Economics cannot triumph over politics

LINKAGES & BARRIERS: WE INHABIT THE MIDDLE GROUND TEAM ET NEW DELHI The Economic Times TUESDAY, AUGUST 08, 2006

ET GUEST editor and Harvard Business School professor Pankaj Ghemawat's informed, though, light-footed take on globalisation began with a searing criticism of Thomas Friedman's intellectually optimistic picture of a "flat world" . (He believes such "apocalyptic" literature appears every 10 years or so.) But its effects were, as far as the edit page went, much more far reaching. For one, it compelled the cerebrally cool and complacently proud leader writers to introspect, vis-Ã -vis their usually gung-ho take on globalisation.

That they had to encounter the Prof's incisive critique of the flat-world thesis, after he had disarmed them with his modesty - "You are experts and I'm here because it seems like fun" - made the whole thing even more challenging. But the logic of this guest editor's arguments, and the whole mass of diverse data and facts that he so easily marshalled to that end, left our professional Socrateses with little choice. What was equally mystifying was the fact that such a thoroughly globalised being (a Rajasthani who has spent 30 years in the US first as a student and then as faculty at Harvard) could look at globalisation in such a clear and dispassionate manner.

That clearly set the agenda, of both the meeting, and the edits that were to be written. Everything - from the colapesticide row and Tatas' pullout from Bangladesh to outsourcing and Wal-Mart - emerged in new hues, as, indeed, did globalisation (see edit page). The Prof's face lit up when he saw our Monday edition's front page anchor - "Culture curry's the main coarse" - an article on how Indian MNCs are coping with other cultures. He exclaimed: "Even I am working on this!"

An advertisement in today's papers, by one of the cola majors that claimed the pesticide residue in its product was within safety norms, did not escape his keen eye. And soon a seemingly insignificant matter was, as if by magic, shaped into an important, leader-worthy subject - what strategies should global companies adopt to handling local issues! That the economics of globalisation cannot ride roughshod over local cultural and political issues is something that only a man with acute intellectual perception could have discerned.

What, however, was more startling was the revelation that such perceptiveness stems from generosity of spirit and courage of mind. Ghemawat, a business economist by training, did not flinch when he said that economics cannot be a complete approach towards understanding globalisation. Disciplines like sociology, in his view, are equally important to arrive at a fuller picture of the phenomenon.

"Economics cannot triumph over politics. To imagine thus would amount to accepting faith over experience." That perhaps explains the Culture Administration Geography and Economics (CAGE) framework that our Monday editor put forth at the edit meeting. It's this CAGE that allowed him to show and the edit writers to see that there had only been 10% globalisation across sectors, institutions, markets and societies.

The now-on-now-off Iran-Pakistan-India gas pipeline was for him as much an example of such "naive economic determinism" comparable with Wal-Mart's belief that it would equally succeed everywhere. Wal-Mart , the professor pointed out, has faced problems of commercial viability outside the US and those countries like Mexico, which share a land border with the US. "But that's a picture Bentonville (Wal-Mart headquarters) does not like to see."

So, does he think globalisation is a utopian idea? On that, it's best to trust his words: "Neither is the world completely integrated, nor is it thoroughly segmented. We inhabit the middle ground. So, companies must realise that while there are linkages between various countries, there are barriers - geographical and cultural - as well. Barriers that they would ignore at their own peril!"