Why can’t countries think like companies? (because both are different entities)

Well, countries can’t think like companies as two are very different entities. Just as we are told elephants can’t think like ants and vice-versa.

It is surprising to read such pieces from public policy professors. Kishore Mahbubani of Lee Kuan Yew Public Policy Institute actually argues something which professors of public policy have usually guarded against – countries are not companies.  So what works in companies does not really work at the country level.Actually, such kind of thinking will leave no role for public policy schools as well.

Much of modern economic thinking gets into this whole idea that country policies do not matter. One should just apply principles of economics (efficiency, profit maximisation etc) to country level and all shall be taken care of. The west has been influenced by this thinking for many years only to reap the enormous problems they have created for themselves.

So what does this article say? It speaks about missed opportunities in China and India:

When the history of the 21st century is written and a list is made of the century’s greatest missed opportunities, the visit of President Xi to India will probably be on it. No, the visit was not a failure. But it failed to seize the great opportunity that beckons China and India in this century. Why was that? The simple answer is that the minds of Chinese and Indian policymakers are polluted with a European concept invented 366 years ago in the Treaty of Westphalia. That concept is “sovereignty”. Why is this concept destructive? Let me explain.

If they were companies and had McK as consultants, things would have been really different:

 Just imagine that China and India were companies, not countries. As companies, they would study each other’s strengths and weaknesses objectively and see whether economic synergies could be exploited to make both companies profitable. Any such objective study would show that enhanced economic cooperation between China and India would be akin to a marriage made in heaven. India badly needs world-class infrastructure. As an infrastructure superpower, China has demonstrated that it can deliver super-highways, fast trains, and cheap power stations to India. And it can even fund them. At the same times, China is running short of labour. India has labour in abundance. Chinese manufacturers could become globally competitive by manufacturing in India. India would then become a manufacturing power.

If I were a McKinsey or Bain consultant looking around for companies with synergistic opportunities, I could not possibly find a better economic partnership. In his heart of hearts, Prime Minister Modi understands this because he visited China four times as chief minister of Gujarat to seize these opportunities. This is why Gujarat has about 31% of Chinese investment in India. President Xi also understood these opportunities. This is why he took the bold step to be among the first foreign leaders to call on PM Modi. Before the visit, the Chinese consul general of China in Mumbai, Liu Youfa, said that $100 billion of deals could be signed. Instead, only $20 billion were signed. So what went wrong?

Sovereignty reared its ugly head. While President Xi was in India, there was a Chinese incursion into disputed territory. The Indian media, predictably, went berserk. PM Modi had no choice but to read out a strong statement reaffirming India’s “sovereignty” over the disputed territories. The concept of “sovereignty” is particularly toxic because it brooks no compromise. The words “sovereign control” mean absolute control.

It is much deeper than that. The history of the two countries has not really been on favorable grounds. The same media which hypes things on one extreme takes it to another extreme when some small events beak out. Similar kind of thoughts prevailed during break up of USSR that just ignore history and get down to economics. But we all now know, how difficult it is to forget political history.

The author  tries again:

Once again, just imagine that China and India were companies. The company of China has a land territory of 9.6 million sq km. The company of India has a land territory of 3.3 million sq km. If these companies were located side by side and discovered that they had a dispute over 7,770 sq km (or 0.08% of China’s territory and 0.2% of India’s territory), they would consider it absolutely irrational to allow a trivial piece of territory to interfere with the massive growth opportunities they could have. I am not saying that money is the most important value. If China and India cooperate and significantly enhance their economic growth, hundreds of millions of Chinese and Indians will be rescued from poverty. What is morally more important? Rescuing millions from poverty or quarrelling over bits of territory?

So why can’t Asian nations compromise on territorial issues? The simple answer is that while Europeans have moved on from the notion of absolute “sovereignty” and indeed given up a significant amount of sovereignty to regional organisations, Asian countries have not followed suit. Indeed, the Europeans have reached a new peak of civilized behaviour by achieving “zero prospect” of war between any two EU states. No two Asian states have achieved a similar “zero prospect” of war. This is why Asians need to seriously ask why they remain mentally colonized by a European concept of “sovereignty”.

If PM Modi and President Xi were company CEOs, they would both focus on the larger economic gains and push aside territorial disputes. Unfortunately, if they do so as heads of government, they would be immediately accused of being “traitors” who gave up “sovereign” territory. Sadly, the people making these accusations from their moral high horses would not be aware that their minds are trapped by a 17th century European concept which no longer makes sense in the small, dense, and interdependent world we have created.

Even more sadly, the ferocious defenders of “sovereignty” are not aware that they are the biggest obstacles to China and India seizing a century that belongs to these two countries. And why does it belong to China and India? From the year 1 to 1820, the two largest economies of the world, as documented by economist Angus Maddison, were China and India. The last 200 years of Western domination of world history have been a major historical aberration. All aberrations come to a natural end. And it would be perfectly natural for China and India to once again have the largest economies in the world.

For over two decades, I have been warning that one big danger that Asians face is that even though Asian countries have been politically decolonized, their minds remain mentally colonized by European concepts. When two major Asian countries ignore a great historical opportunity and instead focus on “sovereignty”, the only question that the rest of the world will ask as they watch China and India bicker is: “Can Asians think?”

Not sure. Our Asian history has always stressed on sovereignty and role of state.  Economic lens is a good way to look at missed opportunities but it is way too narrow a lens. There are many considerations before a policymker and that is what public policy teaches you about.

Infact, even companies think a lot about all kinds of strategies before really agreeing to partner. It is not as easy as the author makes it out to be. Yes economics plays a role, but companies too think about similar kinds of sovereignity issues at the company level. We have had ample cases where companies have let business opportunities go because of all kinds of similar sovereignty issues.

Actually given today’s times,  the question should be reversed — why don’t companies think like countries and think of overall welfare of their employees than just their profits (countries are doing a bad job as well, but trying)? Yes, this fits the question again in the ant can’t think like an elephant thinking but can be worth looking at given the dissatisfaction employees have with companies these days..

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