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Civilians conduct search and rescue operations and debris removal work at the heavily damaged buildings after Israeli attacks at Al Bureij Refugee Camp as Israeli attacks continue on the 27th day in Gaza City, Gaza on November 02, 2023.
Ashraf Amra | Anadolu Agency | Getty Images
The United States is facing its fourth major inflection point in history since the early 20th century, and if world leaders get it wrong, the results could be similar to what occurred during the 1930s and ultimately led to World War II. That’s according to Frederick Kempe, CEO of foreign policy think tank Atlantic Council, and it is a fear he says more CEOs of major corporations are focused on today.
JPMorgan CEO Jamie Dimon recently warned, “This may be the most dangerous time the world has seen in decades.”
According to Kempe, that’s a feeling shared in many corporate boardrooms.
“Every CEO, all the banks I am talking to are factoring in geopolitics in their thinking in a way they didn’t,” Kempe said at the CNBC Global Evolve virtual summit on Thursday.
This shift has not happened suddenly with the outbreak of war in the Middle East between Israel and Hamas, Kempe said. It has been building over the past five years as a series of exogenous shocks have upended the status quo in markets.
“Putin’s war in Ukraine was a wake-up call,” Kempe said, with more C-suite building geopolitical analysis into government affairs teams and adding outsourced relationships with consultants, and also bringing more risk management into C-suite positions.
“No one is saying it won’t affect business. … Geopolitics is coming into the board room in way it hasn’t in my lifetime,” he said.
He said it is reasonable for CEOs to conclude it might yet get worse. The first four years of the latest decade have included four exogenous shocks, from Covid to a “sloppy” withdrawal by the U.S. government in Afghanistan which weakened the U.S. standing in the world, which contributed to Putin’s decision to invade Ukraine and the need to move entire businesses out of Russia, and now the outbreak of war between Israel and Hamas.
“You may not be able to predict the next risk, but if there is one in each of the first four years [of the decade] why wouldn’t there be more in the next six?” Kempe said.
The last three major inflection points in history were World War I, World War II, and the Cold War, and now tensions and risks are higher than ever since then. “There’s a more interconnected world than we’ve ever had with technological capability to do more harm more quickly,” he said.
Kempe believes it’s up to the United States to ensure the global system stays intact. He cited the choices made by the U.S. after World War I that led to isolationism, the Holocaust, and millions of deaths, while the nation “got it right” after World War II, he said, resulting in international institutions like the United Nations and NATO.
The growing bilateral relationships between the U.S.’s adversaries raise the risk level: China, Russia, Iran, and North Korea.
The autocratic countries are working together more closely than Kempe has ever seen before, and although they may not be plotting against the U.S. specifically, they are aligned in not wanting the U.S. “to run the global system any longer,” he said.
That danger presents a huge risk, as Kempe does not think the U.S. is unified enough yet with its own allies to counteract this collaboration.
Kempe’s greatest anticipated peril is a move by China against Taiwan, which would have devastating impacts to the global economy due to China’s prominence in the world markets. But as the new Speaker of the House of Representatives Mike Johnson seeks to separate funding for Israel from Ukraine military aid, and tie Ukraine aid to legislation covering U.S. domestic border security issues, the U.S. needs to keep the war in Ukraine, top of mind, Kempe said. If the U.S. does not support Ukraine enough, China may see that as a green light to attack Taiwan, he said.
Kempe advises companies to decentralize China in their supply chains, mitigate against risk, and build up resilience, “because you may not be able to redirect the next risk. … You have to understand risk first and be humble about it.”
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