Year: 2008

Yet talk to the leaders of some of the world’s biggest companies today, and they’re claiming new abilities to shift organisational gears on a global basis and produce meaningful innovations quickly.

To discover the truth behind these claims, I assembled a research team and ventured deep inside a dozen such giants. After two years of visiting their operations, I am convinced that the transformation these leaders describe is real. Companies such as IBM, Procter & Gamble, Omron, CEMEX, Cisco and Banco Real are moving as rapidly and creatively as much smaller enterprises, even while taking on social and environmental challenges of a scale only large entities could attempt.

A decisive shift is occurring in what might be called the guidance systems of these global giants. Employees once acted mainly according to rules and decisions handed down to them, but they now draw heavily on their shared understanding of mission and on a set of tools available everywhere at once. Authority is still exercised and activities are still coordinated – but thanks to common platforms, standardised processes and, above all, widely shared values and standards, coherence now arises more spontaneously.

In this article I will set forth the pillars of this new model of big business.

Shared values, principles and platforms
Large corporations must respond quickly and creatively to opportunities wherever they arise and yet have those dispersed activities add up to a unified purpose and accomplishment. Companies that meet this challenge rely in part on clear standards and disciplines.

Consider the “CEMEX Way.” Around 2000, the Mexico-headquartered global cement company CEMEX launched this companywide program to identify best practices and standardise business processes globally. The point was to foster sameness in areas where sameness would make life easier.

In every one of the company’s plants, for example, pipes carrying natural gas were painted one color and pipes containing air were painted another color. This made it simple for transferring employees or visiting managers not to waste time figuring out the setup.

Providing a platform on which creative people can build is only half the battle. What’s also required is a shared set of values to guide their choices and actions. Once people agree on what they respect and aspire to, they can make decisions independently and not work at cross-purposes.

At IBM, three simple sentences about customers, world-improving innovation, respect and responsibility were repeated everywhere we visited. Those values were credited with clarifying decisions and cutting through internal politics.       

Getting close at a distance
The payoff for companies that have embedded values and principles in their guidance systems comes in many forms. The first benefit is integration, which permits collaboration among diverse people.

Innovations do not simply emanate from the home country and radiate outward. They emanate from many places. Know-how is transferred to and from emerging and developed countries through a web of global connections.

Sometimes companies achieve collaboration by bringing people from diverse backgrounds together physically. CEMEX is especially adept at getting people to the problem and gaining speed in the process — for example, seconding large numbers of experienced people to newly acquired operations to work on post-merger integration teams for periods of a few months to a few years. This encourages every manager to train replacements and ensures deep bench strength.

Empowerment in the field
Common values and standards also allow people at the front lines to make consistent decisions, even in culturally and geographically disparate locations. Expressing values and standards in universal terms is not meant to inhibit differences. In fact, it helps people see how to meet particular customers’ and communities’ needs by adding localisation to globalisation.

At P&G Brazil, leaders called this “tropicalising.” As a marketing executive told us: “The values and principles don’t change, but we respect the local trade, the local consumer, the local organisation.”
          
Innovating in markets
People are even more inclined to be creative when their company’s values stress innovation that helps the world. Banco Real, the Brazilian arm of a European bank, discovered this when it put social and environmental responsibility at the core of its search for differentiation.

The result was a spate of new financial products, including consumer loans for green projects (such as converting autos or houses), microfinance for poor communities and the first carbon credit trading in the region. By 2007, it had more than doubled its profitability and grown in size to become the third-largest bank in Brazil.

A stronger basis for partnering
Companies that have established strong guidance systems find themselves more effective in selecting and working with external partners – increasingly a necessity for competitive success.

Omron’s principles, for instance, form the basis for choosing partners and gaining trust. The knowledge that partners would share Omron’s values and standards helped the Japanese company’s research and development transform what one manager called a “not-invented-here, ivory tower” research approach into collaborative information sharing with partners.

Fire in the belly
Values and standards offer people a basis for engagement with their work, a sense of membership and an anchor of stability in the midst of constant change.

Values arouse aspirations to increase the company’s positive impact on the world, and that is worth more to many people than increases in compensation, as a manager in India pointed out to me. This, he believed, was why his rapidly growing unit could attract the best talent without offering the highest pay scales.

How the fabric is woven
The key to success with the new model may seem counterintuitive to leaders operating under the old paradigm. More than anything else, we heard in our interviews about a loosening of organisational structures in favor of fluid boundaries and flexible deployment of people. Managers and professionals generally appeared less concerned with where they worked and to whom they reported than with what projects they were able to join or initiate.

Many of these companies have a tradition of making mobility a part of career development, which ensures a degree of international mixing as well as the carrying of expertise from one place to another. Working with extended networks of partners across inter- and extra-company boundaries requires large numbers of people to serve as connectors among activities – not as bosses but as brokers, network builders and facilitators.

One last element that seems central to the success of the global giants we studied is that they have explicitly added mutual respect and inclusion to the values they live by. Diversity programs are valued because they help people form relationships more quickly and overcome tensions between groups.

A giant change
The new model yields a way of doing business that is more localised and humane. The interplay of corporate standards and local conditions puts companies in a position to influence the ecosystem around them and to generate innovation. If these vanguard companies lead others to adopt their way of working, not only will that be good for business, it will also be good for the world.         

One company’s return on values
Imagine a developing country where workers like their beer and like it cheap – to the extent that alcohol use has become a serious public health problem. Now imagine you are the country manager there for a multinational corporation that profits by selling alcoholic beverages. Your goal is to gain more market share. Is this anywhere for values to hold sway?

Here’s how the story played out in Kenya. UK-headquartered Diageo, the world’s leading producer of premium alcoholic beverages, had entered the market with a large investment in East African Breweries but couldn’t match the low price of its competition. That was because the competition was home brew, subject to no standards or inspections and sold out of garages.

Illicit beer was downright dangerous in a country where water supplies are often contaminated – it was known to cause blindness as well as the intense hangovers and related illnesses that routinely lowered productivity in Kenya’s labour-intensive industries. But it was popular because, with no government taxes added to its price, it offered the most sips for the shilling.

Diageo had the benefit of local talent with global thinking who could recognise the opportunity in the situation and seize it. (Over the years, the company encouraged members of the internationally educated African diaspora to return to Africa at expatriate pay rates.) Using Diageo’s global resources, including a Web-based innovation tool, the local team attacked the problem. Importantly, it put the focus on the best outcome for society and was therefore able to open lines of communication with the national government.

The company proposed producing a low-cost beer and making it widely available, giving the buyers of illicit beer an alternative they would consider reasonable. The safer product would succeed, however, only if the government agreed to reduce the surtax on it, so the price would be truly comparable. The government, of course, had no interest in corporate charity, but it became clear that if more people bought legal beer, taxes would be collected on a greater proportion of the alcohol being consumed. A tax cut, therefore, was likely to yield higher tax revenue overall.

Distribution channel
To make the new beer, now called Senator, widely available, Diageo needed to develop a new distribution channel: responsibly managed licensed pubs. The team talked to community leaders throughout Kenya to identify influential solid citizens, such as shopkeepers and sports club owners, who could set these pubs up. Diageo provided equipment and trained them in business operations, eventually establishing 3,000 new outlets.

The launch of Senator beer saw success on many fronts. Beyond the high market share it immediately claimed, Diageo received a prestigious award for contributing to reduced rates of blindness and increases in workplace productivity. Meanwhile, thousands of new small businesses flourished, and government policies started to change. The work was gratifying to Diageo managers both locally and internationally.

At the time of Diageo’s formation in 1997 (by the merger of Guinness and Grand Metropolitan), its leaders had articulated the company’s values and operating principles to emphasise both high global standards and local community responsibility. With that kind of guidance system in place, local decision makers – even in a ‘sin industry’- can have a transformative positive social impact.

Having it both ways
When do you know a paradigm is shifting? When long-standing contradictions begin to resolve. In the giants my research team and I studied, I was struck by the number of areas in which they achieved a balance between seemingly opposing goals.

– They both globalise and localise, deriving benefits from the intersections.
– They both standardise and innovate, endeavoring to prevent consistency from becoming stifling conformity.
– They foster a common universal culture but also respect for individual differences, seeking inclusion and diversity.
– They maintain control by letting go of it, trusting people educated in the shared values to do the right thing.
– They have a strong identity but also a strong reliance on partners, whom they collaborate with but do not control.
– They produce both business value and societal value.
– They bring together the “soft” areas (people, culture and community responsibility) and the “hard” areas (technology and product innovation).
– They do not abandon values in a crisis; in fact, as leaders put them to the test, crises serve to strengthen commitment to values.

Rosabeth Moss Kanter, a professor of business administration at Harvard Business School and author of ‘America the Principled.’ She was also the editor of Harvard Business Review from 1989 to 1992

© 2008, by Rosabeth Moss Kanter, Harvard Business Review / Distributed by the New York Syndicate.

Wall Street tends not to be too choosy about where it gets its money. Normally, one investor’s dollar is as good as any others. But lately, that’s not been the case. With their balance sheets squeezed by the global credit crunch, many US banks and financial firms have opened their arms to so-called “sovereign wealth funds” –investment vehicles controlled by foreign governments. The move has got some people very worried.

The US Senate recently ordered the Government Accountability Office (GAO) – a financial watchdog – to investigate the activities of sovereign wealth funds, after a string of investments topping $35bn in blue chip firms such as UBS, Bear Stearns, Morgan Stanley, Merrill Lynch and Citigroup.

The concern is that funds owned by foreign governments might use their financial clout to somehow exert improper influence. According to a recent Morgan Stanley study, such funds represent some $2,300bn in assets and could reach $12,000bn by 2015. These funds are mainly held by oil exporting countries, such as Norway, Alaska, Russia, Dubai and Qatar, which have seen a large growth in trade surpluses because of rising energy prices. It’s not likely that Norway’s intentions are going to worry anyone, but most of the sovereign wealth funds are run by governments in Asia and the Middle East. Their recent deals with the Wall Street institutions represented their first significant investments in key American companies.

Investment funds
It’s not just the US Senate that is worried about the influence of sovereign funds. The recent growth of these special state-owned investment funds have caused disquiet among many governments, which fear political influence by other states on strategic sectors, such as energy and defence.

The GAO, according to press reports, is trying to find out how much money these opaque funds control, where it has been invested and how the investments have been treated. It is also examining what information the funds are required to disclose on their investments and what action can be taken to discipline them if they misuse their power. David Walker, head of the GAO, told journalists that sovereign wealth funds did not initially cause too much of a stir in Washington, “But as the number of these kind of transactions rises Congress is becoming interested.”

That follows comments last year from Clay Lowery, the acting under-secretary for international affairs at the US Treasury, who said the spread of sovereign wealth funds could create new risks for the international financial system and spur hostility to cross-border capital flows. Lowery called on the International Monetary Fund (IMF) and the World Bank to develop a set of best-practice guidelines for such funds. He said there was a danger that imprudent risk management by sovereign wealth funds could affect financial market stability.

“Little is known about their investment policies, so that minor comment or rumours will increasingly cause volatility,” he said, adding that such funds “are typically not regulated by their domestic regulators, and the extent of indirect regulation may also be limited.”

Lowery also warned that, over the medium term, the size, investment policies and operating methods of these funds could fuel financial protectionism. “There will likely be much public attention to whether sovereign wealth funds exercise the voting rights of their equity shares and, if so, how,” he said. Lowery warned of the danger that, in the absence of good checks and balances, these funds could invite corruption. He cautioned that funds could become “self-perpetuating” interest groups and urged countries to tackle the causes of reserve accumulation, including undervalued currency regimes.

Market efficiency
Other US agencies have voiced concerns, too. The rise of sovereign wealth funds raises questions of “particular significance” for US financial regulator the Securities and Exchange Commission (SEC), including concerns about enforcement, transparency and market efficiency, the chairman of the agency said recently. Christopher Cox said the issue of conflicts of interest arise when the government is both the regulator and the regulated. “Rules that might be rigorously applied to private sector competitors will not necessarily be applied in the same way to the sovereign who makes the rules,” said Cox.

Cox highlighted enforcement as one issue and said that if foreign private issuers are suspected of violating US securities laws, the agency almost always expects the full support from the foreign government and regulatory counterpart in the investigation. “If the same government from whom we sought assistance was also the controlling person behind the entity under investigation, a considerable conflict of interest would arise,” he said.

Cox raised questions over whether government-controlled companies and funds would use business resources in the pursuit of other government interests. He also highlighted transparency as an issue for the investor protection agency and said in many industrial countries the ability of citizens to inquire into government affairs, or to criticise the conduct of government, is severely limited. “In some countries, criticism of government policies lands you in jail, or worse. Is it reasonable to expect that these same governments will be magically forthcoming with investors?” Cox said. “This raises significant questions for regulators such as the SEC, whose mission includes investor protection.”

Majority stake
It’s not just the Americans who are worried. In Australia, a government study has also called for the IMF to impose standards that would stop investment funds owned by sovereign governments from buying a majority or controlling stake in foreign corporations.

“Attempts by foreign interests to purchase controlling stakes in strategic industries or iconic domestic companies can sometimes cause broadly based domestic concerns,” the study from the Australian Treasury says. “Resistance can be even stronger if the purchaser is an overseas government, and can raise suspicions over whether the purchase is … for strategic or other non-commercial reasons.” The study says the biggest problem is that the funds are highly secretive about their investment practices, which raises concern about their motivation. Most provide no public reporting.

The European Union, however, is taking a more benign view of the emergence of sovereign funds, and trying to develop a common approach to tackle its concerns about their activities in Europe.

“There are good reasons for an EU common approach,” Commission President José Manuel Barroso said recently. However, the Commission is seeking to avoid legislative action and envisages soft measures, such as “ground rules or guidelines”, accompanied by efforts to increase transparency on sovereign fund activity. The Commission underlined that it seeks to “avoid all forms of protectionism.”

The Commission’s stance was reaffirmed in a recent speech by Internal Market Commissioner Charlie McCreevy. He pointed out that sovereign wealth funds have been around for decades. The Kuwait Investment Authority has been in existence since 1953 and the Abu Dhabi Investment Authority, one of the biggest with almost €600bn in assets, was set up in 1976. Temasek from Singapore dates from 1974. People have expressed concerns about these funds in the past, he said. “I am old enough to remember the concerns when oil rich Middle-Easterners were buying up prestigious companies and landmark London properties. As time went by and oil reserves tapered off, so did the fuss.”

The public consciousness
McCreevy said such fears have come back thanks to the growth in sovereign funds as a result of rising energy prices and large trade surpluses. “Their size and wider geographical disparity have impinged on the consciousness of policy makers and the wider public.”

What should be done about their growth? “One thing is clear to me: Europe must remain an attractive place for investment,” said McCreevy. “Without continued inward investment our economies will stagnate. We have no interest in erecting barriers to investment.” While they might be unpopular in some quarters, “I suspect in the time ahead we will see many more enterprises seeking investments from such funds,” he added. “Cutting off access to these important sources of liquidity would be like cutting off our noses to spite our faces.”

However, there were aspects of sovereign funds that need to be addressed, he said. “Who controls them? What is their investment strategy? These are legitimate questions? There are also concerns about restrictions on inward investments that EU firms may want to make in the countries concerned.”

“But in raising these issues we must avoid them being used to foment protectionist sentiments. I would not like to see the rise of sovereign wealth funds, which are the by-products of increasing globalisation and benefits of international trade, being used as an argument against the entry of emerging markets investors into the First World corporate sector.”

McCreevy suggested two ways in which the debate should move forward. “Firstly, we need to explain to our citizens that investments which have the potential to compromise national security can be blocked,” he said. “It is often forgotten that a member state is entitled to restrict Treaty freedoms on the basis of legitimate national security concerns. This is true in respect of all investments, be they from sovereign wealth funds, state-controlled companies, private companies or whoever.” A number of EU members have measures in place to restrict investments in the defence sector, the Commission recently proposed controls on investment in the energy sector, and there is already a requirement on investors in European financial institutions to be “fit and proper”.

Secondly, McCreevy said sovereign wealth funds should be transparent in their operations, preferably on the basis of an international code of best practice. “We are working in international organisations and bilaterally, together with our US colleagues, to bring this about,” he said.

Sovereign funds
The IMF is working on a set of guidelines. Last year its chief economist, Simon Johnson, said the organisation was growing increasingly uneasy over the role of sovereign funds. Concerns focused on the lack of disclosure about their activities and the amount of leverage that funds might employ.

“There are an increasing amount of financial flows going through black boxes. Hedge funds are black boxes. Sovereign wealth funds are black boxes. We don’t know what happens and we should worry about that,” he said. “Black boxes should make us uneasy . . . People are beginning to feel uncomfortable about this.” Johnson added that the IMF’s efforts to understand the potential financial risks from sovereign funds remained at a “pretty early stage”.

In the meantime, what do the countries behind these funds make of all the concern? Writing in China Business News recently, Wei Benhua, deputy head of China’s State Administration of Foreign Exchange, said the developed world should not discriminate against funds from developing countries or subject them to “financial protectionism”. Wei characterised such worries as baseless: “The China Investment Corp drew the attention of international society as soon as it was established, with certain countries intentionally disseminating the view of Chinese investment as a threat,” he wrote.

Sovereign wealth funds would benefit international markets by increasing liquidity and by making global resource allocation more efficient, said Wei. “There should be no discrimination in the treatment of sovereign wealth funds; the funds of developing and developed countries should be treated the same way. International society should clearly oppose investment protectionism and financial protectionism in any form.” As the IMF develops its guidelines, China would get actively involved in discussions, he added. There will be many companies in the developed world – Wall Street Banks especially – that will hope these powerful new funds are not dissuaded from investing: in the current climate especially, they need the money.

Washington seeks Russian assistance on non-proliferation while pursuing policies on Russia’s borders that Moscow and many Russians consider highly provocative. In the meantime, both countries are threatened by radical Islam; co-operation between the nuclear powers of the world is imperative; and an emerging set of issues, like environment and climate change, can only be solved on a global basis. Given the extent to which their national interests have become interconnected, neither side can want or, indeed, afford a new Cold War. But the new chill is harmful to the prospects of a peaceful and creative international order.

The two countries have reached this point under presidents who took office nearly contemporaneously and will leave it about the same time. Remarkably, the personal relationship between the two presidents has remained much more constructive than the overall relationship. To the extent that personal trust can shape policies, the two presidents have an opportunity to use their remaining months in office to overcome some of the tensions that have weakened the basis for long-term co-operation.

The estrangement falls into two categories: on the American side, disenchantment with domestic trends in Russia, disappointment in Russia’s foot-dragging on the nuclear issue in Iran and reservations about the abrupt way Russia has dealt with the now independent former parts of the Russian Empire. On the Russian side, there is a sense that America takes Russia for granted, demands consideration of its difficulties but is unwilling to respect those of Russia, starts crises without adequate consultation and intervenes unacceptably in the domestic affairs of Russia.

Historical experience
Though each side’s complaints are to some (and often considerable) extent justified, the difficulty in resolving them reflects a vast difference in historical experience. In the 19th century, acting on the surface in parallel, both countries had devoted much of their national energies to expanding into contiguous, thinly settled regions. But there was an essential difference. America’s expansion was carried out by men and women who turned their backs on their countries of origin to shape their individual futures. Russia’s pioneers arrived in conquered territories in the rear of armies, while the indigenous populations were absorbed into the Empire. Almost all the cities in southern Ukraine and, of course, St. Petersburg were created by tsars who moved thousands forcibly into newly conquered regions.

The vastness of the territories and the openness of the frontiers produced a claim to exceptionalism in both countries. But American exceptionalism was based on individual fulfilment, Russia’s on a mystical sense of national mission. America’s exceptionalism produced an essentially isolationist foreign policy, interrupted occasionally by moral crusades. Russia’s exceptionalism expressed itself in military expansion. Between Peter the Great and Mikhail Gorbachev, Russia expanded from the heartland of Slavic Russia to the centre of Europe, the shores of the Pacific and deep into Central Asia.

Until the end of World War II, Russia and America rarely interacted on a global basis. America turned its back on world politics. Russia was in the paradoxical position of, on the one hand, often being seen as a threat to the established balance of power, while becoming an indispensable element in its preservation when it was attacked by Charles XII, Napoleon and Hitler.

America felt secure behind two great oceans, at least until the emergence of Russian long-range missiles and perhaps until 9/11. Russia, with no natural borders, especially in the West, considered itself permanently threatened. America identified normalcy and peace with the spread of its political values and institutions; Russia sought it through a security belt in contiguous territory. Yet the more polyglot the Russian Empire became, the more vulnerable Russian leaders felt, until expansion turned into a defining characteristic of the Empire.

This dichotomy explains the psychological tensions of recent years. To America, the collapse of the Soviet Union was a vindication of fundamental democratic values; to most Russians – even anti-Soviet Russians – the disintegration of empire is a shocking affront to Russian identity. To Americans, the 1990s in Russia were a period of reform and progress. Most Russians view them as a time of humiliation, corruption and national decline. Many Americans criticise Putin for reverting to an autocratic system. His supporters would argue that Russia’s immediate priority must be the restoration of its international standing. That perception, according to independent polls, seems to be shared by a large majority of Russians.

Putin sees himself in the tradition of Peter the Great and Catherine the Great, who established Russia as a great power. Autocratic beyond the standards of even 18th-century monarchies, they nevertheless considered themselves reformers who would drag a backward country and recalcitrant population into the modern period. Peter spent a year in Europe learning as much as he could of European technology; Catherine corresponded with Voltaire and invited Diderot as well as many scientists to Russia.

America must keep in mind that Russia, containing 11 time-zones, abuts principal areas in rapid transformation: Europe; the Middle East; and China, India and Japan, under whose aegis the centre of gravity of world affairs is moving from the Atlantic to the Pacific. Then there are the republics of Central Asia, repository of some of the world’s largest energy resources.

For Russia to regain its historical status, America is in many respects the most desirable partner. Russia will have an incentive to foster relations with China, partly to enhance its bargaining position vis-à-vis other regions. But it will stop short of making Asia the focal point of its policy, partly because China itself would shrink from such a partnership and because Russia has too many concerns about Siberia to place all its bets on its Asian ties. Russia’s ties with Europe are traditional, but Europe, until its unity is further advanced, is highly reluctant to accept the risks that may be needed to overcome radical jihad or to pose the penalties and rewards to prevent nuclear proliferation.

Tactical issues
Strategically, the US and Russia are very important to each other. Yet their dialogue has concentrated too much on tactical issues. Russian concerns have sometimes been treated as an exercise in tutelage. There is some merit in an exasperated comment made to me by a Russian policymaker; “When we tell you of a Russian problem, you have a tendency to reply that you will take care of it. But we don’t so much want it taken care of as we want it understood.”

For many Russians, the post-Soviet experience represents a reversal of 300 years of Russian history. Most of the acquisitions since Peter the Great having been severed from Russia, the Russian strategic position vis-à-vis its Western neighbours has changed fundamentally for both sides. Russia sometimes repeats its historical emphasis on power in relations with its neighbours. It finds it difficult to adjust its thinking to a world where it faces no threat in the West. At the same time, Russia is no longer the strategic threat to the balance of power that it was during the Cold War, even under the worst assumptions. But if the worst assumptions come to pass, it would be the result of a policy failure on both sides.

A new constructive relationship between America and Russia will require the modification of two traditional attitudes: the American tendency to insist on global tutelage and the Russian proclivity to emphasise raw power in the conduct of diplomacy. Specifically:

As the two largest nuclear powers, the United States and Russia have a special responsibility for non-proliferation. Iran is the key. The haggling over Security Council tactics needs to be brought to a conclusion. Is Russia striving for a special position in Iran and, if so, to what purpose? If the disagreement is tactical, wherein does it arise? Is there a different assessment of the imminence of an Iranian nuclear capability? Or of the efficacy of diplomacy? At what point is the Iranian nuclear weapons capability irreversible? Answers to these questions should guide tactics, not be driven by them.

The most sensitive psychological aspect of America’s relations with Russia concerns what Russians call the ‘near abroad:’ the new independent states that were once part of the Russian Empire. Many Russians find it difficult to think of them – especially those close to the centre of traditional Russian power – as entirely foreign countries and react truculently to what they consider American hegemonic attempts to infringe on historical patterns.

This issue requires restraint on both sides. As someone who strongly supported the expansion of NATO to its present limits, I am uneasy about pushing these territorial limits even further outward except under extreme provocation. At the same time, Russia must understand that America is bound to consider the genuine independence of these countries, like Ukraine and Georgia, as an essential component of a peaceful international order.

Affecting attitudes
A major challenge is the degree to which Russia’s internal evolution should affect US-Russian relations. This has two aspects: To what extent will Russian internal conduct affect America’s attitudes? To what extent should America try to affect Russia’s internal evolution by exhortation or pressure?

With respect to the first question, Russian leaders must understand that the American public is as shaped by its national history as is Russia by its own. America will always judge other societies, to some extent, by their respect for human rights. In many intangible ways, this defines the range of action available to American presidents.

When the line is crossed from advocacy to overt pressure, more intractable issues arise. Russia’s internal condition necessarily is an amalgam of its autocratic, historic past and the new opportunities generated by the collapse of the communist ideological system. A Western-style democratic political system cannot quickly emerge from the building blocks of Russia’s political past; new vistas are needed. Putin’s Russia is an inherently transitory synthesis produced by the impact of the USSR’s closed system on the requirements of a globalising world. This synthesis combines elements of Russia’s historic authoritarian, centralised bureaucratic state and the new opportunities opened up through a co-operative relationship with a unifying Europe and a friendly America.

For the moment, the authoritarian, centralising aspects are dominant, though arguably less so than in any previous period of Russian history. The goal of sound US policy should be to maximise incentives for Russia’s evolution to become more compatible with democratic norms. The dominant factors shaping this evolution will be domestic, not external. Overreaching efforts to determine political evolution in Russia will be more likely to strengthen authoritarian tendencies than the reverse.

In that spirit, a relationship between Russia and the United States that goes from removing frictions to active cooperation will make a major contribution to peace, progress and stability. 

© 2007 Tribune Media Services, Inc