On monarchies and companies: what Middle East has to do with corporate governance

In political science, the debate about relative benefits of monarchy as opposed to other forms of political organisation such as a single or multiple party system has been raging for a while. And let us not be mistaken, this debate has not much focused on Sweden, Monaco or the United Kingdom as opposed to France, the United States or     Germany. In Europe, the dying breed of kingdoms, aka the "symbolic kingdom",  remains of interest only because from time to time photos of naked royalty appear in local tabloids, reminding everyone that even royalty can do remarkably stupid things, making us feel better about ourselves.

The symbolic kingdoms do not unfortunately light up the imagination of political scientists or frankly, for that matter, anyone else except perhaps for some small minority of the French that still hope for a demise of the Republic and the rightful - in their view - restoration of the French dynasty. For that, they have even located the heir to the French throne who is apparently anxious to resume his duties interrupted over two hundred years ago. Aside from the imaginative French, the European kingdoms don't do much as a litmus test for what a monarchical system in Europe would be like as opposed to the multiparty system (which the Americans have quickly rebranded into a much simpler, American kind of good vs bad Bushism, the mighty democracy).

Without going into the whole debate whether we actually have a democratic system in Europe or North America, which is worth to have but can hardly be squeezed into a few hundred words, what is clear is that the only interesting place where monarchies have not only survived but where they have been stable is the Middle East. About half of the countries in the region are reigned by kings, and the royal hold on the region stretches from the far away oil-awash Gulf sheikdoms to North Africa (Morocco) and the Levant (Jordan). Commonalities between them are actually few and far between.

With the unrest that has swept the region in the past year, the question of why Tunisia, Egypt and Libya and not Saudi Arabia, Oman or Kuwait has resurfaced again, and not without justification. Why Tunisia which had a relatively higher standard of living and in some sense greater political liberties than Morocco? Why Egypt, which shares many fundamental economic and social challenges than the neighboring Jordan, which albeit    more than ten times smaller demographically, is definitely not ten times more wealthy or much more egalitarian in its distribution of wealth?

These are the question that have resurfaced in the turbulent seas, brought onshore by the Arab Spring and left us to ponder once again this old beast in new clothes. Only last week, Marc Lynch was asking in the latest edition of Foreign Policy: Does Monarchy Matter?, arguing against what he terms the "monarchical exception". For many like Lynch, monarchy does not matter, what matters are the crutches that have for the past few decades been propping it up: oil. According to this view, monarchies and monarchs are not that different from anyone else, even if they find themselves special.

Some point that even oil could not help Bahrain spiral down the same route as Egypt and Tunisia earlier this year and friends in Manama say that the whiff of tear gas has stubbornly installed itself in the streets of the capital, even as the government has purged Shias from virtually all posts of consequence. Even in the stable Saudi Arabia, which has poured an estimated 130 billion dollars into creating public sector posts and increasing subsidies on already subsidised staples and petrochemical products (which are already sold at a fraction of their actual cost), demonstrations in the restful (and Shia) Dammam are now reported.

Could this fly in the face of monarchical resilience theory? Is the invitation by the Gulf Cooperation Council for Morocco and Jordan to join the club of remaining Middle Eastern monarchs, all by the way proclaiming themselves to be somehow descendants of the Prophet, a last ditch attempt to hold on to power in the same way that Assad is clinging on to his in Syria-now-turned-into-battlefield? In other words, is there reason to believe that the monarchs are going down the same drain where the other now-dictators (yesterday-key-allies) have just recently spiraled?

Not so quick. While the wind of the Arab Spring has certainly blown over the Gulf and other Middle East monarchies, it looks to have just roughed up some sand in the desert without much affecting the Bedouins. They have adjusted their outfits, made some noises about political reform (aka Kuwait and Morocco), and got back on their horses, head up and nose up in the air. No gruesome photos of captured dictators, reports of constant clashes with the police, videos of wailing women complaining of their husbands being detained for no apparent reason. The movie set is back to normal, no change of actors is required.

Regardless of whether this will or will not continue, the lessons of monarchical versus single party (aka individual) control, leaves much to ponder over, not only for the future of the Middle East but for the future of the civilization more generally. For the reasons that monarchs in the Middle East, and indeed elsewhere, tend to survive longer   is that their incentive to squeeze the country for all it has is balanced with their long term political survival, which hinges on some reinvestment and some returns to the population to keep grievances at bay. The monarchs, after all, want some oil to left for their followers, while the autocrats fail to have this longer term vision and tend to upset the balance quicker by getting their hands on more and faster. The case of Ben Ali is perhaps the most poignant.

You might think that the Middle East is far away, that oil is not scheduled to deplete for another few decades, and decide that monarchy and bedouins are not that interesting after all. But before you do that, consider that monarchies and companies, although they appear to have nothing in common, do have something very much to share. The long term perspective. This year, we have not just seen major events in the Arab world, we have also seen persistent and violent demonstrations on the Wall Street and its equivalent in every major North American or European city, bemoaning financial capitalism and its obsession with hard and fast returns.

Much like single party leaders the type of Ben Ali or Assad, the CEOs of major financial companies have proven to be obsessed with milking the cow as fast as they possibly could. Neither suspected that they could be thrown out, investigated or prosecuted for doing so. Now the tide has turned and every misstep by a bank CEO or even the lowliest of its employees is scrutinised in large print in the Financial Times to the point that the bankers themselves are voluntarily giving up their bonuses and talking to the regulators about better oversight of executive compensation.

Perhaps the capitalists remaining in the game should also revisit the monarchical exception theory to better understand why some manage to remain in power over generations, while others barely manage to make it through one generation. It is often said that the "old" capitalists, the likes of Henry Fords and the Rothchilds,  had a longer term vision that included their employees and suppliers in the picture, as opposed to trying to squeeze them for their last penny.

While today, the buzzwords such as ESG, social investment and inclusive growth are all there, the reality does not follow suit. Looking at evening news while indulging on toasts and caviar,  today's managers should remember that not sharing their caviar might at best leave them fighting for their life (aka Assad), and at worst might just dry up that caviar source altogether (aka Ben Ali). So, monarchy matters but not only for the monarchs after all.

Centers of gravity 

New York, London, Paris, Rome, Tokyo. The list of world class cities is not that much longer than that. On that list are those cities, where everyone knows someone, everyone has a thought on some great place to go to, a place with a dear memory, a scene from a film that stroke a particular note, a small nostalgia in their heart. These are cities with which we have a permanent-and-hate relationship in that they swallow us while we are on premises, exhaust us till our last breath with their vastness, but constantly enthrall us with their ability to innovate, yet remain loyal to their established style.

These are the cities always worth a visit: rain or shine, cheap or expensive, downtown or in the periphery, under ring or left wing governments. And they continue to faithfully attract crowds of tourists of all kinds, from the hippie backpackers fitting the exact number of pairs of underwear for the days in town, to the mass tourists sightseeing from the comfort of their mega-sized buses equipped with multilingual travel guides, to the rich and famous with access to the trendiest spots. 

Over the years, other cities have entered into the race for the new travel destination hotspot, and may have, for a second, eclipsed our old time favorites. With eyes full of awe, we have flocked to Bali, Beijing, Dubai, Buenos Aires, Moscow for some Russian chic, some Latin American passion, some Middle Eastern luxury. And sometimes, some of us, have come back, but most have finished that book and moved on to the next genre in the anticipation of a surprise, a novelty, of that tingling sensation of awe, even if it last just a few seconds.

In search for that fleeting tingle, travel guides have tripped over each other to dig up the new jewel, lost somewhere in the middle of some unknown ocean, but eventually we've run of oceans to explore. And we've more or less ran out of up-and-coming cities likes of Istanbul or Dubai and we've gotten bored again. The travel industry went back to the drawing board and have over the years, come up, to their great credit, with scores of cities and villages with resorts, boutique hotels, temporarily unspoiled nature and rare species of animals. 

The competition in the industry has heated up to boiling temperatures. Dubai has poured cash - air-conditioning open space - to build what is now the highest building in the world, the Bourj Al Khalifa. Butan has thought of restricting the number of annual visas for tourists in order to make them feel exclusive. Others are pondering as to how they can up their game in emerging forums such as the Intelligent Cities Summit (whoever thought of that name!), where urban architects, designers, construction geniuses and others get to ponder how to make their city the best place to live. 

The truth, however, is that our choice of a city to grow old in has virtually nothing to do with our choice of a city to visit. Indeed, one could argue that they are the opposite and the fact that retirees often move from large urban centers to a countryside setting is an iron proof of that. For most of us avid travelers, the tingle does not arise from seeing roses in a remote garden, unless our grandmother was an avid gardener, but at a sight something novel. Perhaps Intelligent Cities is not what we are after in the end. 

What we are all after is novelty and novelty at all cost: at the cost of risk, at the cost of extreme temperatures, at the cost of understanding nothing in foreign languages, and of course at the cost of some serious money. While Kabul and Baghdad might indeed be a tad too far for most of us, tourists are now flocking to places as improbable as North Korea or Burma. Some even drop in places as unconventional as Reykjavik, which after the Icelandic meltdown, has become unsurprisingly cheap and surprisingly trendy.

Since the transport industry has banalized the crossing of continents, we have discovered and categorized cities into top destinations for honeymoons, water sports, spas, sex tourism, beautiful people, natural waterfalls, parties. And yet, les grandes classiques have survived the discoveries of destinations with rare animals, cheap sex, ethnic food and around-the-clock sun. They have shaken off the cheap copycat attempts such as Las Vegas or Tianduchang (a Chinese city built as a copy of Paris).

Their reputation stands, completely unfettered, in sight of these discoveries and up-and-coming competitors. They are the cities of their own class, of the same class, as the British nobility or the Hollywood superstars who no longer have to prove their credibility to anyone else. And while they are no longer the economic powerhouses of our century, that no longer matters because they have already passed that stage, created their persona, and moved on, leaving the Moscows of this world to repaint their facade, the Beijings of this world to create their persona and the Beiruts of this world to rebuild.

So, why do we always flock for more of the same while looking for novelty? The answer to this question lies perhaps as much in the uniqueness of each of these cities, as in their ability to cater to all tastes, from the most unsophisticated, to the most demanding. To their ability to pander to inequality, to appall, as much as enthrall, to surprise as much as exhaust, to be anything but remain predictable. To their obvious inequality. Only in London can one eat a mountain of quality Indian food for under 5 pounds and spot a 150,000 pound pot of face cream at Harrods. Only in New York can you access any cuisine in the world and speak every language in the world. 

These cities, to the horror of their bourgeoisie, have swallowed waves of immigration that have rendered them more colorful, more socially complex, more dangerous, but also more multifaceted than those cities who have sent their native Chinese, Mexican, or Moroccans there. These new arrivals have had to fit in the style of the house, be it Dior, Abercrombie and Fitch, or Versace, and weave in the fabric of their host their own influence, without disrupting the grand design of the tissue. 

The result have been cities that - much like the fashion houses - have been able to retain their persona, even faced with bouts of bad behavior as was the case of Dior when John Galliano went of the cuff. So, next time someone tells you that Bodrum is the next Saint Tropez or that Saint Tropez is better value for money than Paris, think again. And again. And again. For some things old are still better than a million things new. And that's precisely why we gravitate there, as Newton told us already a while back.