Tuesday, November 10, 2015

Porter's Five Forces: An Application to Politics and Governance

There is a persistent theme in the report on Global Trends 2030 that speaks of rising socioeconomic inequalities and resultant tensions within and across nations caused by globalization that will culminate in a 'Gini out-of-the-bottle' situation that will, in turn, threaten world peace and stability. World-respected economist Joseph Stiglitz in his book 'Globalization and its Discontents (2002)' appears to state that the grim reality of the 'Gini out-of-the-bottle' is more probable than the other rosier alternatives presented in the report. Nations most at risk are those with weak internal economies that fail to compete in the knowledge-driven, technology-oriented global economy, and those with a dysfunctional domestic political economy that allows the accrual of the gains from globalization into a few hands, usually an exploitative elite, without taking any broad-ranging welfare-enhancing measures. The various states of the Middle East, South Asia and Africa that have weak democracies lacking in internal social cohesion and equity and accountability in governance are all examples of at-risk nations as described above. The question I want to investigate here is whether Porter's Five 'Competitive' Forces analysis can be applied to understanding growth and survival possibilities for such states given that a state is generally understood to be a monopolistic entity rather than a competitive one.

In a state, especially an immature democracy, there are numerous groups jostling for a maximum share of the national pie. The entire difference between long-term prosperity and doom is the right group being in power that values good governance over corruption and inequity. For any group to remain in power, however, it will constantly need to compete in electoral and other arenas with rival groups with different agendas but having the same goal: power. This rivalry will be the force that shapes the nature and structure of that state and government. For example, in a country with a strong army historically prone to coups d'etat, a democratic government may need to adopt various survival strategies: appeasement of the army through unreasonably high fiscal allocations, working hard to generate extra political capital with the masses etc. Furthermore, bad governance, corruption and widespread poverty may cause the state's primary clients, the people, to withdraw their confidence, throw in their lot with any of the major rivals or even support revolutionary insurrection as in the wide ructions of the Arab Spring. Positive and fair engagement with this force, the people, is also, therefore, key. Governments also perennially face threats from new entrants: external military or economic aggression, e.g. the US invasion of Iraq, the Bangladeshi threat to Pakistani textiles etc., or a new domestic political force that undercuts the government's legitimacy by proposing substitute governmental systems, e.g. socialism, or as in the Middle East, radicalized religion. Furthermore, in times of crises, the traditional pillars of state strength, i.e. civil-military establishment, industry and the spirit of nationalism, may either dissipate or reassess and shift their loyalties, e.g. the mass defections of senior regime figures to the opposition in Syria.

The brief analysis presented above shows, albeit crudely, that Porter's model can also generally apply to matters of state politics and governance. In conclusion, much like industry, governments must also delicately balance the five forces of external and internal competition to ensure survival, in the first step, and pursue their goals, in the second.

Muhammed H Haider

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