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.”