Rebuilding trust in public and private institutions: In virtually every region and country, opinion surveys reveal declining public confidence in governments, corporations and multinational organizations.
	Effective leadership in managing global risks: New mechanisms need to identify and – where possible – mitigate threats such as terrorism, environmental degradation, natural disaster and economic instability.
	Innovation, creativity and design strategy: The obsolescence of many 20th century structures compels leaders to develop fresh concepts, new institutional models and more flexible processes for serving diverse populations.

While all three responses are crucial, the last one may hold the key to the first two. Numerous sessions and workshops highlighted the need to reward innovation, encourage unconventional thinking and promote cultural cross-fertilization in every region and at every level of society.

Change – both sweeping and fundamental – appears to be the one constant as the world moves deeper into the 21st century. Political, corporate and social leaders no longer have the option (if they ever did) of relying on inertia and habit to carry them through the currents of global integration. They must respond – often in real time – to powerful forces that cut not just across national borders, but across cultures, markets and technologies.

The Three Responses

"But the process [of global integration] doesn’t have to be smooth. Along with integration we face the risk of disintegration – failed states, struggling middle classes caught in binds everywhere. These forces are of equal importance." Lawrence H. Summers, President, Harvard University

Describing the specific policies required to manage these forces of change is a task of almost hopeless complexity. However, the agenda for this year’s Annual Meeting reflected an assumption that global leaders must articulate and implement policy responses in three broad areas:

•	Rebuilding trust in public and private institutions: There is growing awareness among elites and publics alike that the institutions of the post-World War II order – national governments, multinational corporations, international organizations – no longer function well. In the developing world, corruption and inefficiency threaten to overwhelm trust (and institutions) altogether. In the industrial countries, economic change spurs fears of a broken social contract. Unless these trends are reversed, global leaders face the prospect of a political backlash that could wreck decades of prosperity, integration and global accommodation.
•	Effective leadership in managing global risks: Theory holds that as markets become more flexible and barriers reduce, economic systems gain stability. However, unwise policies or incomplete adjustments can produce unexpected volatility. Likewise, modern infrastructures offer unparalleled speed and convenience – but may be vulnerable to terrorism or natural disaster. Leaders must improve early warning systems, and develop better tools for defining, controlling and – not least – allocating risk.
•	Innovation, creativity and design strategy: In a "flat" world – one approximating the textbook definition of market efficiency – constant innovation is the only guarantee of competitive advantage. This applies as much to institutional cultures and structures as to new technologies and products. But the sources of innovation are not well understood and financial markets are often unprepared to reward long-term innovation strategies as opposed to short-term gain. This position requires leaders to experiment boldly with incentives and work life arrangements.

These key themes become vital when considering the growing importance of the world’s great cities as incubators for innovation, or creating new markets for pricing and trading insurance risks – including personal economic risks such as unemployment or loss of income. This gives rise to growing awareness that globalization has reached a crossroads, one that could determine whether the integration process continues, or gives way to a new era of regional fragmentation and conflict.

"But the process [of global integration] doesn’t have to be smooth. Along with integration we face the risk of disintegration – failed states, struggling middle classes caught in binds everywhere. These forces are of equal importance," noted Lawrence H. Summers, President, Harvard University, USA; Co-Chair of the Annual Meeting 2006.

The Next Wave

Until now, globalization has been about economic efficiency – expanding trade, slashing labour costs and maximizing comparative advantage through the creation of global production chains. These strategies, however, have reached the point of diminishing returns and "knowledge" is rapidly becoming a commodity. Cost efficiencies are now easily replicable, meaning they provide no lasting advantage. They have become a necessary, but not sufficient, condition for success.

To avoid being trapped in a zero sum game, companies and societies alike will need to use their increased productivity to create new products, anticipate new needs, new markets, new technologies and – most of all – new jobs to replace those that have been lost. Populations that until now have been excluded from the progress of globalization – or made more vulnerable by it – will need to be brought into the mainstream, in ways that respect their human dignity and worth. "We won’t have a creative and flourishing world without bringing everyone into the global economy," contended Jacqueline Novogratz, Founder and Chief Executive Officer, Acumen Fund, USA.

However, such ambitions can only be realized if existing leadership institutions – the massive public and private bureaucracies inherited from the hierarchical 20th century – can be renovated. Here, too, though, progress is being made, albeit often too slowly (see Figure 4). Daniel Vasella, Chairman and Chief Executive Officer, Novartis, Switzerland, noted the growing consensus in the corporate world on the need for greater transparency and accountability. Now business leaders need to take that message to their employees, shareholders and customers. "We need to make an effort to communicate what we do and how we do it," he said.

A World of Opportunities

It would be a mistake, however, to view the next phase simply in terms of risks and looming crises. Tremendous opportunities are also on the horizon – not least for the global business community. For example, the demand for environmentally-sensitive, energy-efficient products and services: While some anxiously watch the rise of China and foresee a resource catastrophe, architects, engineers and urban planners are already at work designing the Chinese cities of tomorrow, featuring rooftop farms, sewage treatment plants that produce more energy than they consume and the construction of solar power collectors on a massive scale. "We believe it is possible to create a virtuous cycle in both our ecological and our social systems," said William McDonough, Chairman, William McDonough + Partners Architecture and Community Design / MBDC, USA.

Likewise, the problems of poverty and marginalization, while formidable, are not deterring local leaders from inventing – or emulating – solutions. Sergio Fajardo Valderrama, Mayor of Medellin, Columbia, explained how his city is delivering educational and cultural services to the poor, following trailblazing urban planning efforts in the Brazilian city of Curitiba. Medellin, he noted, recently built five large cultural complexes on the outskirts of the city, each combining a public library, an outdoor movie theatre and a public park. These centres are accessible not only to city residents, but also to inhabitants of the informal shanty towns that surround it. "We wanted the poor to see that we were building the nicest public buildings in the poorest neighbourhoods," he explained. "The message we are trying to send is that there is hope."

Can the creative imperative win the race with the spectres of political disintegration, economic dislocation and ecological collapse? Thinkers have been arguing the question at least since Thomas Malthus and David Ricardo debated the future of the industrial revolution. There is no guarantee that mankind’s ingenuity will continue to trump its knack for self-destructive behaviour. But given the innovative thinking on display at this year’s Annual Meeting, it still looks like the smart bet.