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In 2022, the covid pandemic and the myriad crises it spawned may start to recede. Even in a best-case scenario, though, a tsunami of new challenges—from the failure of climate action to the erosion of social cohesion—is within sight. Addressing them will need leaders to adopt a different governance model. When our institutions are well governed, we pay little attention to them. They are invisible supports for the economy and social order. And ‘good enough’ governance in the second half of the 20th century enabled income growth and social peace. Today, however, many people have lost faith in their leaders. Faced with mounting risks and our collective failure to address them, we’ve started looking for culprits. Some point the finger at inept political leaders, others blame “Davos Man", and a minority sees an elite conspiracy behind the current gloom.

The truth is more complicated. At the heart of our failure to foresee and manage global risks—not just climate change and deepening social divisions but also the re-emergence of infectious diseases, debt crises and inadequate tech regulation—lies an unresolved problem of global governance. Our institutions and their leadership are no longer fit.

We tend to view history as a series of big earthquake-like events. But the degradation of global governance was mostly a case of gradual erosion.

In the Governance 1.0 period after World War II, both public and corporate governance were marked by the rule of a “strong leader". This type of leadership worked well in a society where the cost of information was high, hierarchical management functioned relatively smoothly, and tech and economic advances benefited almost everyone.

The Governance 2.0 model, which emerged at the end of the 1960s, affirmed the primacy of material wealth, and coincided with the rise of “shareholder capitalism" and progressive global financialization. Managers accountable only to shareholders reigned supreme and had global reach. While the 2008 crisis dealt this model a blow, its narrow vision persisted.

The covid shock ushered in Governance 3.0. Crisis management dominates decision-making, with leaders focusing on operational issues and showing a relative disregard for possible unintended consequences. This trial-and-error approach has led to haphazard management of the pandemic and its fallout.

Once the pandemic ends, we will need a new governance model. Governance 4.0 would differ from its predecessors. First, it must replace today’s short-term management with long-term strategic thinking. A focus on problems such as the pandemic, socioeconomic crises and people’s mental health must be complemented with action to tackle climate change, reverse biodiversity loss and environment damage caused by human activity, and address related challenges such as involuntary migration.

Second, we must replace the tunnel vision and top-down approach of the past. As we live in a complex and interconnected world full of discontinuities, the roles of each stakeholder in society must change. Business can no longer ignore its social and ecological impact, while governments can’t act as if they alone have all the answers.

Third, the emphasis on a narrow conception of economics and short-term financial interests must cease. Instead, the primacy of society and nature must be at the core of any new governance system. Finance and business are vitally important. But they must serve society and nature, not the other way around.

The world has changed and public and corporate governance must change with it. Major structural shifts like the Fourth Industrial Revolution and climate change are disrupting every industry and centre of power. Technologies such as blockchain are replacing centralized organizations with decentralized entities, while social, economic and digital inequities are increasing.

For now, many leaders remain stuck in the shareholder capitalism mentality of Governance 2.0, while some societies still favour the strongman leadership and structure of Governance 1.0. And covid means the crisis mentality of Governance 3.0 will continue to dominate. But many leaders are keen to pioneer a new age of governance. They include business executives advocating environmental, social and governance metrics, and some political leaders.

Above all, today’s young people are demanding a better future. Those still using the governance playbooks of previous eras criticize attuned leaders for not staying in their lane. But we should welcome leaders who act outside of their narrow interest as trailblazers and argue for specific action to fight climate change and address social injustice.

The best gauges of responsible and responsive governance today measure the extent to which leaders embrace and consent to stakeholder responsibility over shareholder responsibility. Although the measurement of stakeholder accountability is still in its infancy, the development of consistent metrics will enable us to judge whether leaders are taking a broader view of their role and responsibility.

This century poses new challenges. If we want our children and grandchildren to look back at the progress we made, globally, then our governance model must evolve. ©2022/Project Syndicate

Klaus Schwab is founder and executive chairman of the World Economic Forum, and co-author of ‘The Great Narrative: For a Better Future’

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