The United States is facing its 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.
, “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 five years ago," 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 and , Kempe said. It has been building over the past five years as a series of exogenous shocks have upended the status quo in markets.
" was a wake-up call," Kempe said, with more C-suite members building geopolitical analysis into government affairs teams, adding outsourced relationships with consultants, and bringing more risk management into C-suite positions.
"No one is saying it won't affect business. ... Geopolitics is coming into the boardroom in a way it hasn't in my lifetime," he said.
He said it is reasonable for CEOs to conclude it might get worse. The first four years of the latest decade have included four exogenous shocks: COVID, a "sloppy" withdrawal by the U.S. government in Afghanistan which weakened the U.S. standing in the world, and the need to move entire businesses out of Russia, and now the outbreak of .
"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 the tensions and risks are higher than ever. "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 how the choices made by the U.S. after World War I led to isolationism, the Holocaust, and millions of deaths, while the nation "got it right" after World War II, resulting in international institutions like the United Nations and NATO.
The growing bilateral relationships between adversaries of the U.S.—China, Russia, Iran, and North Korea—raise the risk level.
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 . But as the new Speaker of the House of Representatives Mike Johnson for Israel from Ukraine military aid and to legislation covering U.S. domestic border security issues, Kempe believes the U.S. needs to keep the war in Ukraine top of mind. If the , China may see that as a green light to attack Taiwan, he said.
Kempe advises companies to rely less on 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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