidence that, as $500m. Nestled into the sharp tip at the their money into Europe, Americans put Credit Suisse puts it, Œthe past decade has top, Credit Suisse reckons there are about more into America and so on. A striking been especially conducive to the establish• 1,000 dollar billionaires (see chart 1). 71% say they still do not trust the regulators ment and preservation of large fortunes. For a while after the crash, many rich who are supposed to prevent crises. To get onto Forbes magazine’s list of the people piled into safe havens. The propor• After the crash many of the rich cut 400 richest Americans in 1995, you needed tion of their assets securely parked in back on unnecessary luxuries, particularly $418m. Now it takes $1billion. 7 The rise and rise of the cognitive elite

Brains bring ever larger rewards

HEN the †nancial crisis struck, says a someone with an average income is of av• from 0.28 to 0.4 (see chart 2, next page). In Wprominent banker, the women he erage height. Now imagine that the entire only one large country, Brazil, has the coef• knows stopped wearing jewellery. ŒIt adult population of America is walking †cient come down, from 0.59 to 0.55. wasn’t just that they were self•conscious past you in a single hour, in ascending or• Surprisingly, over the same period glo• about the ostentation. It was because it der of income. bal inequality has fallen, from 0.66 in the didn’t look good to them any more. He The †rst passers•by, the owners of loss• mid•1980s to 0.61in the mid•2000s, accord• goes on: ŒThere were blogs that had my making businesses, are invisible: their ing to Xavier Sala•i•Martin, an economist name, my family’s names, my address. heads are below ground. Then come the at Columbia University. This is because There were death threats. You’d think this jobless and the , who are poorer countries, such as China, have could be some pimply kid in a basement, midgets. After half an hour the strollers are grown faster than richer countries. but John Lennon met some pimply kid still only waist•high, since America’s medi• How much does inequality matter? A from a basement. And the kid shot him. an income is only half the mean. It takes lot, say Richard Wilkinson and Kate Pick• The crash sparked a wave of public ire nearly 45 minutes before normal•sized ett, the authors of ŒThe Spirit Level: Why against †nanciers, and against rich people people appear. But then, in the †nal min• Equality is Better for Everyone. Their in general. It also intensi†ed the debate utes, giants thunder by. With six minutes to book caused a stir in Britain by showing, about inequality, which has risen sharply go they are 12 feet tall. When the 400 high• with copious graphs and statistics, that in• in nearly all rich countries. In America, for est earners walk by, right at the end, each is equality is associated with all manner of example, in 1987 the top 1% of taxpayers re• more than two miles tall. social ills. After comparing various un• ceived 12.3% of all pre•tax income. Twenty The most common measure of inequal• equal countries and American states with years later their share, at 23.5%, was nearly ity is the Gini coeˆcient. A score of zero more equal ones, the authors concluded twice as large. The bottom half’s share fell means perfect equality: everyone earns that greater inequality leads to more crime, from 15.6% to 12.2% over the same period. the same. A score of one means that one higher infant mortality, fatter citizens, shor• Jan Pen, a Dutch economist who died person gets everything. America’s Gini co• ter lives, more teenage pregnancies, more last year, came up with a striking way to eˆcient has risen from 0.34 in the 1980s to discrimination against women and so on. picture inequality. Imagine people’s height 0.38 in the mid•2000s. Germany’s has ris• They even found that more equal coun• being proportional to their income, so that en from 0.26 to 0.3 and China’s has jumped tries are more innovative, as measured by 1 The Economist January 22nd 2011 A special report on global leaders 5

2 patents earned per person. Mr Wilkinson and Ms Pickett suggest that equal societies fare better because hu• mans evolved in small groups of hunter• gatherers who shared food. Modern, un• equal societies are hugely stressful be• cause they violate people’s hard•wired sense of fairness. The authors call for sti er taxes on the rich and more co•operative ownership of companies. Pundits on the left applaud, but others are not so sure. Peter Saunders of Policy Exchange, a They don’t do Dior here centre•right think•tank in London, thinks the book’s statistical claims are mostly among people of Scandinavian stock who few Britons tip cashiers, boycott †rms with bunk. He points to several ‡aws. First, Mr live in America. fat•cat bosses or watch second•division Wilkinson and Ms Pickett did not exclude Factors other than inequality are often football teams. outliers from their sample. So, for example, more strongly correlated with the pro• The Pew Global Attitudes Project asks when they say that unequal countries blems described in the book. In American people in various countries whether in have higher murder rates than equal ones, states, for example, race is a far more accu• their view Œmost people are better o in a all they have really observed is that Ameri• rate predictor of murder, imprisonment free•market economy, even though some cans kill each other much more often than and infant•mortality rates, says Mr Saun• people are rich and some are poor. In Brit• do people in other rich countries, perhaps ders. He also chides the authors for ignor• ain, France, Germany, Poland, America because they are better armed. For the rest ing countries that do not †t their theory, and even Sweden most people agree, but of the sample the link between inequality and for glossing over social problems, such in Japan and Mexico most disagree. People and homicide does not hold. as divorce and suicide, that are worse in in countries that have recently liberalised Likewise, their †ndings about life ex• more equal countries. and are now booming are the most enthu• pectancy depend on the Japanese, whose This debate will probably never be re• siastic: 79% of Indians and 84% of Chinese longevity is more likely to be due to a solved. The statistical problems are tricky say yes. healthy diet than to a ‡at income distribu• enough. If you measure inequality of tion. And their †ndings about teen births, wealth rather than income, the global Degrees of fairness women’s status and innovation depend pecking order changes. By this measure, Inequality jars less if the rich have earned on Scandinavia, a region with a mild and Sweden is less equal than Britain, since their fortunes. Steve Jobs is a be• sensible culture that is equally evident fewer Swedes have private pensions. And cause people love Apple’s products; J.K. if you measure consumption, the world Rowling’s vault is stu ed with gold galle• seems a more equal place. The poor in rich ons because millions have bought her Har• 2 Measuring inequality countries often consume more than they ry Potter books. But people are more re• Gini coefficient* earn, because they receive welfare bene†ts sentful when bankers are rewarded for Rising locally… and use public services. The very rich of• failure, or when fortunes are made by rent• Mid 1980s Mid 2000s ten consume only a small portion of their seeking rather than enterprise. 0 0.1 0.2 0.3 0.4 income. Bill Gates is millions of times rich• In the most corrupt countries the rulers China er than the average person, but he does not simply help themselves to public money. United States eat millions of meals each day. In mature democracies power is abused in The philosophical questions are even more subtle ways. In Japan, for example, India trickier. It seems unfair that footballers, retiring bureaucrats often take lucrative Britain bankers and tycoons earn more money jobs at †rms they used to regulate, a prac• than they know what to do with whereas tice known as amakudari (literally Œde• Japan jobless folk and single parents struggle to scent from heaven). The Kyodo news Germany pay the rent, notes Mr Saunders. Yet it also agency reported last year that all 43 past Sweden seems unfair to take money from those and present heads of six non•pro†t organi• who have worked hard and give it to those sations funded by government•run lottery …but falling globally who have not, or to take away the pro†ts of revenues secured their jobs this way. those who have risked their life savings to In America, too, ex•politicians often 0.67 0.66 bring a new invention to market in order to walk into cushy directorships when they 0.65 help those who have risked nothing. Dif• retire. This may be because they are talent• 0.64 ferent societies choose to deal with this ed, driven individuals. But a study by Amy 0.63 con‡ict in di erent ways. Hillman of Arizona State University †nds 0.62 0.61 It is hard to gauge just how strongly peo• that American †rms in heavily regulated ple object to inequality. A recent poll by the industries such as telecoms, drugs or gam• 1980 85 90 95 200005 06 BBC, a tax•funded broadcaster, found that bling hire more ex•politicians as directors Sources: Xavier Sala-i-Martin, *Index of income inequality in many people in Britain think cashiers and than †rms in lightly regulated ones. Columbia University; OECD; which 0=perfect equality care assistants should be paid more and People from humble origins sometimes World Bank and 1=perfect inequality chief executives and football stars less. Yet rise to the top. Barack Obama was raised 1 6 A special report on global leaders The Economist January 22nd 2011

2 by a single mother. Lloyd Blankfein, the ŒAssortative mating further en• boss of Goldman Sachs, is the son of a Brain gain 3 trenches inequality. Highly educated men clerk. What such people usually have in are much more likely to marry highly edu• US mean household income by highest common is uncommon intelligence. level of education, 2009 $’000 cated women than they were a generation All kinds of talent are rewarded. But the ago. In 1970 only 9% of those with bache• 110 number of people who get rich by singing Bachelor’s degree lors’ degrees in America were women, so or kicking a ball is tiny compared with the 100 the vast majority of men with such de• number who become wealthy or in‡uen• 90 grees married women who lacked them. 80 tial through brainpower. The most lucra• 70 Now the numbers are roughly even (in fact tive careers, such as law, medicine, tech• 60 women are earning more degrees) and nology and †nance, all require above• 50 people tend to pair up with mates of a sim• High-school graduate average mental skills. A bond dealer need 40 ilar educational background. not appreciate Proust, but he must be able Women have made immense strides in to do sums in his head. A lawyer need not 1975 80 85 90 95 2000 05 09 the workplace, too. For example, in 1970, understand ŒA Brief History of Time, but Bachelor’s degree, % of US 25-29-year-olds fewer than 5% of American lawyers were she must be able to argue logically. female. Now the †gure is 34%, and nearly 35 half of law students are female. So highly The clever shall inherit the earth educated, double•income power couples As technology advances, the rewards to 30 have become far more common. The chil• cleverness increase. Computers have 25 dren of such couples have every advan• hugely increased the availability of infor• tage, but there are not many of them. The mation, raising the demand for those 20 lifetime fertility rate for American high• sharp enough to make sense of it. In 1991 school dropouts is 2.4; for women with ad• the average wage for a male American 15 vanced degrees, it is only 1.6. The opportu• worker with a bachelor’s degree was 2.5 nity costs of child•rearing are far higher for 1975 80 85 90 95 2000 05 09 times that of a high•school drop•out; now a woman who earns $200,000 a year than the ratio is 3. Cognitive skills are at a pre• Source: US Census Bureau for one who greets customers at Wal•Mart. mium, and they are unevenly distributed. And raising elite children is expensive. A Parents who graduated from university read more to their children, use a larger vo• lawyer couple can easily a ord to put one are far more likely than non•graduates to cabulary when they talk to them and prod child through Yale, but perhaps not four. raise children who also earn degrees. This them to do their homework. Educated par• The cost of higher education has con• is true in all countries, but more so in ents typically earn more (see chart 3), so tributed to plummeting birth rates among America and France than in Israel, Finland they can a ord private schools or houses pushy parents in other rich countries, too. or South Korea, according to the OECD. Na• near good public ones. In America, where Greens may rejoice at anything that curbs ture, nurture and politics all play a part. residential segregation is extreme, the best population growth, but the implications of Children may inherit a genetic predis• public schools are stu ed with college• these trends are troubling. Demography position to be intelligent. Their raw mental bound strivers, whereas the worst need makes it harder for people who start at the talents may then be nurtured better in metal detectors. School reform helps, but bottom of the ladder to climb up it. And some homes than others. Bookish parents cannot level the playing †eld. that has political consequences. 7 Not for sale

Cash seldom buys political power. What counts are ideas and the ability to inspire

HE popular view of politics is that it is 2008 cost more than $1 billion. That endless Obamaphile videos on YouTube. Tall about money. This is an exaggera• sounds a lot, but America has 300m peo• Chris Hughes, a co•founder of Facebook, tion. Consider the example of America, a ple and dozens of television markets. helped Mr Obama with the techie stu . country where government is often carica• Spending a shade over $3 per American to The Obama campaign showed how fast a tured as Œfor sale. Rich candidates can buy tell them about their presidential choices web•savvy movement can spread. a lot of airtime, which occasionally wins hardly seems excessive. The momentum did not last, however. them oˆce: think of in Barack Obama started with nothing, With the economy still in a ditch, another New York. But often they ‡op: think of Mitt against an opponent, Hillary Clinton, who popular movement eclipsed Mr Obama’s. Romney, , and Meg started with both money and connections. On February 19th 2009 a reporter called Whitman. Or John McCain, who alienated He ended up raising more cash because he Rick Santelli lost his temper on live televi• voters struggling with their mortgages inspired people. He ran a brilliantly decen• sion. Reacting to the news of yet another when he could not recall how many tralised campaign. Supporters set up bail•out for homeowners, he exploded: houses he owned. 70,000 personal fund•raising pages, organ• ŒThe government is promoting bad behav• The American presidential election of ised 200,000 campaign events and posted iour!ðThis is America! How many people 1 The Economist January 22nd 2011 A special report on global leaders 7

2 want to pay for your neighbour’s mort• Spending on electioneering has shot up, cle to reform: voters hate high energy bills. gages that have an extra bathroom and too. In 2000 the total for all federal elec• Politics in many countries is marred by can’t pay their bills? Mr Santelli called for tions was $3.1billion; in 2008 it was $5.3 bil• nepotism. Even when elections are free, a a Tea Party: an anti•tax protest like the one lion. Elections in other countries are much candidate from a famous political family in Boston that heralded the American rev• cheaper. After adjusting for the di erence has a huge head start, in that voters already olution. The notion caught on. Tea parties in population, Britain’s parliamentary poll know his name. Americans have elected erupted everywhere, attracting millions. last year cost only 7% of the American to• two presidents called George Bush. India The has a cranky tal, thanks to tight spending limits. has had three prime ministers from the fringe, but its core belief‹that the govern• It is easier to count dollars than to mea• Nehru•Gandhi clan, and may have more. ment should tax and spend less‹is attrac• sure their e ect, however. Do rich donors Yet the advantages of dynasty are di• tive to many mainstream Americans. The decide elections? It is not clear that they do. minishing. The internet helps talented tea partiers’ passion helped Republicans to For one thing, di erent donors often pur• newcomers to become famous fast. And capture the House of Representatives last sue di erent goals. George Soros, a pro• voters often demand more than just pedi• November. gressive billionaire, backs progressive gree, as Caroline Kennedy recently discov• causes. The Koch brothers, two libertarian ered when she tried to amble into a Senate Beautiful chaos tycoons from Kansas, back libertarian seat. One American senator in ten is close• Technology has made it cheaper and easier ones. Corporations, too, are hardly mono• ly related to another national politician, a for ordinary people to organise them• lithic. American oil †rms tend to back Re• ratio that has been falling steadily for two selves. So the most in‡uential political en• publicans. American lawyers (who give far centuries. In the early days of the republic, trepreneurs are often those who can spot more to campaigns) tend to back Demo• it was closer to one in two. the next big thing and help it along. For ex• crats. Several industries, such as real estate ample, an organisation called Freedom• and health care, back both sides. The power of ideas Works, founded by Dick Armey, a veteran In democracies with a free press, the The strongest force shaping politics is not Republican and former House majority main danger of money in politics is not blood or money but ideas. The big move• leader, o ers tea partiers, many of whom that the rich will buy an election, but that ments of the past century‹communism, are new to activism, practical tips on such they will lobby the victor for favours. A tax fascism, democracy, liberalism‹have all things as setting up phone banks. Mr Ar• break here, a subsidy there and soon you been propelled by big ideas, good and bad. mey makes no claim to lead the Tea Party are talking about real money. In America, So the people who in‡uence government movement. Adapting Hayek, he calls it lobbying by hospitals and drug †rms the most are often those who generate Œbeautiful chaosðlike the market. soared as Congress debated Mr Obama’s compelling ideas or supply them to the The future of political activism lies in health reforms, which is perhaps why the right politicians at the right time. decentralisation, reckons Adam Brandon, bill that passed in 2010 was so porky. Edwin Feulner, for example, is one of a spokesman for FreedomWorks. His ideo• Worse, lobbying by coal †rms has helped the most in‡uential conservatives in logical opponents would agree. Ricken Pa• to stymie American action against global America. His face may be less familiar than tel, a Canadian activist, has built up a pro• warming. But it was not the biggest obsta• Sarah Palin’s, but his †ngerprints can be gressive campaigning group called Avaaz found on the †ne detail of legislation since from nothing to 7m members in only four 1977, when he took charge of the Heritage years, and on a trivial budget, by exploiting Foundation, a conservative think•tank. the power of the web. Heritage is big‹it has a sta of 240 and Avaaz’s dynamism is born of internal more than 700,000 fee•paying members. democracy: it adopts the issues its mem• And it is in‡uential because it combines bers tell it to adopt, from the humane (close analytical rigour with shrewd marketing. Guantánamo) to the Luddite (ban geneti• You need to de†ne your target audi• cally modi†ed crops). Because it operates ence, says Mr Feulner. For him, that means in 193 countries, it can turn local issues into Congress. Heritage’s head oˆce is a short global ones. It can muster a huge number walk from Capitol Hill, on the Senate side. of online signatures in a short time: its re• Last year, to make it that little bit easier for cent petition in defence of WikiLeaks col• members of the House of Representatives lected 300,000 in 24 hours. It can make any to pop in, Mr Feulner opened a second of• politician’s telephone ring o the hook. †ce on the House side. When a bill is being The tea parties and Avaaz show that mooted, Heritage supplies ideas. During you do not need to spend a lot of money to drafting, Heritage scholars suggest revi• be in‡uential. Yet many groups and indi• sions. And when a vote is near, Heritage viduals try to translate cash into sway. gives every lawmaker an easily digestible Websites such as opensecrets.org publish a two•page document explaining what the torrent of data showing how much Ameri• bill contains and what its e ects might be. can companies, industries and interest Timing is crucial. ŒIf you put an idea out groups spend on lobbying and electioneer• too early, no one reads it. A day too late, ing. The trend is relentlessly upward. you miss the vote, says Mr Feulner. The amount spent on lobbying Ameri• American think•tanks are more in‡u• ca’s federal government has risen from $1.4 ential than those in other countries. They billion in 1998 to $3.5 billion in 2009. Silly signs win elections helped concoct the Marshall Plan and the 1 8 A special report on global leaders The Economist January 22nd 2011

2 Iraq war. They are often well funded. The ministration. A similar revolving door op• to educate the public about America’s un• Brookings Institution, a non•partisan out• erates between conservative think•tanks sustainable de†cits. †t, has an annual budget of $80m. That is and Republican administrations. The in• Some accuse American think•tanks of 25 times bigger than that of Demos, a rough terchange creates lines of communication an incestuous relationship with politi• British equivalent. among wonks, lawmakers and the White cians, or of forming part of a permanent More importantly, American think• House. Journalists talk to think•tankers be• . There is some truth in this: tanks are closely entwined with govern• cause they know their ideas are taken seri• think•tankers often stay inside the Beltway ment. The president of Brookings, Strobe ously by those in power. (the ring road around Washington, DC) all Talbott, was deputy secretary of state un• Debate among think•tankers is usually their working lives. But they are not imper• der Bill Clinton. John Podesta, the founder civil. Facts matter. Conservative and liberal vious to elections. Liberal thinkers struggle of the Centre for American Progress, a pro• wonks sometimes join forces to promote to in‡uence conservative administrations, gressive think•tank, was President Clin• causes about which they agree. Heritage and vice versa. And some think•tanks now ton’s chief of sta . Dozens of scholars from and Brookings, for example, have a joint operate on a global level, where parties both institutions joined the Obama ad• venture called the ŒFiscal Wake•Up Tour matter less and ideas matter even more. 7 The world’s water•coolers

Where the in‡uential people meet and talk

OU can do nothing against a con• New York and Washington join the Coun• ŒYspiracy theory, sighs Etienne Davig• cil on Foreign Relations, where they can lis• non. He sits in a lofty oˆce with a stupen• ten to the president of Turkey one week dous view over Brussels, puˆng his pipe. and the chief executive of Intel the next. He is an aristocrat, a former vice•president The world’s richest man, Carlos Slim, a of the European Commission and a man Mexican telecoms tycoon, hosts an annual who has sat on several corporate boards, gathering of Latin American billionaires but that is not why some people consider who cultivate each other while ostensibly him too powerful. He presides over the Bil• discussing regional poverty. derberg group, an evil conspiracy bent on Davos is perhaps the glitziest of these world domination. At least, that is what globocratic gatherings. Hundreds of big numerous websites allege; also that it has wheels descend on the Swiss ski resort ties to al•Qaeda, is hiding the cure for can• each year. The lectures are interesting, but cer and wishes to merge the United States the big draw is the chance to talk to other with Mexico. powerful people in the corridors. Such In reality, Bilderberg is an annual con• chats sometimes yield results. In 1988 the ference for a few dozen of the world’s most prime ministers of Turkey and Greece met in‡uential people. Last year Bill Gates and at Davos and signed a declaration that may Larry Summers hobnobbed with the have averted a war. In 1994 Shimon Peres, chairman of Deutsche Bank, the boss of Not everyone loves Davos then Israel’s foreign minister, and Yasser Shell, the head of the World Food Pro• Arafat struck a deal over Gaza and Jericho. gramme and the prime minister of Spain. wanted it done di erently. Last year the de• In 2003 Jack Straw, Britain’s foreign secre• One or two journalists are invited each bate was about Europe’s †scal problems, tary, had an informal meeting in his hotel year, on condition that they abstain from and whether the euro would survive. suite with the president of Iran, a country writing about it. (Full disclosure: the editor The world is a complicated place, with with which Britain had no diplomatic ties. of The Economist sometimes attends.) oceans of new information sloshing But Davos is hardly a secretive institution: Because the meetings are o the record, around. To run a multinational organisa• it is crawling with journalists. The other they are catnip to conspiracy theorists. But tion, it helps if you have a rough idea of globocratic shindigs are opening up, too. the attraction for participants is obvious. what is going on. It also helps to be on †rst• Even Bilderberg has recently started pub• They can speak candidly, says Mr Davig• name terms with other globocrats. So the lishing lists of participants on its website. non, without worrying how their words cosmopolitan elite‹international †nan• Some American organisations, such as might play in tomorrow’s headlines. So ciers, bureaucrats, charity bosses and foreign•policy think•tanks, are also well they †nd out what other in‡uential people thinkers‹constantly meet and talk. They placed to exert global in‡uence. The Car• really think. Big ideas are debated frankly. ‡ock to elite gatherings such as the World negie Endowment for International Peace, Mr Davignon credits the meetings for help• Economic Forum at Davos, the Trilateral for example, has established itself as one ing to lay the groundwork for creating the Commission and the Boao meeting in Chi• of the most globally trusted talking•shops, euro. He recalls strong disagreement over na. They form clubs. Ethnic Indian entre• with oˆces in Beijing, Beirut, Brussels and Iraq: some participants favoured the inva• preneurs around the world join TiE (The Moscow, as well as Washington‹though it sion in 2003, some opposed it and some Indus Enterprise). Movers and shakers in has yet to ful†l the vision of its founder, 1 The Economist January 22nd 2011 A special report on global leaders 9

2 Andrew Carnegie, who wanted it to abol• face of immense cultural obstacles. He governments acted in concert to prop up ish war. The key to wielding in‡uence, says says he has enjoyed trips to Davos in the banks with taxpayers’ money. In America Jessica Mathews, Carnegie’s president, is past but will not attend this year. He can the response was led by a well•connected Œvery simple. You hire the best people. learn more, he says, by listening to his trio: Hank Paulson, George Bush junior’s In countries where think•tanks are sub• 167,000 employees. treasury secretary and a former boss of servient to the state, such as China and On the face of it there seems much to be Goldman Sachs; Tim Geithner, Barack Russia, foreign out†ts such as Carnegie en• said for the world’s shakers and movers Obama’s treasury secretary and a former joy a reputation for independence. If they meeting and talking frequently. Yet for all boss of the New York Federal Reserve, as can back this up with useful knowledge, their tireless information•swapping, glo• well as a veteran of the IMF, the Council they can sway policy. For example, Carne• bocrats were caught napping by the †nan• on Foreign Relations and Kissinger Asso• gie scholars advised the authors of Rus• cial crisis. Their networks of contacts did ciates; and , of Harvard, MIT, sia’s post•Soviet constitution. And when throw up a few warnings, but not enough Stanford, Princeton and the Bush White relations between American and Russia to prompt timely action. House, who is now chairman of the Feder• grew frosty under President George W. al Reserve. The bail•outs were unpopular Bush, Carnegie’s Moscow oˆce helped The limits of jaw•jaw everywhere, but may have prevented the keep a line of communication open be• Jim Chanos, a hedge•fund manager who world’s banking system from imploding. tween the two governments. made his †rst fortune betting that Enron Governments are now trying to craft Such meetings are Œan important part was overvalued, warned the G8 †nance rules to prevent a recurrence. Lots of peo• of the story of the superclass, says Mr ministers in April 2007 that banks and in• ple have o ered advice. Among the Rothkopf, the author of the eponymous surance †rms were heading for trouble. He weightier contributions was a report from book. What they o er is access to Œsome of made another fortune when bank shares the Group of Thirty (G30), an informal col• the world’s most sequestered and elusive crashed, but is still furious that his warn• lection of past and present central•bank leaders. As such, they are one of Œthe in• ings were politely ignored. He thinks it an governors. The Volcker Report, advocating formal mechanisms of [global] power. outrage that several senior regulators from a central clearing mechanism for deriva• Some globocrats think the importance that period are still in positions of power. tives trading and curbs on proprietary trad• of forums like Davos is overstated. How• And he accuses some bankers of Œa whole• ing by banks, helped shape America’s ard Stringer, the boss of Sony, is the kind of sale looting of the system by paying Dodd•Frank †nancial•reform bill. The G30 person you would expect to relish such themselves bonuses based on what they is in‡uential because it consists of people gatherings. Welsh by birth, American by must have known were phantom pro†ts. with experience of putting policies into , he took over Japan’s most ad• He thinks they should be prosecuted. practice, says Stuart Mackintosh, its direc• mired company in 2005, when it was in se• Globocrats failed to avert the crisis, but tor. So when it makes recommendations, rious trouble, and turned it around in the they rallied once it struck. Rich•country they can be turned into action, he adds. 7 The global campus

The best universities now have worldwide reach

T IS not just meetings of the rich and remains huge at the top of the knowledge founded 25,800 companies that were still Ipowerful that are getting increasingly tree. Two•thirds of postgraduates who active, employing 3.3m people and gener• cosmopolitan. Global universities are Œre• study abroad choose America. In some of ating annual sales of $2 trillion. ŒIt’s a very shaping the world, argues Ben Wildavsky, the hardest disciplines most postgrads at entrepreneurial culture, says Susan Hock• the author of ŒThe Great Brain Race. Be• American universities are foreign: 65% in †eld, MIT’s president. cause big problems often transcend bor• computing and economics, 56% in physics The university gets buckets of cash ders, many ambitious students demand a and 55% in maths, notes Mr Wildavsky. from the government, but Ms Hock†eld global education. The number of people does not like to rely on it. A new energy•re• studying outside their home country Feet on the ground search initiative was funded with more jumped from below 2m in 2000 to 3.3m in The best American universities are noth• than $300m from private companies such 2008, according to the OECD. ing like the stereotype of isolated ivory as Eni, an Italian energy †rm, and ABB, a The most popular destination is the towers. Take the Massachusetts Institute of Swiss•Swedish industrial conglomerate. English•speaking world, led by America, Technology (MIT), founded in 1861to accel• Ms Hock†eld, a neuroscientist, is excit• which hosts 19% of the world’s mobile stu• erate the industrialisation of America. Its ed by the potential of collaboration across dents. French and German universities are ties with business are now intimate and disciplines. In the 20th century technologi• also popular, but more narrow in their al• global. Companies fund much of its re• cal progress was driven by the conver• lure. Most of the foreign students in France search. Sta and students collaborate with gence of engineering and physics, which come from Europe or former colonies in established †rms and set up a prodigious yielded electronics. In the 21st century the Africa, but foreign students in America number of their own. A study in 2009 by hot area will be the convergence of engi• come from everywhere. the Kau man Foundation, a think•tank in neering and biology, she predicts. For ex• America’s lead is declining slightly, but Missouri, estimated that MIT alumni had ample, MIT’s cancer•research centre is 1 10 A special report on global leaders The Economist January 22nd 2011

2 sta ed by a mix of biologists and engi• spreads it. It does so both in narrowly tar• used it‹roughly 7,000 times the number neers. Its projects include making nano• geted ways, such as advising the White of students currently attending MIT. particles that can destroy cancer cells. An• House, and in scattershot ways, such as The university promotes collaboration other team at MIT, led by Angela Belcher, posting its course materials on the internet. across borders, too. It †nds internships has found a way to make genetically mod• Nearly everything, from texts to videos of abroad for its students and operates a raft i†ed viruses synthesise the cathodes and lectures, is available online free. You can of joint ventures, working with foreign ac• anodes of lithium•ion batteries at room read the simpli†ed ŒHighlights for High ademics to improve urban planning in temperature. This saves energy and uses School or walk yourself through a whole China and poverty relief in India. no harmful organic solvents. course, says Ms Hock†eld. Since the ser• ŒAll the interesting problems cross As well as generating knowledge, MIT vice began in 2002, some 70m people have boundaries, says David Ellwood, the

The surest way to wield in‡uence Crazy•talking boˆns is to invent something useful

HEN trying to generate new ideas, be curbed, says Mr Myhrvold. If it comes DNA nano•machine to deliver drugs to WŒyou have to make sure people feel o , he will make another fortune. If not, precisely the right spot in a patient’s body. OK about saying crazy things, says Na• he has plenty of other ideas. The second principle is that pro†ts than Myhrvold. His †rm, Ven• Mr Myhrvold’s †rm illustrates some matter. Invention has many mothers, of tures, seeks to pro†t from inventions. Mr useful principles for those who want to which money is probably not the most Myhrvold does not need the money; as a foster innovation. First, as technology important. Inventors tinker because that former chief technology oˆcer of Micro• grows more complex, advances depend is what they love doing. Necessity, fam• soft he already has sacks of it. But he be• less on individual inspiration and more ously, plays a role. But inventors also want lieves that Œinvention is the closest thing on collaboration. The more that the mil• to live well. The pro†t motive is a crucial to magic we have. lions of scientists in the world talk to each source of discipline. It is one thing to make Mr Myhrvold convenes Œinvention other, the more good ideas will emerge. a battery•powered car; quite another to sessions, each one including thinkers The number of patents granted has risen make one suˆciently cheap and powerful from a variety of †elds. He puts them in a from 900,000 in 1985 to 1.9m in 2008. for people to buy it. room with gallons of co ee and lets them Mr Myhrvold’s †rm is based near Seat• Yet the market for ideas is far from per• bounce ideas around. Assistants record tle, but ‡ies in scientists from far and wide fect. Capital is impatient. There is plenty the conversation and jolly it along by pro• and maintains a subsidiary in India to tap of venture capital for ideas that promise jecting relevant scienti†c papers onto a the torrent of innovation there. Its boˆns returns in the short or medium term, but screen. Mr Myhrvold, a physicist by train• in Bangalore are working on projects rang• longer•term research and development ing, takes part with gusto. ing from a red laser to preserve food to a depends heavily on governments. It is Because he is brainy and well connect• typically funded on a charitable basis: ed (investors in his †rm include Microsoft, ŒGive me the money and you’ll never see Intel, Apple, Google, Sony and Nokia), it again, as Mr Myhrvold puts it. He fa• other brainy people are happy to attend vours a more businesslike approach, in• his pow•wows. No idea is too outrageous volving a more liquid market for investors to receive a hearing. One participant sug• to buy and sell ideas. Such a market, he gested killing malarial mosquitoes with thinks, would attract billions of dollars for laser beams. Everyone laughed. But then new inventions. they started thinking about it and realised His ideas are controversial. Intellectual that laser technology is much cheaper Ventures, as well as generating its own than it was, thanks to Blu•Ray players and ideas, buys sheafs of patents from others. laser printers. A working prototype was Some people in Silicon Valley fear that Mr built in 2008. The †rm is now looking for a Myhrvold will use his portfolio of patents partner to manufacture it. to sue technology †rms for allegedly in• Among other things, his team has de• fringing them. But Mr Myhrvold denies signed a nuclear reactor that would use any intention of becoming what Valley nuclear waste as its fuel. This, he says, folk call a Œpatent troll. He runs a number would squeeze 20 times more power out of funds that allow patient investors to of uranium than current technology does. take a punt on a basket of ideas that may He and Bill Gates set up TerraPower, an en• produce a long•term pay•o . This gener• ergy †rm, to develop the idea. This is the ates immediate rewards for inventors kind of ambitious and risky bet that the who sell their patents, thereby encourag• world has to make if global warming is to No idea is too wacky for Mr Myhrvold ing innovation, he argues. The Economist January 22nd 2011 A special report on global leaders 11

quick election cycles and extreme parti• but a disproportionate share of global Well endowed 4 sanship, notes Mr Ellwood, but also the leaders are American•educated, so they Leading universities bene†ts of accountability. For students are familiar with American values. Financial years ending 2009, $bn who plan to go home and run China, that Some people †nd the growing in‡u• 0 5 10 15 20 25 may matter some day. ence of globally educated elites alarming. Nearly half of the Kennedy School’s The late Samuel Huntington, a Harvard Harvard 1 students are foreign. Alumni include the who became famous for his 1996 Stanford 3 secretary•general of the UN, the president book ŒThe Clash of Civilizations and the Princeton 7 of the World Bank, the head of China’s Or• Remaking of World Order, fretted that MIT 4 ganisation Department (China’s top civil globocrats have Œlittle need for national Cambridge 5 servant), the prime minister of Singapore loyalty and see national governments as Columbia 8 and the current presidents of Mexico, relics Œwhose only useful function is to fa• Chicago 9 Mongolia, Liberia and Colombia‹as well cilitate the elite’s global operations. That as Klaus Schwab, the founder of the World may be true of a few, but ethnic and na• Oxford 10 Economic Forum. tional loyalties remain strong. 7 UC Berkeley 2 Shanghai Jiao Tong The world’s best universities recruit Caltech world ranking, 2010 6 from a global talent pool for both students Sources: NACUBO; Thomson Reuters; and sta . This not only enhances their aca• Advantage America 5 university financial statements demic †repower but also makes their All Nobel prize-winners in the sciences alumni part of a global network. A gradu• Top nationalities and universities 2 dean of Harvard’s Kennedy School of Gov• ate of France’s École Nationale d’Adminis• ernment. Some straddle borders. Some tration can †nd fellow énarques in every 0 20 40 60 80 straddle disciplines. Some require co•oper• part of the French establishment. A Stan• United States 209 ation between business, government, aca• ford graduate can †nd other in‡uential Germany demia and non•pro†t groups. ŒSo you Stanford graduates anywhere in the world. Britain have to train people to cross boundaries, By a popular Chinese ranking, com• Harvard Mr Ellwood concludes. piled by Shanghai’s Jiao Tong University, 17 Leaders need Œan incredible curiosity of the world’s leading 20 universities are France and a capacity to listen, he says. At Harvard American. Lots of them are very rich (see Cambridge they hear a range of views on the appropri• chart 4). They also win a disproportionate Russia ate relationship between governments, share of Nobel prizes (see chart 5). This is MIT markets and citizens. Students are exposed an important source of soft power for Stanford to arguments for and against democracy. America. Its government may no longer in• Source: Nobelprize.org They see the problems associated with spire as much respect or fear as it once did, Tribes still matter

How global leaders tap into diaspora networks

UNDREDS of millions of Indians can• urging them to join in. The overseas Indi• account will be able to wire money to his Hnot prove they exist. They have no ans brought oodles of useful experience. mother by sending it to her ID number. His birth certi†cate, no driving licence, no so• Raj Mashruwala had helped to set up the mother will be able to pick up the cash at cial•security number. So they †nd it hard to number•crunching system for the New her local village shop, which will have a open a bank account, borrow money or York Stock Exchange. Srikanth Nadha• miniature scanner for her †ngerprints. The draw on government services. muni had helped set up Healtheon, a big shopkeeper will charge a small fee for the Nandan Nilekani, an Indian software health IT †rm. The team assembled in Ban• service. Villagers will no longer have to billionaire, volunteered to give every one galore, set up a whiteboard in a rented waste days trekking to the nearest town to of his 1.2 billion compatriots an identity apartment and started brainstorming. get to a bank. number tied to biometric data. The Indian The programme went from start•up to Brainy globetrotters are rarely rootless. government thought this a wonderful roll•out in little more than a year, with the Even the most cosmopolitan usually feel idea, but there was a snag. The proposed †rst identity numbers allocated in October an aˆnity with others who share the same database was ten times larger than the larg• 2010. If everything works as planned, poor language, culture or heritage. That is why est biometric database in existence. How Indians will for the †rst time be able to diaspora networks are so powerful, and was a poor country going to build it? prove who they are, thus making them• why some of the world’s most in‡uential Mr Nilekani turned to the Indian dias• selves more creditworthy. people rely on them so heavily. pora for help. He called up ethnic Indians Mr Nadhamuni thinks all sorts of ser• Some diasporas are vast and global. For who had done well in Silicon Valley. Before vices can be grafted onto the national ID example, there are an estimated 25m non• long they were calling their friends and system. A migrant labourer with no bank resident Indians and 60m overseas Chi•1 12 A special report on global leaders The Economist January 22nd 2011

2 nese, including signi†cant numbers in nearly all countries. They create a web of cross•border connections. Boˆns are 30•50% more likely to cite a paper by some• one of their own ethnicity than you would expect if such ties made no di erence, ac• cording to William Kerr of Harvard Busi• ness School. Diaspora networks speed the ‡ow of information, the lifeblood of sci• ence and commerce. They also foster trust. A Lebanese trader in west Africa will feel safe doing Yes, it’s me. Now lend me some money business with a Lebanese trader in Latin America because one man’s high•school the language, they understand the culture generates about $100m in annual sales. friend knows the family of the other’s wife and they have guanxi (connections). Even a relatively low•tech business back in Beirut. That means they can seal Mei Xu, a Chinese•American entrepre• such as candle•making evolves rapidly. Ms big deals with a single phone call. If one neur, left China after the Tiananmen Xu’s supply chain is now multinational. cheats the other, he will be shut out of the Square massacre. She was a student in Beij• The most imaginative designs are created entire Lebanese diaspora trading network. ing, which in the government’s eyes made in America. Routine design work is done in her a potential agitator for democracy. So China. The candles are mostly made in World wide web of migrants she was sent to do a dull job in a ware• Vietnam. The †rm also has a factory in Networks of exiles dominate trade in house in the middle of nowhere. She emi• Maryland to satisfy its most impatient cus• many parts of the world: the Indians in grated to America, yet retained her con• tomers. China is no longer just a source of east Africa and parts of the Caribbean, the tacts in China. With her husband, David cheap labour, says Ms Xu. It is a blossom• Chinese in South•East Asia, and so on. A Wang, she started a business. She asked ing market and increasingly a source of disproportionate number of prominent her friends in China to help her †nd Chi• new ideas. businesspeople come from migrant fam• nese products that might sell well in Amer• Studies of business leaders tend to em• ilies. Carlos Slim, the world’s richest man, ica, and settled on arty scented candles. In phasise their vision, drive and ruthless• is Lebanese•Mexican. Mukesh Ambani, In• 1995 she persuaded her sister to open a fac• ness. Such traits are important, but mem• dia’s richest man, was born in what is now tory in Hangzhou to supply them. bers of the global elite are human, too. Yemen. Eric Li and Robin Xu, the founders The candles proved popular. Target, a Sajjid Chinoy, an economist at JPMorgan in of Baidu, China’s answer to Google, used chain store, ordered $2m worth, then qua• Mumbai, returned to India after living in to work in America. drupled the order. The factory could not America for 15 years. An outsider might Migrants form bridges between the cope. With only two months to meet the have thought that he moved back because countries they live in and the ones they Christmas rush, Ms Xu had to †nd extra ca• India’s economy is growing much faster hail from. This is especially true of the pacity somewhere in China. She succeed• than America’s, creating boundless oppor• overseas Chinese (including those in Hong ed, with no time to spare, by calling all her tunities for bright young brainworkers. In Kong and Taiwan), who handle some 70% contacts. ŒSomeone who does not know fact, he returned because his brother had of foreign direct investment into China. China could not have done that, she says. been injured in a terrible car accident. ŒIt’s They have three advantages: they speak Her †rm, Paci†c Trade International, now often about family, he says. 7 Asia’s new aristocrats

What Indians and Chinese make of their tycoons

TINY tropical †sh sits in a glass vase on targets precisely. A crowded station, to in this heaving, bustling city of 14m. Aeach table in a restaurant in the lobby maximise the death toll. A small Jewish India’s movers and shakers all seem to of the Oberoi Hotel. A bright red piano †lls centre. And the poshest hotels in Mum• know each other. The Indian elite have the air with music. The passion fruit souf• bai‹the Taj and the Oberoi‹which were created their own islands, frowns a cabinet ‡é with bitter chocolate pavé and goats’ packed with the city’s elite. minister: ŒIt’s a bit unhealthy. They send milk ice cream is delicious. The bill would ŒEveryone in my lost their kids to private schools. They have ruin most Indians. friends, says Cyrus Guzder, the chairman their own water and electricity. So they One day gunmen walked into the res• of AFL, a logistics †rm. ŒWe all socialise at barely notice how bad the government is taurant and shot diners and sta at close the Taj and the Oberoi. We’ve all been to at delivering power, water and schooling range, spattering blood over the walls. At weddings and parties here. He sits in a to the other 1.2 billion Indians. least 175 people died in the attacks that be• soft chair in a members•only club in the Yet to many Indians the nation’s ty• gan on November 26th 2008 in Mumbai. Oberoi as a waiter serves canapés. The coons are heroes. A few made their for• The terrorists appear to have chosen their club is quiet and uncrowded, a rare luxury tunes corruptly, but the software moguls 1 The Economist January 22nd 2011 A special report on global leaders 13

2 of Bangalore created a huge export indus• Chinese blogosphere. Pop songs with the gressmen assume that Huawei is a front for try out of nothing, and many others refrain ŒMy dad is Li Gang! quickly circu• the People’s Liberation Army. They fear helped to spur India’s galloping growth. lated. Li Gang was forced to make a tele• that if the †rm is allowed to supply sensi• Ratan Tata, the soon•to•retire boss of a con• vised apology. His son was arrested. Chi• tive communications infrastructure, it glomerate that produces everything from na’s leaders would like the 95% of the might bug it so that China’s spies can listen tea to cars, lives modestly and treats his population who are not members to think in. There is no evidence to support this employees well. The brothers Anil and that the party cares. But the most revealing idea, but no way to investigate it either: Mukesh Ambani are more controversial, fact is that Mr Li junior evidently thought Huawei’s ownership structure is opaque. but they have turned the family business he could get away it. The perception that commercial suc• into two global giants, with interests from The party’s tentacles are everywhere. cess often depends on political ties makes chemicals to entertainment. State•owned †rms do its bidding. Private inequality in China more galling. In the Some Indian gazillionaires are ‡ashy. †rms must avoid o ending it. Projects it mid•1980s Chinese incomes were more Mukesh Ambani’s house has 27 stories, supports make rapid progress. For exam• evenly distributed than India’s‹hardly three helipads and three ‡oors of hanging ple, it wants China to dominate the market surprising, since China was nominally gardens. Vijay Mallya, a beer•and•airlines for green energy. So when the price of poly• communist and India is a‰icted by a , constantly amuses the newspa• crystalline silicon (the main raw material system. But now China is less equal than per•reading public with his speedboats for solar panels) shot up in 2007•08, a busi• India, with a Gini coeˆcient of 0.4 to In• and sports teams. But for most of the coun• nessman, Zhu Gongshan, won swift ap• dia’s 0.37. China has 800,000 dollar mil• try’s elite the most conspicuous item of lionaires, but also 400m people who live consumption is sending their children to on less than $2 a day. university in America. The disparity between rural and urban In much of India, life is getting percepti• incomes is also vast. City•dwellers make bly better each year. Wealth per person has two•and•a•half times as much as rural Chi• vaulted by 150% in the past decade, from nese‹the widest such gap in any big coun• $2,000 to $5,000. Many Indians think the try. This is partly because of a system of nation’s entrepreneurs deserve some of residence permits, called hukou, that re• the credit. In Dharavi, a slum outside sembles the pass system in South Africa Mumbai, an illiterate mother called Aruna under apartheid. People with a city hukou sits in her tiny one•room ‡at, which is can live and work there freely. Those with a home to ten people. Asked how she feels rural hukou can come to a city only as guest about the rich, she says: ŒThey have workers. Some 150m rural Chinese work in worked hard. And we must work hard, cities without the right to live there, in ef• too. Her eldest daughter has a job enter• fect making them foreigners in their own ing data at a bank. The next one is studying country. They often cannot use public diligently. The family may be near the bot• schools and clinics, and they are barred tom of the ladder, but it sees a way up. from public housing. Peasants who protest can be deported back to the countryside. The party is watching you The government has promised to liber• The relationship between rich and poor in alise the hukou system, but cities can still China is di erent. China’s stellar growth exclude anyone they like, and often do. has lifted some 500m people out of pover• Costly cars for comrades Real freedom of movement would prompt ty. Much of the credit belongs to Chinese 250m peasants to move to the cities, pre• entrepreneurs. Since Mao’s boot was lifted proval to build a factory to make it, and dicts Yukon Huang, a former head of the from their necks, they have built marvels, China’s sovereign•wealth fund invested World Bank’s oˆce in China. City folk from the skyscrapers of Shanghai to the $710m in his venture. don’t want that. The incomers might clog factories of Guangdong. Yet mainland Chi• But since the party is accountable nei• their schools, build slums on their door• nese business leaders operate in the shad• ther to voters nor to the law, there is little to step or compete with them for jobs. ow of a secretive and unaccountable rul• prevent its bosses from abusing their pow• Or for women. Guy Sorman, the author ing party. To get on, many join it. Some do er. The children of some of China’s leaders of a sceptical book about China, ŒThe Em• so reluctantly, to avoid being crushed. Oth• have amassed huge fortunes in murky pire of Lies, describes a rule in Shanghai ers do so gladly, hoping to use the power of ways. Banks often lend to the well•con• that allows a local man to obtain a hukou the state to enrich themselves. nected instead of the creditworthy. Local for his wife from outside after 15 years of Individual party members are not en• leaders levy taxes that have no basis in law. marriage, but makes no provision for a tirely above the law. If a local bigwig be• Because business and power are so en• Shanghai woman to marry someone from haves so appallingly that the resulting twined, even the most able business• elsewhere. Asked why not, the mayor’s of• protests are heard in Beijing, the party may people are treated with suspicion outside †ce told Mr Sorman it was unthinkable cut him down to size. In October last year China. For example, Huawei, a maker of te• that a Shanghai woman would marry a the son of Li Gang, a senior police oˆcer in lecoms equipment, whose products are Œforeigner. Baoding, killed a pedestrian while alleged• generally considered excellent, neverthe• The hukou system was designed to help ly drink•driving. He sped o , shouting, Œre• less has trouble doing business in America the party control the people. But by creat• port me if you dare; my dad is Li Gang! because its founder, Ren Zhengfei, is a re• ing two Chinas, it is building up tensions News of the incident went viral in the tired army oˆcer. Some American con• that one day could explode. 7 14 A special report on global leaders The Economist January 22nd 2011

They work for us

In democracies the elites serve the masses

N SEPTEMBER last year Bill Gates and The computer revolution he helped to IWarren Bu ett sat down with 50 of Chi• bring about transformed the way people na’s richest tycoons to a sumptuous dinner handle information. Perhaps his founda• of nothing at all. The point the two philan• tion will spur some equally momentous thropists were making was that those who change, but it seems unlikely. have more money than they can ever spend on themselves should consider Tying Gulliver down spending it on others. Recent history bristles with examples of Philanthropy has a long history. What is the elite causing mischief. In 2008 clever new is that philanthropists now have but reckless bankers sparked a global melt• more money to give away than ever be• down. Governments are quite rightly tak• fore. They are often young, energetic and ing steps to rein in their excesses; tougher intellectually gifted, too. Bill Gates was regulations may reduce the risk of a repeat, only 39 when he set up his charitable foun• but will not eliminate it. On a smaller dation, so he could end up spending more scale, the world’s brainy citizens are not years managing his charity than he did necessarily being altruistic even when running Microsoft. , the they claim to act for the common good. founder of Facebook, was only 26 when he American lawyers, in punishing doctors’ gave $100m to schools in Newark. mistakes, make medicine more costly. Stu• Modern philanthropists are typically dents in Europe riot to demand that others, self•made, so they are used to getting including those not fortunate enough to at• Carnegies have proliferated things done. Rather than simply handing tend university, pay for their tuition. sacks of cash to charities that already exist, The elite are most likely to do harm markets force business leaders to heed they often prefer to build their own institu• when they rely on the coercive power of their customers’ demands all the time. tions, observes Paul Schervish, the director the state: for example, when they persuade And the law applies to rich and poor alike, of Boston College’s Centre on Wealth and it to grant them special favours. In autocrat• even if the rich can a ord better lawyers. Philanthropy. The way they measure their ic countries such as China and Russia the All these curbs require continual re†ne• success is not by how much they disburse most in‡uential people devote a dispro• ment: greater transparency in government, but by the return they earn on their charita• portionate amount of energy to such rent• vigorous enforcement of antitrust rules, ef• ble investment, measured in lives saved or seeking. In liberal democracies ordinary forts to make justice swift and fair. Yet by improved. folk are better defended. Elections force and large in liberal democracies the pow• The super•rich philanthropists of a cen• politicians to take the public’s wishes into erful get on by pleasing others. In short, tury ago, such as John D. Rockefeller and account every few years. Competitive they work for us. 7 Andrew Carnegie, were equally driven but less numerous. Today there are well over O er to readers 400 billionaires in America alone, many Future special reports Reprints of this special report are available from Feeding the world February 26th of them in †ne fettle and eager to embark the Rights and Syndication Department. Property March 5th on a second career. Such people are often A minimum order of †ve copies is required. Editor’s survey: the role of the state March 19th workaholics and have no wish to retire. April 9th Corporate o er Pensions The charitable rich do their bit to soothe Customisation options on corporate orders of 100 California April 23rd the social tensions that arise from growing or more are available. Please contact us to discuss inequality. Yet their work should be seen your requirements. in perspective. Even in America voluntary For more information on how to order special transfers of wealth are dwarfed by public reports, reprints or any queries you may have spending. Americans gave away $217 bil• please contact: lion in 2009, estimates Mr Schervish. Gov• ernment spending on health care and pen• The Rights and Syndication Department 26 Red Lion Square sions was ten times that. London WC1R 4HQ By and large, global leaders change the Tel +44 (0)20 7576 8148 world more by doing their day jobs than in Fax +44 (0)20 7576 8492 their spare time. Even Mr Gates, who was e•mail: [email protected] Previous special reports and a list of widely reviled for his business activities, www.economist.com.rights forthcoming ones can be found online probably did more good by amassing his Economist.com/rights Economist.com/specialreports fortune than he is doing by giving it away.