“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 exclusivists 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 p. 326 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.
p. 327 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 12th 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 p. 328 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.
Here we come again to the coefficient of flatness. Countries without natural resources are much more likely, through human evolution, to develop the habits of openness to new ideas, because it is the only way they can survive and advance.
The good news, though, is that not only does culture matter, but culture can change. Cultures are not wired into our human DNA. They are a product of the context—geography, education level, leadership, and historical experience—of any society. As those change, so too can culture. Japan and Germany went from highly militarized societies to highly pacifist and staunchly democratic societies in the last fifty years. Bahrain was one of the first Arab countries to discover oil. It was the first Arab country to run out of oil. And it was the first Arab country in the Arab Gulf to hold an election for parliament where women could run and vote. China during the Cultural Revolution seemed like a nation in the grip of a culture of ideological madness. China today is a synonym for pragmatism. Muslim Spain was one of the most tolerant societies in the history of the world. Muslim Saudi Arabia today is
one of the most inp. 329tolerant. Muslim Spain was a trading and merchant culture where people had to live by their wits and therefore learned to live well with others; Saudi Arabia today can get by just selling oil. Yet right next to Saudi Arabia sits Dubai, an Arab city-state that has used its petrodollars to build the trading, tourist, service, and computing center of the Arab Gulf. Dubai is one of the most tolerant, cosmopolitan places in the world, with, it often seems, more sushi bars and golf courses than mosques—and tourists don’t even need a visa. So yes, culture matters, but culture is nested in contexts, not genes, and as those contexts, and local leaders, change and adapt, so too can culture.
The Intangible Things
You can tell a lot by just comparing skylines. Like many Indian Americans, Dinakar Singh, the hedge fund manager, regularly goes back to India to visit family. In the winter of 2004, he went back to New Delhi for a visit. When I saw him a few months later, he told me about the moment when he realized why India’s economy, as a whole, still had not taken off as much as it should have—outside of the high-tech sector.
“I was on the sixth floor of a hotel in New Delhi,” he recalled, “and when I looked out the window I could see for miles. How come? Because you do not have assured power in Delhi for elevators, so there are not many tall buildings.” No sensible investor would want to build a tall building in a city where the power could go out at any moment and you might have to walk up twenty flights of stairs. The result is more urban sprawl and an inefficient use of space. I told Singh that his story reminded me of a trip I had just taken to Dalian, China. I had been to Dalian in 1998, and when I went back in 2004, I did not recognize the city. There were so many new buildings, including modern glass-and-steel towers, that I began to question whether I had actually visited there in 1998. Then I added another recollection. I went to school in Cairo in the summer of 1974. The three most prominent buildings in the city then were the Nile Hilton, the Cairo Tower, and the Egyptian TV buildp. 330ing. Thirty years later, in 2004, they are still the most prominent buildings there; the Cairo skyline has barely changed. Whenever I go back to Cairo, I know exactly where I am. I visited Mexico City shortly before Dalian, where I had not visited in five years. I found it much cleaner than I had remembered, thanks to a citywide campaign by the mayor. There were also a few new buildings up, but not as many as I expected after a decade of NAFTA. Inside the buildings, though, I found my Mexican friends a little depressed. They told me that Mexico had lost its groove—it just wasn’t growing like it had been, and people’s self-confidence was waning.
So in Delhi, you can see forever. In Cairo, the skyline seems forever the same. In China, if you miss visiting a city for a year, it’s like you haven’t been there in forever. And in Mexico City, just when Mexicans thought they had turned the corner forever, they ran smack into China, coming the other way and running much faster.
What explains these differences? We know the basic formula for economic success—reform wholesale, followed by reform retail, plus good governance, education, infrastructure, and the ability to glocalize. What we don’t know, though, and what I would bottle and sell if I did, is the answer to the question of why one country gets its act together to do all these things in a sustained manner and why another one doesn’t. Why does one country’s skyline change overnight and another’s doesn’t change over half a century? The only answer I have been able to find is something that cannot be defined: I call it the intangible things. These are primarily two qualities: a society’s ability and willingness to pull together and sacrifice for the sake of economic development and the presence in a society of leaders with the vision to see what needs to be done in terms of development and the willingness to use power to push for change rather than to enrich themselves and preserve the status quo. Some countries (such as Korea and Taiwan) seem to be able to focus their energies on the priority of economic development, and others (such as Egypt and Syria) get distracted by ideology or local feuds. Some countries have leaders who use their time in office to try to drive modernization rather than personally enrich themselves. And some countries simply have venal elites, who use their time in office to line their pockets p. 331 and then invest those riches in Swiss real estate. Why India had leaders who built institutes of technology and Pakistan had leaders who did not is a product of history, geography, and culture that I can only summarize as one of those intangible things. But even though these intangibles are not easily measured, they really do matter.
The best way I know to illustrate this is by comparing Mexico and China. Mexico, on paper, seemed perfectly positioned to thrive in a flat world. It was right next door to the biggest, most powerful economy in the world. It signed a free-trade agreement with the United States and Canada in the 1990s and was poised to be a springboard to Latin America for both these huge economies. And it had a valuable natural resource in oil, which accounted for more than a third of government income. China, by contrast, was thousands of miles away, burdened by overpopulation, with few natural resources, with its best labor crowded onto a coastal plain, and with a burdensome debt legacy from fifty years of Communist rule. Ten years ago, if you took the names off these two countries and just gave someone their profiles, he surely would have bet on Mexico. And yet China has replaced Mexico as the second-largest exporter of goods into the United States. And there is a general sense, even among Mexicans, that even though China is thousands of miles away from America, it is growing closer to America economically, while Mexico, right on America’s border, is becoming thousands of miles away.
I am by no means writing Mexico off. Mexico, in the fullness of time, may turn out to be the slow-but-sure tortoise to China’s hare. China still has a huge political transition to get through, which could derail it at any moment. Moreover, Mexico has many entrepreneurs who are as Chinese as the most entrepreneurial Chinese. Mexico would not have exported $138 billion worth of goods to the United States in 2003 if that were not the case. And you have many rural Chinese who are no more advanced or productive than rural Mexicans. But on balance, when you add it all up, the fact is that China has become the hare and Mexico has not, even though Mexico seemed to start with so many more natural advantages when the world went flat. Why?
This is a question Mexicans themselves are asking. When you go to Mexico City these days, Mexicans will tell you that they are hearing that p. 332 “giant sucking sound” in stereo. “We are caught between India and China,” Jorge Castaneda, Mexico’s former foreign minister, told me in 2004. “It is very difficult for us to compete with the Chinese, except with high-value-added industries. Where we should be competing, the services area, we are hit by the Indians with their back offices and call centers.”
No doubt China is benefiting to some degree from the fact that it still has an authoritarian system that can steamroll vested interests and archaic practices. Beijing’s leadership can order many reforms from the top down, whether it is a new road or accession to the World Trade Organization. But China today also has better intangibles—an ability to summon and focus local energies on reform retail. China may be an authoritarian state, but it nevertheless has strong state institutions and a bureaucracy that manages to promote a lot of people on merit to key decision-making positions, and it has a certain public-spiritedness. The Mandarin tradition of promoting bureaucrats who see their role as promoting and protecting the interests of the state is still alive and well in China. “China has a tradition of meritocracy—a tradition that is also carried on in Korea and Japan,” said Francis Fukuyama, author of the classic The End of History and the Last Man. “All of them also have a basic sense of ‘stateness’ where [public servants] are expected to look to the long-term interests of the state” and are rewarded by the system for doing so.
Mexico, by contrast, moved during the 1990s from a basically one-party authoritarian state to a multiparty democracy. So just when Mexico needs to summon all its will and energy for reform retail on the micro level, it has to go through the much slower, albeit m
ore legitimate, democratic process of constituency building. In other words, any Mexican president who wants to make changes has to aggregate so many more interest groups—like herding cats—to implement a reform than his autocratic predecessors, who could have done it by fiat. A lot of these interest groups, whether unions or oligarchs, have powerful vested interests in the status quo and the power to strangle reforms. And Mexico’s state system, like that of so many of its Latin American neighbors, has a long history of simply being an instrument of patronage for the ruling party or local interests, not the national interest.
Another of these intangible things is how much your culture prizes p. 333 education. India and China both have a long tradition of parents telling their children that the greatest thing they can be in life is an engineer or a doctor. But building the schools to make that happen in Mexico simply has not been done. India and China each have more than fifty thousand students studying in the United States today. They come from about twelve time zones away. Mexico, which is smaller but right next door, has only about ten thousand. Mexico is also right next door to the world’s biggest economy, which speaks English. But Mexico has not launched any crash program in English education or invested in scholarships to send large numbers of Mexican students to the United States to study. There is a “disconnect,” said President Zedillo, among Mexico’s political establishment, the challenges of globalization, and the degree to which anyone is educating and harnessing the Mexican public to this task. You would have to look a long time for a graduate science or math program at an American university that is dominated by Mexican students the way most are dominated by Chinese and Indian students.
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