Competitive advantage of nations: theories and realities

For the last few decades most economists have described competition using algebraic equations, convinced of the applicability of methods derived from the natural sciences and which assume an ideal world. Those interested in the practical issues, who have approached the problems from the perspective and methods of experience and practical reasoning, have mostly been frowned on.

The position of the academic establishment has been that if a piece of academic work cannot be modelled by the rules of the natural sciences, it is not worth attention. Anyone who does not publish an empirical data-set analysed using SPSS in one of the established peer-reviewed journals is not scientific.

Most of these journals are run by the same group of academics who started them, and they set the criteria for who may participate and how. Thus, once a journal is created, it functions rather like a private club. The only way to enter is to write papers that cite the names and contributions of those who have published there before and contain similar ideas, or follow a similar line of thought. Each journal is ranked according to an Impact Factor (IF), which is calculated by the number of references made to it. Thus, normally, the older a journal is, the higher its IF.

The top researchers in this system are normally those who can assemble a large number of PhD students and colleagues to work on publications with them. Since one’s English must be impeccable for a manuscript to be accepted, anyone whose mother tongue is not English is at a considerable disadvantage. A given topic or issue can be recycled or reused in numerous articles with only minor changes. To bump people’s publication rate up further, three or more authors will collaborate and include one

another’s names on all their manuscripts, even though most of the work, or in some cases all of it, has been done by only one of them. That way each of the three gets three papers to his name even though he has only written one. The fact that a publication is cited in this system is then taken as an index of its usefulness and value. Ultimately you manage to build up that 43-page CV which will yield a professorship and a tenure-track position at a highprestige university. The question whether your scientific findings can be used to solve real-life problems is less important, and is never really raised. To spend time with practical business people is often seen as an activity which will hamper your career progress, because research takes longer that way.

Academics interested in the notion of competitive advantage have tended to operate more or less outside this system. One of the better-known “dissidents” among business academics is Michael Porter (see e.g. Porter 1980, 1985, 1990).

Porter, once little-known but now an established and highly thought-of scholar, resurrected the ideas about competition introduced by Adam Smith’s 1776 Wealth of Nations. (Not that Smith was the first to write about competition, but he did so more systematically than anyone had done earlier.) The issue of competition was at the heart of economic theory right from the start. By reviving the subject Porter not only brought economics back to its origins, but shifted attention away from Keynesian interventionism, the neoclassical school, and leading margin a list approaches to economics.

Porter’s greatest methodological contribution is not as a macro economist like Smith, but lies in his micro perspective on the problem of competitive advantage: he considers nations as the sum of the performance of individual businesses and industries, and offers analyses of their interdependence. But although his work, using the concept of economic space, relies on the study of geography and on maps, he does not write in the geopolitical tradition. Instead he has created a niche of his own in economic theory, as an alternative economist in the management tradition. Consequently he is sometimes associated with Austrian scholars such as Joseph Schumpeter and his pupil Peter Drucker, who had altogether less interest in theory.

Porter’s strength as an economist is that he has the courage to abandon the neoclassical and marginalist agenda, and bring the topic of business strategy closer to real life, elevating reality above theory. Even though he is a well-known management academic today, Porter is still often overlooked in surveys of economists, for instance in the extensive History of Economic Thought website compiled and updated by the New School in New York. He has never yet been a candidate for the economics Nobel Prize as far as we can tell from what has leaked out, because what he does simply is not counted as economics. Instead he continues to publish mainly in popular journals and magazines. His ideas are useful, but not abstract or mathematical enough for the academic establishment.

What, then, are some of the other differences between this management tradition and the geopolitical tradition? Porter does not enter into the issue of the intrinsic value-systems of different cultures, for instance when comparing the competitiveness of different nations by presenting contrasting industrial success stories such as those of Japan and Sweden (co-authored with the Swedish economist Orjan Solvell). He is also reluctant to draw historical parallels. In that way his approach is more American.

From a European perspective Porter’s work might be criticized by saying that it is not enough to study these two countries’ competitive advantage just by examining variables in a narrowly-defined business matrix. The number and nature of these countries’ institutions and their investments in infrastructure are effects of the features we are trying to uncover, not their cause. The causes are ultimately the national and cultural characteristics of the respective populations, which again are the outcome of centuries of shared life among separate groups of individuals.

But it is as if economists never dare venture into such matters, fearing perhaps that they will be trespassing into others’ domains, into sociology or anthropology. In this example it is noteworthy that both the Japanese and the Swedes are alienated cultures, geographically isolated and relatively insecure vis-a-vis other cultures. Their response to prosperity has been to develop exports.

These are aristocratic warrior cultures, with martial virtues well established among their elites, today mostly expressed in the protection of their MNEs. These characteristics have allowed them to develop into highly-organized and competitive industrial societies, maintained through strict hierarchical thinking. The leadership in both countries is dominated by older males, even though the idea of equality between the sexes is well developed, in Sweden at least. Sweden has the largest proportion of older male leaders in Europe.

This may come as a surprise to some, since after all there are few countries where one encounters more talk about sexual equality. Sweden has also the highest percentage of youth unemployment in Europe. However, this has not led to protests, such as we see elsewhere in Europe.

In more general terms we may say that a society’s wealth is the sum of its members’ individual economic performance moderated by the degree of modernity of the region’s infrastructure. A nation is an organic rather than a static entity, fragile, dependent; it has to be recreated every day. Competitiveness is about a long series of factors working together: schools, roads, infrastructure, etc.

Only by understanding how to manage these mechanisms can we hope to prosper, as individuals, communities, regions, and States. This is not something that all nations will or can do. It is not something you implement after having read a textbook. That would be the main criticism of Porter’s approach, as compared to that of geoeconomics. Porter does not delve into the notions of power, geography, or human virtues as elements of economic performance.

Peter Drucker (who died in 2005) is seen by many as Porter’s predecessor. He too was an outsider with respect to the academic establishment, both literally (he worked at Claremont Graduate University) and in his theories. Even though he wrote 37 books – the first appeared when he was thirty, the last after his death – he hardly wrote any “scientific” journal papers at all, and only put his name to a handful of more popular articles (in Fortune, Forbes, and the Harvard Business Review).

On Wikipedia he is described as a “writer [and] management consultant”, as a management thinker, not a scientist. It makes one wonder what use scientific economists are. Drucker also became unpopular with many business leaders because he said what he thought about their companies. But he was probably the most influential professor of management of the twentieth century. In his analyses Drucker did not avoid questions of demographics, cultures, and the methodology of social science .

He saw and understood better than most the rise of Japan as an economic superpower. Part of the reason for Japan’s success lies in its culture. In other words, “differences matter”. In the world of real-life business it is hard to find a company which ignores cultural differences, or an employer who fails to distinguish clearly between the characters of his various individual employees. The term used is often “shared values”, but we basically mean the same. Yet most university textbooks on Human Resource

Management (HRM) today say little or nothing about the topic. Instead, HRM practices are often treated as a bureaucratic process, where the problem is how to develop and use standardized tables and forms which are distributed to employees and filled out at regular intervals. Having good staff is typically explained as the result of effective procedures and good choice of organization charts.

This is very far from how the same phenomenon is studied in Asia, where trust and relationships are placed in the center. National, cultural, and personal differences are sidelined as less important factors in the HRM literature. If any personal characteristics are lacking or unsuitable, suitable education or training can fix that, or so it is supposed. This is the instrumental approach, which sees success as a matter of pressing the right buttons : anything can be achieved by anyone. It is an optimistic view, idealistic and naive.

It leaves little if any room for factors such as upbringing, habits, and values relevant to the success of our organizations and nations. It is a system of thought which is suited to our modern welfare state and our democratic institutions, and which helps to make consulting companies profitable. The paradigm is more about political correctness than about performance or competition. And there is nothing wrong with that, so long as we are aware of the difference.

To take another example, China and India both claim to be economic superpowers in the making, and this claim is supported by the writings of a great many economists and management experts. Certain considerations also suggest that the claim might be correct: the two nations have larger populations than any other country, their land areas are huge, they are well endowed with natural resources, if not necessary as measured per capita, they have populations who are willing to study, excellent logistical possibilities, and so forth. Yet, so far, only one of them is succeeding, though both have the know-how, the theories, the labour, and the capital to succeed.

Knowing how to do things is simply not enough, one also needs to be able to put one’s knowledge into practice. This is where India has failed. India is a country where getting from the airport for the software city of Bangalore to a company in the city centre can be a real challenge, especially if you arrive in the daytime. When there are no potholes in the road there are cows hindering the traffic. Crossing state borders within India can be a true bureaucratic nightmare. It takes not only time, but frequent bribes. Thus, possessing the requirements is not enough for a country to succeed.

We might also look at what is being traded. Seventy per cent of Indian exports to China are raw materials, mostly iron ore. By contrast, India imports almost exclusively finished products from China, and an increasing proportion of these is high-tech goods. Also by contrast, Chinese cities of relatively minor current economic importance, such as Zhengzhou or Luoyang, have better-developed road systems than we find in many major European cities.

Bribes still play an important role in China too, but they do not interfere with construction or transport. In any case, the incidence of bribery has been drastically reduced in China over just the past five years, in part because of stricter punishments and because the state has clearly shown that no one however rich are beyond the law. In India the government is still struggling to rise above local political and religious strife.

This has a long series of negative consequences for the competitiveness of the country, especially for any efforts that require large-scale collaboration, including all large-scale infrastructure projects. Instead, Indian economic growth relies mainly on two factors: mastery of the English language, and the ability to deal with products and services over the Internet at a competitive price. India has highly able elites, but the country does not function as a unit.

Thanks to its size, India has many successful companies. But at the same time we find that its IT companies have few domestic clients. All this is unlikely to change in the near future. On the contrary, we can expect to see China taking a large part of its IT (back-office) business away from India once the Chinese population have managed to improve their English-language skills. Presenting the potential success of the respective countries as if it were merely a function of their population size is too simplistic. This is another example of how the social sciences have failed through political bias. English-speaking writers are too quick to give the country which was previously under British rule credit for being an emerging economic superpower. An important economic actor yes and a major player, but not a superpower in the making.

It is as though the social sciences were making it harder for us to formulate correct analyses about the world around us, not easier. A young person who spends a few years travelling will probably learn much more about the world than someone who has merely studied it on paper. A person who works in business for a year or two will probably learn more than one who goes to business school. Bright business students were often already bright when they entered these institutions. And it might also be argued that our social-science methodology is more political than scientific. Universities are supposed to foster free and critical thinking. Currently they seem also to be fostering political consensus.

That was no great problem while the Western world was experiencing real economic growth and social progress, when we could imagine that our science and our improved standard of living were related as cause and effect. But now we have come too far away from real political theorists such as Hobbes and Machiavelli. This has taken us away from the very world we are trying to understand.

There is a parallel here with the study of the social sciences in the Soviet Union. A chief reason why Russia produced so many great natural scientists was that Russians realized that their social sciences were mostly Communist propaganda, so they chose not to study them. Hence anyone with a good mind and a keen interest in the truth studied natural science.

We in the West now are rather like Soviet citizens who continued to believe in ideals derived from the French Revolution. (We think of our ideals as inherited from the democracy of the ancient Greeks, but that is questionable: apart from the fact that we do not have slavery, mass representative democracy as we know it would scarcely have been recognized as democracy by Athenians of the classical period.) Ideologies are fine, but should be recognized as such. In this perspective, geopolitics and geoeconomics constitute important realist contributions to the task of rethinking the social sciences.

The differences between geopolitics and geoeconomics

Studies of geopolitics and of intelligence have a long history of coexistence, with mutual influence and inspiration. Members of the world’s intelligence organizations, officers of the armed forces, politicians, and civil servants have always been keen readers of geopolitical writings. Recently, managers and executives of private-sector organizations have also become more interested in geopolitical ideas, as international business has expanded and managers’ perspectives of the world have become truly global. At the same time it has become clear that this is not geopolitics in the old sense, but a new version.

Hence we need to draw out the similarities and differences between geopolitics and geoeconomics.

The power dimension is common to both subjects, but the forms and the perspectives, the emphases, and the variables they choose to study and analyse are often different, as suggested in the table below:

Table 4.2: Variables for Competitive Advantage

Despite the somewhat different perspective from the doctrine of Realpolitik, these two subjects ultimately operate in a sort of symbiosis. There will always be a strong political component in geoeconomics and a strong economic component in geopolitics. How we approach the realpolitical doctrine very much depends on our perspective, whether we are a privatesector organization or a nation state. A responsible company will tend also to view problems from the perspective of the nation state, and vice versa.

Some will argue that there is no real difference between geopolitics and geoeconomics, that in the end politics is all about economics, since it all comes down to resources which can be translated into quantities, expressed in some monetary form. But even if this is true in the last analysis, it is too simplistic.

The fundamental differences have to do with (i) the users, managers versus public administrators, but also (ii) the circumstances of the respective studies, in terms of their different working environments. Decision-makers in private-sector organizations differ in a number of ways from their colleagues in the public sector:(a) they are more focused on financial goals, and (b) they pay less attention to political agendas and public opinion. The circumstances differ, first of all in terms of (a) competition, (b) regulations, and (c) internationalization.

There is also (iii) a difference in the academic home associated with these studies : political science for geopolitics, and international business and management for geoeconomics. An expert on political affairs is seldom an expert on international business, if for no other reason than because such people move in different circles and in a different social context, have different goals and tactics, but also because they will have had different training and education.

This has also led to contrasting organizational cultures. A diplomat will typically know little of managerial accounting, and likewise a businessman will lack knowledge of the ways (legal, administrative, social) in which a nation state functions. When the idea of power and geography was new there was only strategy, with no separation between State, economic, or military intelligence. We find an example of this in Sun Zi’sArt of War. Lack of separation between the political and the economic spheres continued much later, as in Machiavelli’s Prince. (These two books are still used as primary literaturein many courses on geopolitics and geoeconomics.)

The first attempt to separate economics and political science in connexion with the study of geography was made in Germany, under the term Wirtschaftsgeographie (Haushoffer 1924: 1). This process of divergence has continued, to the point where there is no longer much politics left in the discipline of economics. In onsequence that discipline has achieved a higher level of abstraction and specialization, but has simultaneously become less relevant as a body of literature to help us understand larger, more complex social issues.

Another weakness in the modern discipline, from the perspective of economic reality, is that it systematically omits the power dimension. Current studies of economics and management show insufficient interest in who has most resources, how they use their resources, where they live, and how they think. These are vital data which have a significant effect on economic growth in general. But such information is often regarded as trivial, and left to more popular magazines, such as Forbes, Focus, or Le Nouvel Observateur.

Academics view themselves and their work as something more significant, conducted at a higher level: they deal in theory. So we should not be surprised when their findings turn out to have little relevance for the world of economic reality. Every year hundreds of my students search for scientific papers relating to whatever practical problem they are studying.

There are tens of thousands of articles out there, but they rarely seem to provide clear answers. Consequently there is a disjunction nowadays between economic theory and economic reality. Another consequence is that many economists prefer to gain their information about economic facts from magazines like The Economist rather than any of the 245 or so economics journals ranked by the ISI Web of Knowledge.

The Economist has pitched upon a good mix of history, geography, politics, and real-life descriptions of economic phenomena, probably in large part because it was shaped by successful practical businessmen, such as the Rothschild family.

The situation of political science is even more problematic. Politics is impossible to understand without a proper helping of political realism. The biggest problem with political science lies in its over specialization, and in the fact that it has forsaken most understanding of economic realities, treating these as the domain of economics and international business.

Political science has lost so much of this understanding of basic economic mechanisms that it seems no longer capable of explaining what makes a State strong or weak. Instead it occupies itself with “piecemeal social engineering”: descriptions of organizational structures, party politics, and legal questions. As a result both subjects, economics and political science, have become weaker as disciplines, less able to understand and describe the reality we observe.

Geopolitics and geoeconomics recognize an obligation to keep these two dimensions in mutual contact, and that is very much appreciated by students and by practical men of affairs. Interdisciplinary lies at the heart of both subjects. Thus it is no surprise that courses in geopolitics have become highly favoured subjects not only in military and naval academies, but at schools of political science, public administration, and business.

For instance, the French business school Haute Ecole du Commerce (HEC), located at Jouy-en-Jossas just outside Versailles, has a long tradition of teaching geopolitics to business students, as do the Institut d’Etudes Politiques (IEP) and Ecole Normale Superieure (ENS) in Paris, to mention some better-known examples. Harold Wilensky (quoted in Risen 2001) says that the greatest threats to the intelligence function are specialization, centralization, and hierarchy, in that order. What kind of questions, then, are raised in the discipline of geoeconomics ? On one hand there are economic and political issues, as discussed above. On the other hand there are the geo-questions, so often neglected.

The real strength of geoeconomics first becomes apparent when we combine the two. To take some examples, the location of centralized capitals such as Paris and Moscow can be explained through the fact that many rivers lead to these places, providing both a safe haven, but more importantly a site for trade. Shanghai is located halfway along the Chinese coastline near the naturally-sheltered outlet of the third longest river in the world. Ultimately these patterns are so pervasive that it is hard to find exceptions: most of the larger human settlements on this planet result from considerations relating to natural resources and economic interests, which boil down to the search for competitive advantage, or simply the struggle to survive.

The location of Silicon Valley can be seen as a function of the sum of two great universities (Berkeley and Stanford) on the edge of a large urban community (San Francisco). The IT industry is a natural spin-off from an earlier centre of arms manufacture which was located in the same area ( spin-off theory). Its success also results from the advantage of having being the first of its kind (first-mover advantage) within what has been among the most-developed meritocratic societies in the world. Thus it quickly grew into “the biggest game in town”, attracting people from all over the world. The significance of these two points, being first and being biggest, are stressed by Peter Drucker (1985). His phrase for combining both simultaneously is “fustest with the mostest”.

It has been suggested that even if many companies wanted to move out of Silicon Valley now, say because they received a better offer from somewhere else, perhaps Taiwan, it would not really be an option for them to move, because Silicon Valley companies have become so interdependent that tens of thousands of people would need to make the same decision at the same time for anyone to risk moving. No major company would want to be the first to move out ( first-leaver disadvantage).

The key people in Silicon Valley today may number between one and two hundred thousand. To move them you would need to move their families too, so several hundred thousand people in total. Thus we can speak of a social critical-mass theory. Once you have a certain mass you have a lasting advantage; when you start up with something new you establish yourself as a key player. It is more difficult to be number two or three.

These theories are worked out through evolutionary thinking, by comparing social life to organic systems. These same ideas, if not the exact terminology and examples, can be found in writings on entrepreneurship by the Austrian economists Schumpeter and Drucker. Quality of life is another important factor when companies relocate their headquarters or national offices. This means that developing science parks in itself is not enough.

You need to develop an entire social infrastructure around them, including kindergartens, schools, a well-functioning health sector, entertainment, and so on, to attract the right people. These are what we sometimes call third-generation science parks. Many smaller cities and regions seriously overreach themselves by looking at the idea of establishing a science park from too narrow a point of view.

Success is also very much a question of the type of competence you attract, which will set the standard for the organizational culture. The value of social-science competence has been exaggerated in the Western world over the past decades. Other than the financial industry which we find concentrated in places like New York and London, there are not many economically successful centres which are not founded on a local concentration of people with natural-science backgrounds.

What is important is to export and to create export surpluses, preferably in high-value products. This is a lesson we used to understand in Europe, but which much of Europe has largely forgotten (though countries like Germany, Switzerland, the Netherlands, and Sweden are exceptions).

For a nation to guarantee its citizens a competitive education there are two pure strategies: either we educate them ourselves, by investing in universities and so forth, or we buy them in (persuade them to immigrate) from other places to teach our own citizens. Europe is a good example of an area that has followed the first strategy for generations, the USA is an example of the second.

America has not only shown itself to be the best drainer of brains in world history, but it has even created the world’s best universities through this practice. It is both a pull and a push approach. American institutions are on one hand actively searching abroad (push). At the same time ambitious individuals all over the world find their way to the US on their own, driven by the promise of wealth and happiness (pull).

Their great universities are the result of two factors: large financial donations (money), and foreign students and researchers (brains). With money you buy the best brains. With a system of competitive entrance exams you attract the best students, who have the greatest potential to earn the most money, and so they give large donations in turn. Most of the foreign students come from Asia. In the near

future Asian countries, especially China, will seek to build their own Harvards, Berkeleys, and Stanfords. According to the World Intellectual Property Organization, the number of Chinese patent filings increased by 33 per cent in 2007, almost four times the increase for the USA. China is still well behind the USA, Japan, South Korea, and Germany in terms of absolute number of patents granted (it ranks sixth) and of number of patents in force (eighth).

The next thing will be that China will wish to keep its best brains and their money at home, so as to invest more in their own society. When that happens, as we are starting to see now, it will signal the onset of a sharp decline in American competitive advantage, since the USA has been particularly dependent on scientists coming in from abroad. American high-school students are already among the weakest in the Western world in the natural sciences. The standard of mathematics among high-school students in the state of California is the third lowest in America.

Questions related to what we might call “regional knowledge management” are crucial for any State or city hoping to create a science or industrial park, but the same techniques can also be applied to smaller projects, for instance to the development of a new shopping area. There is no guarantee that a good shopping precinct will succeed just because it lies within a populated area. It must also match the tastes and needs of those who live there. The main difference is that this latter issue can be treated as a segmentation problem within the discipline of marketing (that is, at the micro level), whereas the former is an issue at the macro level, hence more relevant to the discipline of geoeconomics.

Perhaps because of its close association with matters of location, geoeconomics – often spelled “geo-economics”– is taken by some, particularly in the USA, to mean area development. Area development is about everything from the development of research complexes and research/science parks to location of airports (Conway 1994: 5). In this book, however, we use geoeconomics in its macro or broader meaning as a discipline which has developed as an offshoot of geopolitics. This is what the word means in Continental Europe.

Geopolitics is traditionally linked to variables of ethnicity, country, religion, and language : slowly-changing variables. Geoeconomics is more linked to rapidly-changing variables, particularly technological change and developments in commerce. These different relationships to the notion of change can lead the two disciplines to contrasting conclusions. As an example, let us look at some of the arguments used in the current debate about Turkish membership of the European Union.

Geopoliticians often suggest that the Turks cannot belong to the EU because they are a Seljuk tribe of Mongol origin, thus very unlike us Europeans in many respects (historical premiss no. 1, P1).

They are Muslims (P2), and have been at war or in confrontation with Europe and European interests for most of the time since they first invaded Anatolia some thousand years ago, until the fall of Constantinople in 1453, and then much later, the decline of the Ottoman Empire (P3). A difficult people to defeat, they were the only major tribe which the Varangians (the Viking mercenaries in Constantinople) could not resist. Therefore they cannot possibly join the EU (conclusion, C).

Furthermore, Roman Catholics (especially in Bavaria) and Greeks would not accept their joining (P4). Nor would the French (P5). Leftist groups would not accept it either, since they argue that Turkey systematically violates human rights, and suppresses its Kurdish minority– to say nothing of women’s rights (P6).

The logic of geoeconomics however tends to follow a different line of reasoning, less focused on ethnic origin or political ideology. From a geoeconomic perspective what matters is first of all economic performance. If Turkey is now in a position to negotiate for EU membership, officially this is because of certain political changes in the region, which has achieved greater stability, development,

Turkey is now considered a democracy with a well-functioning parliamentary system, even though the army still has a strong position vis-a-vis the National Security Council (MGK). and fairness; All other Eastern Mediterranean states have been admitted: Cyprus, Greece, and Malta. so that the important considerations are economic. Arguments about ethnicity, religion, or historical conflicts are really secondary. With a population of 71 million, Turkey will constitute the second largest market in the EU after Germany. With a GDP of about 800 billion dollars in 2008, the Turkish economy is already as strong as that of the Netherlands. They are the thirtieth largest exporter in the world (behind India, Switzerland, Austria, and the Czech Republic at ranks 26 to 29 respectively).

Also, Turkey has a young population, which might help improve Europe’s low birth-rate statistics. And the Turks are an energetic people, not afraid of work. In short, and since the country does not insist on large agricultural subsidies a la France or Poland, from an economic point of view there are strong arguments to suggest that Turkey will make a positive contribution to the economic strength of the EU. Therefore, given that they are capable of implementing EU directives, it makes sense to include them in the Union (conclusion, C2).

Turkey has also made considerable advances on the political level, introducing free elections and giving greater freedom to its citizens, despite a number of military coups and a strong and nervous military establishment which is always ready to seize power and defend the secular tradition of Ataturk. If Turkey can comply with the social and political criteria set by the EU, it seems likely that it may become an EU member eventually.

The controversy over Cyprus is solvable. (Greece is not particular popular now in any case.) Besides, having Turkey safely within our camp would make aggressive moves by a new Russian superpower less likely. But the Turks would need to give up their close military co-operation with the USA, and demonstrate that they can keep religion separate from politics. If these conditions can be satisfied, though, time will work in favour of Turkish membership. Globalization will take care of the rest. Already it is difficult to see a difference between the youth of Turkey and, say, Italy. They listen to the same music, laugh at the same sitcoms, and eat the same junk food. It will only take one generation for them to be sitting opposite one another at the negotiating table and discovering how much they have in common.

What we are seeing in Turkey and elsewhere is that economics is bringing about the change which politics and political ideologies in the twentieth century failed to accomplish: it is bringing together people with different backgrounds, raising their standard of living and, in turn and over time, ensuring them a minimum of human rights. Thus the market economy has shown itself to be an accelerator not only of human evolution, but also of social justice and continuing technological progress. New technology is in turn changing our human condition and our behaviour. In the forefront of these new developments lie discoveries in nanotechnology, the neurosciences, and biology in general.

Never before in history have the forces which make us human beings resemble one another been as strong as they are today. The main causes for this are mass distribution of popular culture and the implementation of new technology. For better or worse, much of the youth of today are growing up with a common frame of reference, composed of bits andpieces from films, music, and sports – culture as represented by Walt Disney, Britney Spears, or David Beckham.

The Greek tragedies, Shakespeare’s sonnets, Byron’s plays, the poems of Alfred de Musset, the novels of Goethe are no longer essential reading for the new economic elites, whose sole virtue is that they have demonstrated that they can make money, for others and for themselves. If this is what it takes to bring about sustainable peace, then so be it. We shall have to comfort ourselves with the hope that the tradition of Bildung will somehow survive, even if confined to a smaller circle.

More people from different cultures are forming families, too. Thanks to faster and cheaper transport and telecommunications, young couples from all over the world are finding each other and falling in love in numbers that would have been unimaginable to the flower-power generation only four-five decades ago. Over time, provided we can maintain our standards of living, this will lead to a more mixed and possibly to a more tolerant world population. The growing incidence of terrorist attacks might set this development back in the immediate future, but unless something goes drastically wrong it is not likely to alter the general direction of our social evolution.

We might see counter-reactions. Thus, some ethnic groups are beginning to feel threatened, or even fearing that they could be in danger of disappearing. Consequently there is a debate about the value of ethnic diversity. It is also uncertain whether the large-scale experiments in multiculturalism which we are seeing unfold in major cities of the Western world today, such as London, Amsterdam, and Paris, will succeed economically. Immigrants are still over-represented in statistics of unemployment, social welfare, and crime. It may be that the majority of these outsiders will be better integrated and assimilated into our societies tomorrow, so that what we eventually end up with will be not a mixed and segregated society but a new and more vital society.

Such processes of assimilation have already succeeded many times throughout history. Thus, the original Swedish culture was very different from what we see in Stockholm today, which is also a mix of predominantly German and French people and cultures. Traces of the original Swedish culture can still be found in the deepest parts of Dalarna, where they speak a dialect closer to Icelandic. But to say that it would have been better for Stockholm and Sweden if the old culture had been preserved makes little sense today. Sweden has turned into something else, something new. It makes little sense biologically either, as the mix of ethnicities has produced a more diverse and thus a stronger gene pool.

The world is continually changing, and Man is the major player in this process. He knows now that he himself is the evolutionary motor of his own creation. Our advances in the natural sciences are increasing this awareness. To get an idea of the speed with which culture is changing, look at mural painting in the Mediterranean basin between 30,000 and 5000 BC. Notice how little this art changed over all that time. Then look at the development in the arts over the past 500 years since the Renaissance. It is like an explosion.

Archaeological museums are another excellent source of support for same point, if we compare artefacts made before the time of the Ancient Greeks with what came after the Indo-Europeans flooded into the European peninsula some 20,000 years ago. When we learned to smelt iron, there was a great leap forward in manufacture of novel objects, setting off a chain reaction of new discoveries and inventions. It is only about a decade since we discovered how to map Man’s DNA, and the consequences of this promise to be at least as important as the discovery of iron. With this technology we will be able to identify potential diseases and create cures tailored to the individual. This suggests that the changes to come will be even greater than the ones we have seen.

On the other hand, it is increasingly clear that progress in the natural sciences has become a solution and a problem at the same time. Left uncontrolled, science will lead to a countdown for Mankind’s very survival, as the current environmental situation on our planet reminds us. We can also foresee people creating and spreading devastating biological weapons.

Controlled, science may help to bring us closer together, if not always peacefully. Peace will have to be fought for every day, and there will be no end to conflict. Progress in the sciences will not lead to a utopian state where competition and the struggle for power will fade away. Instead we must continue to look for ways to manage these factors. What we need is a well-balanced, stable political system under which politics and business go hand in hand.

In this evolutionary race the businessman can be compared to a horse, and the elected politician to a rider. Society is the cart, and it is built on our values and virtues. In the cart are placed inventions that will make our lives better. If there is one thing that history has taught us, it is that the horse must be placed in front of the cart for it to move forward. That is, private, selfish initiatives should be welcomed, but must be controlled. Of all men, the businessman shows greatest initiative. He is the one in the most vulnerable, challenging situation on the top of the heap. He cannot get off. He cannot stop moving: he must advance, or he will fail. That is his destiny. In return for this hardship, he must be allowed certain favours, which nowadays chiefly take the form of material wealth. This seems to be the content of our new social contract.

Ever since Watt invented the steam engine in 1769 the curve of human technical evolution has grown ever steeper, and nothing at present is set to stop it or slow it down. As Gregory (1967: 5) puts it:

• The slope is ever steeper but has no crest
• The climb is ever harder but has no end
• The view is ever widening but not quite enough

Man is forever doomed to achieving but not arriving As human beings we have to take part in this race, or we will risk feeling disillusioned and isolated. But we also need to understand what is happening. We need a more pragmatic framework for the social sciences, allowing them to better explain to us what is happening. We need a broader understanding of human behaviour, which can incorporate change as an explanatory variable, and can reintroduce the power dimension into the equation.

What I have suggested in this book is that we should start to look for answers by using simple observations, bold syntheses, practical logic, and the study of biology, in place of today’s combination of physics, mathematics, and equilibrium theory.

To see where things went wrong it is not enough to study the rise of empiricism under John Locke and the subsequent spread and dominance of mathematical analytic methods in the social sciences in the twentieth century. We also need to understand how and why post modernism and French theory have imposed themselves on the current social-science paradigm. In the post modernists’ own words, we need to deconstruct deconstructionism.