MUCH recent analysis has focused on the contest between two potential economic giants — India and China — drawing out their strengths and weaknesses and asking who will dominate in the race between them.
Of course, as we know, the issue is more interesting than China and India. Those who study political economy, analyse risk and look for growth opportunities are scrambling to define in an insightful way the models that seem to be at work in today’s global business environment.
Business executives and government officials are grappling with the extraordinary variety of models currently at work in the global economy.
The simple bipolar ideas that previously divided haves and have-nots, north and south, east and west are no longer useful demarcations in a world with multiple approaches, which are full of contradictions and yet successful. Today the global economy is driven by at least nine discreet models of development. Six successful, one uncertain and two failed categories mark economic development.
First the successes. The US remains undoubtedly the engine room of technological innovation housed in an effective political and economic system that encourages growth and investment. It is a global, military and cultural superpower and a young nation still full of vigour and dynamism.
The second is the European Union. Respected for its incremental strategy starting from a set of post-war economies to a more or less integrated market, the European achievement over the last 50 years is remarkable in political and cultural terms. Economically, it has grown at a much lower rate than the US. Although it has produced a few notable stars such as Nokia and SAP and has a number of legacy businesses, such as Siemens and BMW, it has not produced the equivalents of Google, E-bay, Cisco and Microsoft. Europe of course has its own challenges, not the least of which are its sluggish growth, ageing population and accession.
The third model is Japan. Japan, literally and culturally, stands alone. An island nation that embarked on a disastrous war to be followed by the most extraordinary economic success of the 20th century, Japan rose in the 1970s and 1980s to become the second-largest economy in the world. In the mid-1980s Japan was seen as a viable economic threat and alternative to the US. How strange it was then for Japan in the 1990s to reverse all of this, and to seemingly be unable to grasp the full opportunities attached to the knowledge economy.
In that period, the giants of China and India slumbered and stumbled on. China was dominated by Mao Zedong. Post-Mao China was then brilliantly led by Deng Xiao Peng. The reformers won and, as we all know, China has taken its place in the global economy. India now is following suit. The world’s largest democracy is clipping along at an 8% growth rate.
The sixth model is that of southeast Asia. Southeast Asian economies are dominated by entrepreneurs of Chinese descent. It is a region of 800-million people; people of Chinese origin make up between 6%-10% of the population and 60%-80% of the wealth in most of the successful nations. The Asian Tigers have been great examples of mid-sized economies leapfrogging into the global system. Led by authoritarian governments, they have stamped a planned framework onto their societies. This has probably been tolerated because of the results.
In Singapore we have a nation state led by family and friends which has gone from a yearly income of $600 a person at the time the British went home, to an economy where it is now more than $30000.
Simply looking at the numbers and leaving one’s values at home, it is clear that authoritarian states and more recently, in China’s case, the Communist Party have used their resources and planned well.
Last, there are the least successful models. Many small and mid-sized economies have been unable to cope with globalisation. Many are Latin-American economies, some in eastern Europe and some in Asia.
Many are in Africa. Here 800-million people live on a continent where about 150-million enjoy incomes of roughly $3000 a year or more while 650-million live in preindustrial economies, poorly led, stuck in survival economics without sufficient infrastructure or superstructure.
Perhaps the good news is that this seems to be turning around over the last five years or so, but we have had false and failed starts many times.
The point this brings us to is to consider which political economy model is it that effectively describes SA? Perhaps we are a hybrid — a mix of Anglo-Saxon capitalism with a developmental state led by a party with an overwhelming mandate.
Maybe we should stop there, without getting ourselves caught up in too much analysis. Let’s simply get on with the job.
As I was leaving Singapore on my most recent trip, it was explained to me that the plan for the development of Singapore is read by every high-school child, all government officials, not to mention the citizens.
As I flew on SAA, I read the Star newspaper, full of horror stories and difficulties and wondered how we will compete against these many forms of effective organisation.
SA’s approach is a medley of heritages — on the one hand, a business system with strong Anglo-Saxon features, on the other a developmental state at work. Most of all we are a frontier society with a powerful mix of pragmatism, resilience, the smell of greed and fear mixed daily to mark the extraordinary range of activities in a place we call home.
The hybrid that is SA today, however, may be too full of contradictions around which to build a clear strategy. The critical need for consensus, broadly shared values, sufficient clarity to know what to do next week, let alone next month, are vitally important for the shared prosperity so needed.
How to generate this is a vital debate, which we should constantly fuel through curiosity, conversation and commitment. The debate is not adjacent to, but central to the agenda of business in SA.
‖Binedell is director of the Gordon Institute of Business Science.
