The World Is Flat (47 page)

“When you and I were born,” said Luis de la Calle, “our competition [was] our next-door neighbors. Today our competition is a Japanese or a Frenchman or a Chinese. You know where you rank very quickly in a flat world... You are now competing with everyone else.” The best talent in a flat world will earn more, he added, “and if you don't measure up, someone will replace you-and it will not be the guy across the street.”

If you don't agree, just ask some of the major players. Craig Barrett, the chairman of Intel, said to me, “With very few exceptions, when you would think about where to site a manufacturing plant, you would think about the cost of labor, transportation, and availability of utilities-that sort of stuff. The discussion has been expanded today, and so it is no longer where you put your plant but now where do you put your engineering resources, your research and development-where are the most efficient intellectual and other resources relative to cost? You now have the freedom to make that choice... Today we can be anywhere. Anywhere could be part of my supply chain now-Brazil, Vietnam, the Czech Republic, Ukraine. Many of us are limiting our scope today to a couple of countries for a very simple reason: Some can combine the availability of talent and a market-that is, India, Russia, and China.” But for every country Intel considers going into, added Barrett, he asks himself the same question: “What inherent strength does [the] country bring to the party? India, Russia-crummy infrastructure, good educational level, you have a bunch of smart folks. China has a little bit of everything. China has good infrastructure, better than Russia or India. So if you go to Egypt, what unique capability [does that country have to offer]? Exceedingly low labor rates, but what is [the] infrastructure and education base? The Philippines or Malaysia have good literacy rates-you get to employ college grads in your manufacturing line. They did not have infrastructure, but they had a pool of educated people. You have got to have something to build on. When we go to India and are asked about opening plants, we say, 'You don't have infrastructure. Your electricity goes off four times a day.'”

Added John Chambers, the CEO of Cisco Systems, which uses a global supply chain to build the routers that run the Internet and is constantly being wooed to invest in one country or another, “The jobs are going to go where the best-educated workforce is with the most competitive infrastructure and environment for creativity and supportive government. It is inevitable. And by definition those people will have the best standard of living. This may or may not be the countries who led the Industrial Revolution.”

But while the stakes in reform retail today are higher than ever, and countries know it, one need only look around the world to notice that not every country can pull it off. Unlike reform wholesale, which could be done by a handful of people using administrative orders or just authoritarian dictates, reform retail requires a much wider base of public and parliamentary buy-in if it is going to overcome vested economic and political interests.

In Mexico, “we did the first stages of structural reform from the top down,” said Guillermo Ortiz. “The next stage is much more difficult. You have to work from the bottom up. You have to create the wider consensus to push the reforms in a democratic context.” And once that happens, noted Moises Nairn, a former Economy Minister of Venezuela and now editor of Foreign Policy magazine, you have a much larger number of actors participating, making the internal logic and technical consistency of the reform policies much more vulnerable to the impact of political compromises, contradictions, and institutional failures. “Bypassing or ignoring the entrenched and defensive public bureaucracy-a luxury frequently enjoyed by the government teams that launch initial reform measures-is more difficult in this stage,” Nairn said.

So why does one country get over this reform retail hump, with leaders able to mobilize the bureaucracy and the public behind these more painful, more exacting micro-reforms, and another country get tripped up?

Culture Matters: Glocalization

One answer is culture. To reduce a country's economic performance to culture alone is ridiculous, but to analyze a country's economic performance without reference to culture is equally ridiculous, although that is what many economists and political scientists want to do. This subject is highly controversial and is viewed as politically incorrect to introduce. So it is often the elephant in the room that no one wants to speak about. But I am going to speak about it here, for a very simple reason: As the world goes flat, and more and more of the tools of collaboration get distributed and com-moditized, the gap between cultures that have the will, the way, and the focus to quickly adopt these new tools and apply them and those that do not will matter more. The differences between the two will become amplified.

One of the most important books on this subject is The Wealth and Poverty of Nations by the economist David Landes. He argues that although climate, natural resources, and geography all play roles in explaining why some countries are able to make the leap to industrialization and others are not, the key factor is actually a country's cultural endowments, particularly the degree to which it has internalized the values of hard work, thrift, honesty, patience, and tenacity, as well as the degree to which it is open to change, new technology, and equality for women. One can agree or disagree with the balance Landes strikes between these cultural mores and other factors shaping economic performance. But I find refreshing his insistence on elevating the culture question, and his refusal to buy into arguments that the continued stagnation of some countries is simply about Western colonialism, geography, or historical legacy.

In my own travels, two aspects of culture have struck me as particularly relevant in the flat world. One is how outward your culture is: To what degree is it open to foreign influences and ideas? How well does it “glocalize”? The other, more intangible, is how inward your culture is. By that I mean, to what degree is there a sense of national solidarity and a focus on development, to what degree is there trust within the society for strangers to collaborate together, and to what degree are the elites in the country concerned with the masses and ready to invest at home, or are they indifferent to their own poor and more interested in investing abroad?

The more you have a culture that naturally glocalizes-that is, the more your culture easily absorbs foreign ideas and best practices and melds those with its own traditions-the greater advantage you will have in a flat world. The natural ability to glocalize has been one of the strengths of Indian culture, American culture, Japanese culture, and, lately, Chinese culture. The Indians, for instance, take the view that the Moguls come, the Moguls go, the British come, the British go, we take the best and leave the rest-but we still eat curry, our women still wear saris, and we still live in tightly bound extended family units. That's glo-calizing at its best.

“Cultures that are open and willing to change have a huge advantage in this world,” said Jerry Rao, the MphasiS CEO who heads the Indian high-tech trade association. “My great-grandmother was illiterate. My grandmother went to grade two. My mother did not go to college. My sister has a master's degree in economics, and my daughter is at the University of Chicago. We have done all this in living memory, but we have been willing to change... You have to have a strong culture, but also the openness to adapt and adopt from others. The cultural exclu-sivists have a real disadvantage. Think about it, think about the time when the emperor in China threw out the British ambassador. Who did it hurt? It hurt the Chinese. Exclusivity is a dangerous thing.”

Openness is critical, added Rao, “because you start tending to respect people for their talent and abilities. When you are chatting with another developer in another part of the world, you don't know what his or her color is. You are dealing with people on the basis of talent-not race or ethnicity-and that changes, subtly, over time your whole view of human beings, if you are in this talent-based and performance-based world rather than the background-based world.”

This helps explain why so many Muslim countries have been struggling as the world goes flat. For complicated cultural and historical reasons, many of them do not glocalize well, although there are plenty of exceptions-namely, Turkey, Lebanon, Bahrain, Dubai, Indonesia, and Malaysia. All of these latter countries, though, tend to be the more secular Muslim nations. In a world where the single greatest advantage a culture can have is the ability to foster adaptability and adoptability, the Muslim world today is dominated by a religious clergy that literally bans ijtihad, reinterpretation of the principles of Islam in light of current circumstances.

Think about the whole mind-set of bin Ladenism. It is to “purge” Saudi Arabia of all foreigners and foreign influences. That is exactly the opposite of glocalizing and collaborating. Tribal culture and thinking still dominate in many Arab countries, and the tribal mind-set is also anathema to collaboration. What is the motto of the tribalist? “Me and my brother against my cousin; me, my brother, and my cousin against the outsider.” And what is the motto of the globalists, those who build collaborative supply chains? “Me and my brother and my cousin, three friends from childhood, four people in Australia, two in Beijing, six in Bangalore, three from Germany, and four people we've met only over the Internet all make up a single global supply chain.” In the flat world, the division of labor is steadily becoming more and more complex, with a lot more people interacting with a lot of other people they don't know and may never meet. If you want to have a modern complex division of labor, you have to be able to put more trust in strangers.

In the Arab-Muslim world, argues David Landes, certain cultural attitudes have in many ways become a barrier to development, particularly the tendency to still treat women as a source of danger or pollution to be cut off from the public space and denied entry into economic activities. When a culture believes that, it loses a large portion of potential productivity of the society. A system that privileges the men from birth on, Landes also argues, simply because they are male, and gives them power over their sisters and other female members of society, is bad for the men. It builds in them a sense of entitlement that discourages what it takes to improve, to advance, and to achieve. This sort of discrimination, he notes, is not something limited to the Arab Middle East, of course. Indeed, strains of it are found in different degrees all around the world, even in so-called advanced industrial societies.

The Arab-Muslim world's resistance to glocalization is something that some liberal Arab commentators are now focusing on. Consider a May 5, 2004, article in the Saudi English-language daily Arab News by liberal Saudi journalist Raid Qusti, titled “How Long Before the First Step?”

“Terrorist incidents in Saudi Arabia are more or less becoming everyday news. Every time I hope and pray that it ends, it only seems to get worse,” Qusti wrote. “One explanation to why all of this is happening was brought up by the editor in chief of Al-Riyadh newspaper, Turki Al-Sudairi, on a program about determining the roots of the terrorist acts. He said that the people carrying out these attacks shared the ideology of the Juhaiman movement that seized the Grand Mosque in the seventies. They had an ideology of accusing others of being infidels and giving themselves a free hand to kill them, be it Westerners-who, according to them, ought to be kicked out of the Arabian Peninsula-or the Muslim believer who does not follow their path. They disappeared in the eighties and nineties from the public eye and have again emerged with their destructive ideology. The question Al-Sudairi forgot to bring up was: What are we Saudis going to do about it? If we as a nation decline to look at the root causes, as we have for the past two decades, it will only be a matter of time before another group of people with the same ideology spring up. Have we helped create these monsters? Our education system, which does not stress tolerance of other faiths-let alone tolerance of followers of other Islamic schools of thought-is one thing that needs to be re-evaluated from top to bottom. Saudi culture itself and the fact that the majority of us do not accept other lifestyles and impose our own on other people is another. And the fact that from fourth to 12
^th
grade we do not teach our children that there are other civilizations in the world and that we are part of the global community and only stress the Islamic empires over and over is also worth re-evaluating.”

It is simply too easily forgotten that when it comes to economic activities, one of the greatest virtues a country or community can have is a culture of tolerance. When tolerance is the norm, everyone flourishes- because tolerance breeds trust, and trust is the foundation of innovation and entrepreneurship. Increase the level of trust in any group, company, or society, and only good things happen. “China began its astounding commercial and industrial takeoff only when Mao Zedong's odiously intolerant form of communism was scrapped in favor of what might be called totalitarian laissez-faire,” wrote British historian Paul Johnson in a June 21, 2004, essay in Forbes. “India is another example. It is the nature of the Hindu religion to be tolerant and, in its own curious way, permissive... When left to themselves, Indians (like the Chinese) always prosper as a community. Take the case of Uganda's Indian population, which was expelled by the horrific dictator Idi Amin and received into the tolerant society of Britain. There are now more millionaires in this group than in any other recent immigrant community in Britain. They are a striking example of how far hard work, strong family bonds and devotion to education can carry a people who have been stripped of all their worldly assets.” Islam, down through the years, has thrived when it fostered a culture of tolerance, as in Moorish Spain. But in its modern form, in too many cases Islam has been captured and interpreted by spiritual leaders who do not embrace a culture of tolerance, change, or innovation, and that, Johnson noted, surely has contributed to lagging economic growth in many Muslim lands.