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It was worth a smile at breakfast that morning in February 2006, a scrap of social currency to take out into the world. Michael Porter, the Harvard Business School management guru, had grown famous offering competitive strategies to firms, regions, whole nations. Earlier he had taken on the problems of inner cities, health care and climate change. Now he was about to tackle perhaps the hardest problem of all (that is, after the United States’ wars in Afghanistan and Iraq).

He had become adviser to Moammar Gadhafi’s Libya.

There at the bottom of the front page of the Financial Times was a story that no one else had that day, or any other – a scoop. It turned out that Porter and his friend Daniel Yergin and the consulting firms which they had respectively co-founded and founded, Monitor Group and Cambridge Energy Research Associates, had been working for a year on a plan to diversify the Libyan economy away from its heavy dependence on oil. Their teams had conducted more than 2,000 interviews with “small- and medium-scale entrepreneurs as well as Libyan and foreign business leaders.” (Both men are better-known as celebrated authors: Porter for Competitive Strategy: Techniques for Analyzing Industries and Competitors and The Competitive Advantage of Nations, Yergin for The Prize: the Epic Quest for Oil, Money and Power and The Commanding Heights: the Battle for the World Economy.)

The next day Porter would present the 200-page document they had prepared in a ceremony in Tripoli. Gadhafi himself might attend. The FT had seen a copy of the report, which envisaged a glorious future under the consultants’ plan. If all went well, it said, then by 2019 – the 50th anniversary of the military coup that brought Col. Gadhafi to power – Libya would have “one of the fastest rates of business formation in the world,” making it a regional leader contributing to the “wealth and stability of surrounding nations.”

From Cairo, the FT’s William Wallis reported:

The Harvard project is part of the efforts of Saif al-Islam, the colonel’s son, to restore Libya’s international legitimacy after his father’s renunciation of weapons of mass destruction and Tripoli’s agreement to pay compensation to the victims of the 1988 Lockerbie aircraft bombing.

A year later, in February 2007, BusinessWeek trumpeted the relationship, first on the eve of another Porter lecture on the “New Dawn” in Tripoli, then again a month later. The Cambridge, Mass., firm that Porter had started fifteen years before with seven other HBS professors had become. BW reported, “deeply engaged in overhauling the Mediterranean petro-state.” It wasn’t clear, the magazine noted, that partial bank privatization and “mini-MBAs” for some 250 emerging leaders would prevail over statism and red tape.

We now know that Gadhafi’s son bribed his way into his PhD from the London School of Economics (LSE); that Monitor Group had been paid to help him write his dissertation there (much of which apparently turns out to have been plagiarized, anyway); that the Libyan government was paying Monitor $250,000 a month for its services; that, according to The New York Times, Libya’s sovereign wealth fund today owns a portion of Pearson PLC, the conglomerate that publishes the Financial Times and The Economist; that the whole deal quietly fell apart two years later.

Sir Howard Davies resigned earlier this month as director of the LSE after it was disclosed he had accepted a ₤1.5 million donation in 2009 from a charity controlled by Saif Gadhafi.

It turns out that Monitor also proposed to write a book boosting Gadhafi as “one of the most recognizable individuals on the planet,” promised to generate positive press, and to bring still more prominent academics, policymakers and journalists to Libya, according to Farah Stockman of The Boston Globe. She did a banner job of pursuing the details she found in A Proposal For Expanding the Dialogue Surrounding the Ideas of Moammar Khadafy, a proposal from Mark Fuller in 2007 that a Libyan opposition group posted on the Web.

Among those enlisted were Sir Anthony Giddens, former director of the LSE; Francis Fukuyama, then of Johns Hopkins University; Benjamin Barber, of Rutgers University (emeritus); Nicholas Negroponte, founder of MIT’s Media Lab; Robert Putnam and Joseph Nye, both former deans of Harvard’s Kennedy School of Government. Nye received a fee and wrote a broadly sympathetic account of his three-hour visit with Gadhafi for The New Republic. He also told the Globe’s Stockman he had commented on a chapter of Saif’s doctoral dissertation. (When The New Republic scolded Nye earlier this month, after Mother Jones magazine disclosed the fee, Nye replied that his original manuscript implied that he had been employed as a consultant by Monitor, but that the phrase had been edited out).

Connoisseurs of the consultant’s art will relish Monitor’s 2007 proposal, with its elaborate plan to write and sell a book about Gadhafi as a world-historical figure to a major publisher, and its hints of prospective visits from Cass Sunstein, future constitutional adviser to President Barack Obama (“positive preliminary conversation”) and Nelson Mandela. No memo dated before Porter’s February 2006 appearance in Tripoli has surfaced yet. An earlier letter of understanding, dated May 2006, stated that “Monitor is not a lobbying organization.”

But the lobbying law may be involved, as noted earlier this month by Paul Blumenthal, of the Sunlight Foundation.. Last week Monitor acknowledged it may have a problem with the Foreign Agents Registration Act and hired an outside counsel to advise its internal investigation. Chances are we’ll hear more about this.

Curiously enough, Porter’s name didn’t appear in the Boston Globe account until the twelfth paragraph under the headline “Local Consultants Aided Gadhafi/Cambridge firm tried to polish his image”, well below the continuation of the article on an inside page. Stockman’s account of Porter’s explanation is worth quoting in full.

Monitor’s work in Libya began when Michael Porter, a Harvard Business School professor who is among the country’s top theorists on management strategies, received a call from Saif Gadhafi around 2001, according to Porter. Saif, a western-leaning doctoral student who US officials hoped would become the next leader of Libya, asked for his expertise to help change Libya’s battered, Soviet-style economy. Porter met Saif and several Libyan ministers in London but said he could not help until Libya resolved the issues that had earned it international condemnation, including the bombing of Pan Am flight 103 over Lockerbie, Scotland. The terrorist attack killed all 259 passengers and crew and 11 villagers. “I remember telling Saif, ‘We can’t do anything until you settle your dispute with the rest of the world,’” Porter recalled in a recent interview. In the next few years Libya offered compensation to the Lockerbie victims and gave up its nuclear weapons program, putting it on a path of normalize relations with the United States. So in 2005, Porter agreed to be a senior adviser on a program, to lay out a blueprint for reforms.

He told the Globe’s Stockman he ended his personal involvement in later 2007, after he realized “that the reforms were going nowhere when a person who opposed them was appointed head of the group charged with implementing them.”

Why did a couple of guys as smart at Porter and Yergin become involved in such a mug’s game? It is always possible that Porter thought really thought Saif Gadhafi was full of promise as a democratic reformer when they met. (Today Saif is back in Tripoli, vowing to fight “to the last bullet.”) It is possible that Porter thought the Bush administration would welcome the access to Libyan business that he and Yergin gained through their project. Nicholas Negroponte’s brother John was, after all, Director of National Intelligence from 2005-07.

It’s true, too, that Harvard University was in no way institutionally involved. After its mission to advise the Russian government on behalf of the US State department collapsed in 1997 amid a welter of conflict of interest charges, Harvard closed its Institute for International Development. After losing a long court battle, and partly as a consequence of it, the university relieved Lawrence Summers of his presidency (but made him a university professor) and revoked economics professor Andrei Shleifer’s endowed chair.

But Porter is also a university professor, one of just twenty who hold Harvard’s highest honor. Monitor consultants and journalists writing about the Libyan program have indiscriminately brandished the Harvard name. How can he have been so personally reckless?

I’ve followed Porter’s career with interest for twenty-five years. Some part of the explanation for his interest in Libya surely has to do with a nearly boundless sense of personal efficacy. A fine student-athlete – an All-American golfer for Princeton in 1968 – Porter graduated with a degree in aeronautical engineering and then moved easily into technical economics at Harvard, managing a rock band in his spare time.

The 1970s were a time of great ferment in theories of industrial organization. As Harvard undergraduates, Bill Gates and Steve Ballmer honed their wits in A. Michael Spence’s advanced micro course, before Gates went out into the world to found Microsoft. By the end of the decade, Porter decided his competitive advantage lay in codifying the latest understandings for corporate executives. Three spectacular business best-sellers followed.

Porter became a rising star in the Reagan administration; a frequent consultant to governments around the world in the 1990s; proprietor (with Jeffrey Sachs, of Columbia University), of a Global Competitiveness Report; a peripatetic adviser to corporations large and small; and, by 2000, the single most famous professor at the Harvard Business School. He advised presidential candidate Mitt Romney in 2007. Here he is addressing the National Governor’s Association last month about budget balancing.

But there is also all that Libyan oil and money. The sovereign wealth fund at its peak was worth $70 billion or so, all of it operating under the indirect control of Saif Gadhafi. Income from Libya’s oil production is as much as $40 billion a year. The US eased its sanctions on Libya in April 2004, permitting US companies to bid on Libyan oil and gas for the first time in twenty years, sparking considerable interest in a country whose plentiful reserves can cost as little as $1/bbl to lift. Libya’s “new dawn” would be well lubricated, in any event. Porter and Yergin signed on to coach the country less than a year later.

In a statement last week, Monitor wrote that “just a few years ago many saw a period of promise in Libya.” That was certainly true in Cambridge. What dissenting Libyans in Tripoli witnessed was a parade of well-paid visitors flattering their half-mad dictator, and a squad of Harvard-connected consultants bent on creating a National Security Organization for the government, designed to augment the existing security apparatus with a new corps of MBA-trained personnel officers.

I’m not going to hold my breath waiting for Porter to give some evidence of contrition about his mission to Tripoli. Sir Howard Davies may have resigned as director of the LSE (“The short point is that I am responsible for the school’s reputation and that has suffered”), but being a Harvard professor apparently means never having to say you’re sorry. Perhaps instead the university will find some way to rein in on its professors’ more self-serving ambitions.