EVER since the collapse of the Soviet Union ended the old, neat
division between East and West, people have been inventing new ways of
dividing up the world. In the 1990s it was fashionable to talk about
America, Europe and Japan. Today pundits draw the line between emerged
and the emerging markets.
Joel Kotkin, a geographer, suggests another frame of reference. In
“The New World Order”, a paper for the Legatum Institute, a think-tank
in London, he looks at the world through the prism of culture. The ties
of history and habit—of shared experiences and common customs—can
explain a lot about who does business with whom. Mr Kotkin quotes Ibn
Khaldun, a 14th-century Arab historian: “Only tribes held together by a
group feeling can survive in a desert.” Substitute “globalised economy”
for “desert” and this describes the modern world quite well.
Mr Kotkin’s argument chimes with recent research. The World Values Survey
divides the world into big cultural zones (the Confucian zone, the
English-speaking zone, etc) on the basis of common values. These common
values cannot be explained simply by income (eg, English-speaking
countries tend to be rich, and rich countries tend to be liberal).
Pankaj Ghemawat of IESE, a business school, calculates that two
countries which share a common language trade 42% more with each other
than two otherwise identical countries that lack that bond. Two
countries that once shared imperial ties trade a startling 188% more.
Imperial ties affect trade patterns more than membership of a common
currency (which boosts trade by only 114%).
Cultural ties matter in business because they lower transaction
costs. Tribal loyalty fosters trust. Cultural affinity supercharges
communication. Reading a contract is useful, but you also need to be
able to read people. Even as free trade and electronic communications
bring the world closer together, kinship still counts. Indians in
Silicon Valley team up with other Indians; Chinese-Americans do business
with Taiwan and Shanghai.
One of the most vibrant cultural networks is also one of the oldest:
the Sinosphere. China’s growing might is reinforced by its links with
the overseas Chinese. Some 70m ethnic Chinese live outside mainland
China. Some are descended from those who moved abroad during China’s
imperial expansion from the 12th to the 15th centuries, settling in what
are now Indonesia, Vietnam, Malaysia and Myanmar. More recently, many
fled to escape the horrors of Maoism, or to seek a better life in
America or another rich country. Together they connect China to every
corner of the world.
The overseas Chinese are the biggest investors in mainland China.
Some 68% of the foreign direct investment (FDI) that China received in
2009 came from places where ethnic Chinese are the biggest group, with
Hong Kong the number one source, Singapore number four and Taiwan number
nine. The overseas Chinese also spearhead China’s global expansion:
Africa, for example, is dotted with Chinese malls that sell the latest
gadgets from Guangdong. China’s government grasps the importance of
cultural ties: it has funded hundreds of Confucius Institutes to teach
Chinese and nurture China’s soft power.
The world’s second rising power is doing something similar, though
with less direction from the top. India’s success at home is reinforced
and rearticulated by the Indosphere. Ethnic Indians are less than 1% of
America’s population but 13% of the graduate students at the country’s
best universities. In Britain ethnic Indians earn at least 10% more than
the national average. The top five destinations for Indian overseas
investment all have large Indian populations: Mauritius, America,
Singapore, the United Arab Emirates and Britain. The Tata group, an
Indian conglomerate with a new British-educated boss, is the largest
employer of manufacturing workers in Britain.
The third great cultural zone is the “Anglosphere”. Mr Ghemawat has
tried to measure the links between Britain’s former colonies and the
rejected mother country. He looked at the flow of goods, services, FDI,
migration and information (using telephone calls as a proxy). He
compared the ex-colonies’ traffic with Britain with their traffic with
the rest of the world. He found that trade flows were 13% higher than
you would expect, capital flows were 24% higher and the flows of people
and information were a startling 93% higher. The Anglosphere is not the
only great European cultural block: Mr Ghemawat calculates that by some
measures Spain’s ties with its old colonies are even closer than
Britain’s.
Despite the financial crisis of 2008, which has seriously tarnished
the reputation of Anglo-Saxon capitalism, Mr Kotkin predicts that the
Anglosphere will remain powerful for some time. It is the world’s
biggest economic block: it accounts for more than a quarter of the
world’s GDP (at purchasing-power parity), compared with the Sinosphere’s
15% and the Indosphere’s 5.4%. It is still the frothiest fountain of
science and technology. America produces far more scientific papers than
any other country, and Britain ranks number five. English is the
closest the world has to a lingua franca. It dominates international
business and diplomacy. It also binds the Anglosphere to the rising
Indosphere.
Global tribesmen
This way of looking at the world clearly leaves something to be
desired. Culture is not everything. Wise firms recruit people on the
basis of merit, not blood or background. Those that get too clubby miss
good ideas produced by outsiders. Also, the lines between different
cultural zones are often blurred: Britain is tugged towards Europe as
well as its old dominions. But cultural ties explain so much that it
would be foolish to ignore them. In an age when many businesspeople are
turning into global nomads, it is worth remembering the enduring power
of tribal loyalties.
Source - Economist
