BRICS Business Magazine English Edition No.5 by MEDIACRAT

The World and BRAZIL 路 RUSSIA 路 INDIA 路 CHINA 路 SOUTH AFRICA

BUSINESS MAGAZINE

Global Leaders in Cultural Diplomacy Country Branding The Agenda for the Big Five The Cult of Courage of China's Wealthiest Man Major Languages of the Present and Future

OPINION

Nouriel Roubini Park Geun-hye Pankaj Ghemawat BUSINESS

Wang Jianlin Shailesh Rao Rodrigo Canales S T R AT E G Y

Vladislav Inozemtsev Marcos Troyjo Kristel Van der Elst SOFT POWER

Simon Anholt Sergey Mitrofanov Andy Puddicombe Celso Amorim L ANG UAG E S

Vladimir Plungian Maxim Kronhaus CITIES

Alejandro Aravena Lev Kuznetsov

Chairman of the Editorial Board Ruben Vardanian

BUSINESS MAGA ZINE

Cover illustration: Katya Gorelik Photos & illustrations by: AP/Fotolink, DepositPhotos, East News, MEDIACRAT, Reuters, Russian Look, ITAR-TASS Registered as № ФС77-51070. 19,000 copies. BRICS Business Magazine is a registered trademark of MEDIACRAT. © 2014 MEDIACRAT. All rights reserved. No part of this publication may be reproduced or transmitted in any language, in any form or by any means, electronic or mechanical, including photocopy, recording, or any information storage or retrieval system, without written permission. The views expressed in articles are the authors’ and not necessarily those of BRICS Business Magazine. Every effort has been made to represent faithfully the views of all contributors and interviewees. The publisher accepts no responsibility for the content of advertising materials, errors, omissions or the consequences thereof.

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Our civilization has no plans to do away with weapons and money. With this in mind we still place high hopes on ‘soft power,’ which means the ability of any country to convince and attract people and entire institutions by demonstrating that its system is reliable, viable and, most importantly, appealing. In such matters every detail counts. Music, literature, cinema, the standard of living and the way of life, internet accessibility and even approximate ideas as to what future prospects lie ahead – all play an important role. To convince and attract means to inspire trust. There is no other tool that is more rational than trust – after all, it is capable of bringing down costs in any processes – from business to international relations. However, very few people are able to learn to trust and afford this luxury, which is rather unfortunate. In today’s world trust has truly become one of the most sought-after commodities. Expanding trust and its reach is a key priority, which I am sure can be addressed. Naturally, the ‘attract – convince – inspire trust’ formula needs to be augmented to include the notion of ‘understanding.’ We need to fully recognize and take account of the difference between ourselves and other people and bear in mind that we think and perceive information in different ways. In any communication there is a risk of pseudo-communication when the difference between the meaning conveyed and the meaning perceived is too great. Many developing nations suffer from this problem to varying degrees. Therefore, it is not enough to just accumulate soft power with all of its components in the hope that it will work out automatically by itself. One needs to have a long-term plan spelling out how this soft power will be used. This task can be simplified if we comply with the rules of the game that are the same for everyone. Deep down these rules amount to respect and the aforementioned trust. Not everyone seems capable of it – far from it – but each of us needs to strive to respect others while remembering to respect ourselves. The same can be said about trust. Ruben Vardanian, Chairman of the Editorial Board of BRICS Business Magazine

EXPERTS AND CONTRIBUTORS

Wang Jianlin – Chairman of Dalian

Shailesh R ao – Director of New Products & Solutions at Google Enterprise, Head of Google’s Cloud Global Business Unit

Wanda Group

Nouriel Roubini – Professor of

Pankaj Ghemawat – Anselmo Rubiralta

Economics and International Business at the Stern School of Business, New York University

Professor of Global Strategy at IESE Business School, Distinguished Visiting Professor of Global Management at the Stern School of Business, New York University

Park Geun-hye – President of the Republic of Korea

Vladislav Inozemtsev – Head of the Public Administration Department at Lomonosov Moscow State University, Director of Moscow’s Centre for Post-Industrial Studies

Celso Amorim – Brazil’s Minister of Defense and former Minister of Foreign Affairs

Marcos Troyjo – Director of the BRICLab Jean-Pierre Lehmann – Founder of The Evian Group, an international coalition of corporate, government and opinion leaders, and Professor Emeritus of International Political Economy at IMD

at Columbia University, where he also teaches international affairs

Michael Spence – Nobel laureate and William R. Berkley Professor in Economics and Business at the Stern School of Business, New York University

Mo Ibr ahim – Chairman of the Mo

Jack A. Goldstone – Professor of

Ibrahim Foundation, founder of Celtel

Public Policy at George Mason University, Head of the International Laboratory for Political Demography and Macrosociological Dynamics at Moscow’s RANEPA

Simon Anholt – independent policy advisor on strategies, author of the Nation Brands Index, winner of the 2009 Nobels Colloquia Prize for Leadership on Business and Economic Thinking

Jeffrey D. Sachs – Quetelet Professor of Sustainable Development and Health Policy and Management, and Director of the Earth Institute, Columbia University

Sergey Mitrofanov – Head of the Moscow oﬃce of Brandﬂight, founder of Mitrofanov & Partners

Joel Whitaker – Senior Vice President and Global Head of Research at Frontier Strategy Group

EXPERTS AND CONTRIBUTORS

Artem Konstandyan – President

Vladimir Plungian – Corresponding Member of the Russian Academy of Sciences, Head of the Department of Theoretical and Applied Linguistics at Lomonosov Moscow State University

and Chairman of Promsvyazbank

Pierre Casse – Professor of Leadership at the Moscow School of Management SKOLKOVO

Maxim Kronhaus – Head of the Social Lev Kuznetsov – Governor

Linguistics Centre at the Russian Academy of National Economy and Public Administration

of Krasnoyarsk Krai

Andy Puddicombe – former Buddhist Eugene Abov – Publisher of Russia

monk, co-founder of Headspace

Beyond the Headlines

Alejandro Ar avena – award-winning Chilean architect

Christopher Hartwell – Head of Global Markets and Institutional Research, SKOLKOVO Institute for Emerging Market Studies

Rodrigo Canales – Associate Professor

Shang-Jin Wei – Director of the Chazen Institute, and N. T. Wang Professor of Chinese Business and Economy, Columbia Business School

Oliver Stuenkel – Professor of

Simeon Djankov – Rector of the

linguist and cultural critic

New Economic School and Visiting Professor at Harvard Kennedy School

Tao R an – Professor in the Department

Evgeny K aganer – Professor of

of Economics at the Renmin (People’s) University of China

Information Systems at IESE Business School

Matthew Ferchen – Associate

of Organizational Behavior at Yale School of Management

International Relations at the Getúlio Vargas Foundation (FGV) in São Paulo

Thorsten Pattberg – German writer,

Professor at Tsinghua University, Resident Scholar at the Carnegie-Tsinghua Center for Global Policy

Claire Hsu – Co-founder of the Asia Art Archive and a World Economic Forum Young Global Leader

Pushpa Ar abindoo – Co-Director of the UCL Urban Laboratory at University College London

Kristel Van der Elst – Head of the World Economic Forum’s Strategic Foresight Team

CONTENTS

№••• •••• • ••

OPINION Innovation is harder to achieve than the mobilization of resources and the copying or reverse engineering of existing technologies. Thus, many BRICS may be close to the point where the easy sources of growth are gone, while the sources of fast growth that propel an economy to high-income status are harder to achieve.

The BRICS could come up with a practical initiative to unite the efforts of periphery and developed nations in fighting corruption. Such an initiative could radically step up efforts to fight corruption inside the BRICS through civil society mechanisms and monitoring. Meanwhile, the West could do away with offshore jurisdictions and introduce a total ban on transfers of significant amounts from developing nations to banks in the United States and Europe.

14 16 18 20 24 26 30 32 34

Midlife Crisis Asia’s Democratic Drama From Moscow to Sochi Reinventing the Inter-Korean Relationship Africa: In Search of a Law Fathoming the Depth The Demography Rules One Should Socialize More Next Steps for Emerging Economies

Nouriel Roubini Jean-Pierre Lehmann Jeffrey D. Sachs Park Geun-hye Mo Ibrahim Pankaj Ghemawat Jack A. Goldstone Oliver Stuenkel Michael Spence

BUSINESS

36 38 40 44 46

The Cult of Courage of Wang Jianlin Fail Early, Fail Often Emerging Market Meltdown? The Challenges of a Post-Crisis World Beyond Violence

Guo Haifei Shailesh Rao Joel Whitaker Artem Konstandyan, Pierre Casse Rodrigo Canales

S T R AT E GY

52 58 60

Tomorrow’s Agenda Introverted Economy Steppe Change

Vladislav Inozemtsev Marcos Troyjo Kristel Van der Elst, Trudi Lang

CONTENTS

South Korea, one of the most extraordinary success stories of the last 60 years, is a country that has managed to achieve a high standard of development, and wealth, and prosperity, and stability, and peace, almost unequalled in human history. And yet it still only ranks 33rd out of 50 in the Nation Brands Index. Why? Because Korea’s success is only of interest to Koreans.

The expansion of a language is not a function of power politics. It is predicated on how attractive are the specific cultural and intellectual patterns that exist within the space of this given language.

108

S O F T P OW E R

62 74 78 88 96 100 102 108

Soft Power: A Double-Edged Sword?

Bryane Michael, Christopher Hartwell, Bulat Nureev Straddling Journalism and Propaganda Eugene Abov Marketing Manual Basics Simon Anholt, Sergey Mitrofanov Headspace – The Little App of Calm Polly Vernon Has Beijing’s Trojan Horse Developed a Limp? Olga Sorokina Strong Softness Celso Amorim India’s Cinematic Trident Evgeniy Pakhomov Soft Revolution Claire Hsu

L A N G UAG E S

110 114 124

25 Languages of Our Time Natural and Mental Phenomena The Rules of the Language

David Pegg

CITIES

126 130 132

Alejandro Aravena: A visionary architect who wants to change the world Measuring the Unmeasurable Vitamins for Krasnoyarsk

Bruce Watson Pushpa Arabindoo Lev Kuznetsov

GEOGR APHY AND ETERNIT Y

136 136 148

Sense of Location The Immortals

Simon Anholt

OPINION

Nouriel Roubini —•—

Midlife Crisis The BRICS have exhausted the sources of easy growth without having managed to boost productivity. As bad as that might sound, they still stand a chance of solving their domestic problems to become not just developing, but developed, countries.

First of all, while most of them implemented first-generation reforms, they failed to implement second-generation structural reforms that are more micro-based and boost productivity growth. As a result, their potential growth rate has fallen. Second, not only did they fail to implement market-oriented reforms, most of them moved toward a growth regime based on state capitalism: an excessive role for the public sector and stateowned enterprises in the economy, an excessive role for state-owned banks in the allocation of savings to investment and credit creation, trade protectionism, resource nationalism, and so on. State capitalism may have worked at earlier stages of development and during the global financial crisis, which had prompted a fall in private spending, but it is now distorting economic activity and leading to a fall in potential growth, as investment becomes less efficient. All of the BRICS have experienced a stagnation of the business environment, with few reforms after 2006. With the easy sources of growth gone and the external environment less supportive, issues such as the rule of law and operating rigidities become a more significant speed bump. Third, the commodity super-cycle is probably over – for a variety of reasons – and this hurts the BRICS that are commodity exporters: Russia, Brazil and South Africa. Given the slowdown of China, after years of high prices, commodity prices may fall further, hurting the growth of the commodity-oriented BRICS. Fourth, in the boom years for the BRICS and for emerging markets, macro policies became too loose, leading to overheating : excessive credit growth in part driven by excessive capital

Are the BRICS in the midst of a midlife crisis? Based on recent data, this would appear to be the case. China grew at a rate of over ten percent for 30 years, but its growth rate has now slowed to around 7%, and it may fall further if the reforms to rebalance growth from creditfuelled fixed investment to consumption are delayed at the risk of a hard landing. India, meanwhile, grew rapidly earlier this decade (9%+, in 2010-2011) but its growth rate slumped to 5% in 2013 and may only modestly pick up this year. The other BRICS are even worse: in 2013 growth was 2.5% in Brazil, 1.3% in Russia and 1.9% in South Africa. This year things will not be much better, and I forecast mediocre growth of 1.8% in Brazil, 1.7% in Russia and 2.6% in South Africa. Three of the five (Brazil, India and South Africa) are now part of what investors consider the Fragile Five emerging market economies (the other two being Turkey and Indonesia). These fragile emerging markets share weaknesses, such as large current account deficits, large fiscal deficits, falling growth, rising inflation and political and policy uncertainty, and they all face parliamentary or presidential elections this year. Last year their financial markets headed south (with weaker currency, weaker bond markets and weaker equity markets) and this year could also be a challenging one. What ails the BRICS (and a few other emerging market economies)? Nouriel Roubini is Professor of Economics and International Business at the Leonard N. Stern School of Business, New York University. He participated in the World Economic Forum’s Annual Meeting 2014. 14

Midlife Crisis

Source: www.weforum.org

Innovation is harder to achieve than the mobilization of resources and the copying or reverse engineering of existing technologies. Thus, many BRICS may be close to the point where the easy sources of growth are gone, while the sources of fast growth that propel an economy to highincome status are harder to achieve

of private-sector development. Innovation is harder to achieve than the mobilization of resources and the copying or reverse engineering of existing technologies. Thus, many BRICS may be close to the point where the easy sources of growth are gone, while the sources of fast growth that propel an economy to high-income status are harder to achieve. Of course, in spite of their recent economic difficulties, one should not be too pessimistic about the future of the BRICS. There are many reasons to be optimistic about their prospects for growth. First, they are all large economies with large populations and markets, and three out of five still benefit from a demographic dividend. Second, in spite of the delays in the last decade, most may eventually shed a model of state capitalism and implement structural reforms that increase potential growth. Third, the macro weaknesses that some of them faced are solvable; none of them face the past risks of severe currency, sovereign or external debt crises. Fourth, some secular forces are still in their favor, such as urbanization, industrialization, the catch-up from low per capita income, the rise of stable middle classes and the development of a consumer-oriented society and economy. However, future success will depend on fixing macro-imbalances, implementing appropriate structural reforms, strengthening weak political and other institutions, shedding state capitalism, and further opening up their economies to global trade and investment. If such policies are put in place, the risk of hitting a thick brick wall of low growth will be avoided, and the future of the BRICS could be bright again.

inflows; growing currency appreciation, which led to a loss of competitiveness and in some cases external deficit; and looser monetary and fiscal policy, given cheap external financing. The deterioration of macro policies was serious in Brazil, India and South Africa but even in China credit-fuelled investment has led to a surge in public debt that will burden the official and shadow banking system. Fifth, in some BRICS – specifically China and Russia – there is no demographic dividend, as the population is aging for a number of reasons: the one-child policy in China and more fundamental low fertility rates and high mortality rates in Russia. Lower population growth is associated with lower potential growth. Sixth, many BRICS may end up in the middleincome trap, failing to progress to a higher per capita income. Solid institutions, good governance and appropriate macro policies, and the mobilization of savings, capital and labor inputs can lift an economy from a low per capita income to middle-income status (as many emerging markets and most of the BRICS have done in the last two decades), but transitioning into a developed market is much more difficult. Indeed, World Bank studies suggest that only a small number of emerging market economies have escaped the middle-income trap, and as more emerging markets navigate from low to middle income, avoiding the trap becomes harder. Making the transition means moving from resource mobilization (of labor and capital) to sustained increases in total-factor productivity growth, and requires innovation, investment in new technologies and the digital economy, an opening up of the economy, and the fostering №1(5), 2014

OPINION

Jean-Pierre Lehmann —•—

Asia’s Democratic Drama Should democracy be considered the prerogative solely of the Western world, unable to take root in Asia? If we look deep into past centuries, we may ﬁnd an honest answer to this question.

one’s fingers. And even these were imperfect: using the most basic democratic yardstick – universal suffrage – the United States could not be seen as truly democratic until the civil rights victories of the 1960s. Although Britain was a beacon of democracy in the 20th century, it did not extend this principle to an empire that held sway over more people and territory than any previous world power. It suppressed independence movements in India and across the Middle East and Africa (though many of these movements’ members willingly fought for Britain during both World Wars). Similarly, the Dutch did not extend their democracy to Indonesia. Nor did France support free and fair elections in Indochina or in its Middle Eastern and African colonies. The Belgians were particularly brutal in Congo. The Spanish and Portuguese ravaged Latin America. And the Germans were not much better in Southwest Africa. Indeed, two of history’s most terrifying ideologies, fascism and communism, were devised and embraced in continental Europe. The fact that the word ‘democracy’ derives from ancient Greek, and that one can discern the kernel of democratic thought in Greek philosophy, by no means implies that democracy is embedded in the West’s political DNA. Only after centuries of absolutist rule, extremism, war, revolution and

Asia’s political spectrum ranges from the brutal despotism of North Korea to the enlightened constitutional monarchy of Bhutan (so enlightened that it developed Gross National Happiness as an alternative measure to Gross Domestic Product), with many shades in between. But the old charge that Asia is ill-suited to Western-style democracy is being leveled again. Are the skeptics right? In South and East Asia, democracies outnumber dictatorships by 17 to six. But democracies are facing turbulent times. Thailand’s political impasse, amid massive anti-democracy demonstrations, has hit world headlines, and elections have also been violently contested in Bangladesh. There have been widespread human rights abuses in Sri Lanka. Cambodians have suffered a brutal political clampdown. And political life in the world’s largest democracy, India, is raucous and unruly. Nonetheless, the notion of democratic exclusivity is both wrong and historically shortsighted. Although almost all Western countries are currently democracies, this has only been the case since the 1990s. Just a half-century earlier, one could count the number of Western democracies on Jean-Pierre Lehmann is founder of The Evian Group, an international coalition of corporate, government and opinion leaders. He is Professor Emeritus of International Political Economy at IMD, Switzerland, and holds visiting professorships at Hong Kong University and at NIIT University in Neemrana, Rajasthan. 16

Asia’s Democratic Drama

The fact that the word ‘democracy’ derives from ancient Greek, and that one can discern the kernel of democratic thought in Greek philosophy, by no means implies that democracy is embedded in the West’s political DNA. Only after centuries of absolutist rule, extremism, war, revolution and oppression can the West as a whole reasonably claim to be free, democratic, peaceful and prosperous – and even now there are exceptions. It is also debatable whether this so-called Western democracy was a cause or a consequence of peace and prosperity

share of global GDP had fallen to less than 20%. In his 1968 work Asian Drama: An Inquiry into the Poverty of Nations, Swedish economist and Nobel laureate Gunnar Myrdal considered the words ‘Asian’ and ‘poor’ to be synonymous. But over the past three decades, Asian prosperity appears to be within reach once more. It is of course impossible to say how Asia might have developed had Western imperial powers stayed away. There is no reason to suppose that the region could not have found its own path to peace, prosperity and democracy. Socially and economically, Asia now stands roughly where Europe was at the start of the 20th century; and one can only hope that its democratic journey will be shorter and less violent. Crucially, that path has already been taken by South Korea. Despite 35 years of brutal Japanese colonization, three years of civil war, military dictatorship, and a lack of natural resources, the country has emerged from extreme poverty to become – in a volatile neighborhood – a stable, prosperous and vibrant democracy. Its neighbors could surely follow in its footsteps. Democracy is not a Western product; nor is it for Western citizens alone. Asia has enough historical experience to suggest that even its six remaining dictatorships could, in time, embrace a fairer system of government – and the peace and prosperity that come with it.

oppression can the West as a whole reasonably claim to be free, democratic, peaceful and prosperous – and even now there are exceptions. It is also debatable whether this so-called Western democracy was a cause or a consequence of peace and prosperity. The West was not always the world’s most politically advanced region. When Jesuit missionaries came to China in the 17th century, they enthused about how much Europeans could learn from the country’s enlightened political philosophy, Confucianism. The enlightenment philosophers Voltaire and Kant did just that. Confucian concepts such as the ‘mandate of heaven’ seemed infinitely more just than that of Europe’s ‘divine right of kings.’ The Nobel laureate economist Amartya Sen traces the origins of Indian democratic dialogue to the third-century-B.C. Buddhist Emperor Ashoka. He also contrasts the religious tolerance preached and practiced by the Muslim Emperor Akbar in the 1590s with the Inquisition, which was hounding heretics in Europe at around the same time. Our assumptions about the relative prosperity of Asia and the West should also be reconsidered. As recently as 200 years ago, Asia accounted for 60% of global GDP. However, following the industrial revolution in northwestern Europe, the colonization of much of Asia, and the Opium Wars in China, their relative positions switched. By the 1950s, Asia’s №1(5), 2014

OPINION

Jeffrey D. Sachs —•—

From Moscow to Sochi A former adviser to Boris Yeltsin, and a Western economist considered in Moscow to be one of the most controversial among his peers, came up with what is perhaps the most optimistic predictions for Russia’s future.

collapse of world oil prices after 1985 contributed to the severe economic crisis in the Soviet Union and Russia in the late 1980s and early 1990s. This is an important point, given that the economic reforms implemented by former Soviet president Mikhail Gorbachev and former Russian president Boris Yeltsin thus confronted powerful headwinds. For two years (1992-1993), I was a macroeconomic adviser to Prime Minister Yegor Gaidar and Finance Minister Boris Fyodorov, trying to help Russia end the high inflation and extreme shortages that characterized the last years of the Soviet era, and to begin Russia’s transition to a market economy. I recommended a macroeconomic stabilization strategy that had been highly successful in nearby Poland, and that called for timely financial assistance from the United States, Europe, and the IMF, just as Poland had received. Unfortunately, the West did not provide the needed financial assistance, contrary to my (and many other people’s) recommendations, and the Russian economic and financial calamity was more severe as a result. At the time, I attributed Western inaction to incompetence on the part of the US government and the IMF. Looking back, it is clear that there was also a deliberate strategy by US neoconservatives, such as then-Defense Secretary Dick Cheney, to weaken the new Russian state. The US government was also complicit during the mid-1990s in the plundering of Russian state-owned property, including oil assets that were unscrupulously privatized.

The Winter Olympics in Sochi are the first to be hosted by Russia since the Cold War-era Moscow Summer Games in 1980. Obviously, much has changed politically in the interim. But today’s Games also create an opportune moment to look back at Russia’s recent economic history – and to peer forward as well. Many people who remember the collapse of the Soviet Union in 1991, and its tumultuous aftermath, believe that Russia’s economy today must be impoverished and unstable – and far behind booming China. Wrong. According to the International Monetary Fund, Russia’s per capita income in 2013, measured in terms of purchasing power parity, is roughly $18,600, nearly double China’s per capita income of around $10,000. And, according to World Bank data, extreme poverty is close to zero, compared to 11.8% in China in 2009 (the most recent year for which data are available). Yes, Russia’s economy has been buoyed recently not only by sound macroeconomic policies, but also by high world oil and gas prices. In fact, the Jeffrey D. Sachs is Quetelet Professor of Sustainable Development and Health Policy and Management, and Director of the Earth Institute, at Columbia University, and is also Special Adviser to the United Nations Secretary-General on the Millennium Development Goals. 18

From Moscow to Sochi

industries, including nuclear energy, commercial The good news is that Russia was able to bounce aviation, commercial space technology (including back from those terrible years, no thanks to the satellites and GPS), ICT hardware and software, West or the US government. Russia’s market electric vehicles, high-speed rail, petrochemicals, economy, albeit marred by corruption, took root. and heavy equipment for the mining and After several years of political infighting and hydrocarbon sectors. All of these industries will unnecessary delay, macroeconomic stabilization benefit from the potential for enormous demand was achieved, and Russia’s economic growth was growth in large markets, such as China, Africa, restored, especially as world oil and gas prices began and India. to rise. From 2001 to 2013, Russia’s GDP grew at But achieving long-term growth led by higha robust 4.4% average annual rate. tech industries requires a business environment Russia achieved a good measure of financial that encourages private-sector investment, includstability as well. The IMF puts Russia’s inflation ing openness to foreign players. Moreover, the sorate at 6.9% in 2013, with unemployment at 5.5%, cial and political environment must be conducive while the budget deficit was just 0.3% of GDP. to a high-tech labor force, providing an attractive Moreover, Russia’s foreign-exchange reserves stand quality of life, ensuring at a healthy $500 billion. civil liberties, and supportBut Russia could ing entrepreneurship and achieve still greater sucRussia has the know-how, skilled engineering, creativity. Finally, economcess by basing its econand natural-resource base to become a global ic policies must promote omy on two growth encompetitor in a range of major high-tech gines rather than one. industries, including nuclear energy, commercial technological advances and global technical cooperaOil and gas will continue aviation, commercial space technology tion in promising sectors. to provide a strong lift to (including satellites and GPS), ICT hardware It is notable that Russia Russia for years to come, and software, electric vehicles, high-speed rail, recently completed an agreeespecially as China bepetrochemicals, and heavy equipment for the ment to finance a nuclear comes a major customer. mining and hydrocarbon sectors. All of these power plant in Hungary, and Yet Russia also has vast industries will beneﬁt from the potential for looks likely to do the same in and still under-developed enormous demand growth in large markets, Turkey. The demand for nupotential in many global such as China, Africa, and India clear energy will grow as part high-tech industries. of the global effort to decarDuring the Soviet era, bonize the world energy sysRussia produced a vast artem. Russia’s new reactors seem to be safe, and comray of technology-based industrial products, from petitive with those produced elsewhere. Similarly, we airplanes to computers to sophisticated machine might see new Russian-built civilian aircraft entering goods. Unlike Chinese industry, Russia’s manuthe global market in partnership with international facturing branches were almost completely cut off firms, especially those that can work with Russian from world markets, both by the Cold War and by companies on advanced ICT avionics. Soviet planning. When post-Soviet Russia opened Back in 1991, many thought that Russia could itself to trade, its industrial enterprises lagged far not end high inflation, adopt a market economy, or behind cutting-edge technologies, especially in the compete effectively in world markets. Two decades dynamic information and communications techlater, Russia has proved the skeptics wrong. Yes, nology (ICT) sector. Russia remains too dependent on oil and gas, and Many industries collapsed, owing to neglect, should move further on transparency, openness, lack of international partners, and financial chaos. and competition in business and governance. Yet Those that survived did so only barely, with greatly the trend is positive: Russia has become a stable, reduced output going mainly to the ex-Soviet high-income market economy, with strong market. prospects for decades of rapid GDP growth and Russia has the know-how, skilled engineering, high-tech progress if it pursues a sensible economic and natural-resource base to become a global strategy in the coming years. competitor in a range of major high-tech №1(5), 2014

OPINION

Park Geun-hye —•—

Reinventing the Inter-Korean Relationship South Korea’s president talks about the complex dialogue between the two Koreas, and her country’s new foreign policy priorities vis-à-vis the DPRK.

sustainable peace on the Korean Peninsula by making North Korea pay dearly for its aggressive acts while ensuring opportunities for change and assistance if it is willing to become a responsible member of the international community. Since the launch of my administration, North Korea has escalated its military threats and bellicose rhetoric against the South. In April 2013, the North took the extreme step of unilaterally barring South Korean workers from entering the Kaesŏng Industrial Complex, a symbol of inter-Korean exchange and co-operation, and withdrawing all of its own workers. Following the shutdown of the Kaesŏng facility, some suggested that the North be offered, through back-channel contacts, incentives to improve inter-Korean relations. But, aware that such contacts with the North had produced many adverse effects in the past, I opted for an open and transparent proposal for dialogue. I repeatedly emphasized to North Korea that trust can be built only by cooperating on small but meaningful projects and abiding by our promises – and calling attention to problematic

On February 12, 2013, North Korea carried out its third nuclear test in the run-up to the inauguration of a new administration – my own – in the South. Around that time, the Presidential Transition Committee adopted the ‘Trust-Building Process on the Korean Peninsula’ as a key policy of the new administration. Though the North’s nuclear test created pressure to revise the trust-building process, I made it clear that I would stay the course. Indeed, since its conception, the trust-building process has taken into account possible military provocations from North Korea, and is intended specifically to break the vicious cycle of provocations followed by compromise and rewards to placate tensions. The trust-building process was formulated to overcome the limitations of both appeasement and hardline policies: while the former depended entirely on the North’s tenuous good faith, the latter implied only relentless pressure. The trust-building process, based on the strength of formidable deterrence, is intended to build Park Geun-hye is President of the Republic of Korea. 20

Reinventing the Inter-Korean Relationship

No country, including South Korea, will invest in the North if it persists in nuclear development. If North Korea truly cares for its people, it must give up the unrealistic twin goals of nuclearization and economic development. Instead, it must abide by international norms and behave predictably if it is to get along with its neighbors and become a credible partner

the reunion of separated families only a few days before the agreed date, breaking the hearts of those who had long been eagerly awaiting it. North Korea then resumed its slander and threats against us. Following the recent purge of Jang Sung-taek, known as the North’s ‘second man,’ the political situation on the peninsula has spurred further concern among Koreans and the international community, serving as a reminder of how unpredictable the current situation is – and thus how difficult it has become to develop interKorean relations. For the past ten months, my government has sought to abide by international norms in implementing its North Korea policy, while trying to meet people’s expectations. We will stick to these fundamental principles and set the following priorities for future North Korea policies. First, we will pave the way to peace and unification on the Korean Peninsula. My government will maintain a strong deterrent capability, because airtight security constitutes

behaviors – along the way. I have also explained to the international community the credibility and necessity of anchoring our policy in the trust-building process, securing support from many countries. North Korea finally came to the dialogue in mid-July, and a month later agreed to normalize the operation of the Kaesŏng Industrial Complex in a constructive manner. As follow-up measures, a secretariat for the joint management of the complex was established, and government officials from the two Koreas began daily meetings. It was a small but significant step forward, considering that inter-Korean dialogue has been virtually non-existent over the past five years, and that tensions stoked by the North reached a peak in the early days of my administration. But there is still a long way to go to full normalization of the Kaesŏng facility, not to mention inter-Korean relations. The North remains lukewarm on the follow-up dialogue for the passage of workers, communication, and customs clearance, all of which are essential. Furthermore, North Korea unilaterally canceled №1(5), 2014

OPINION

If the North shows a firm commitment to the foundation of genuine peace. From this denuclearization and takes practical steps to point, the government will strive to forge this end, we will take the lead in securing the sustainable peace through dialogue, exchanges, international community’s support for active and co-operation, in order to achieve unification assistance in the North’s economic development. and improve the quality of life of all Koreans. Furthermore, we will endeavor to help the Korea will also work to consolidate copeninsula progress together with our neighbors operation with the international community in in the Northeast Asian region. this process. Unification is certainly a matter North Korea has recently shown interest for the Korean people to decide, but it should in setting up special economic development be achieved with the support of neighboring zones. But no country, including South Korea, countries, ensuring that unification benefits all will invest in the North if it persists in nuclear parties in the region. development. If North Korea truly cares for its Second, the government will endeavor to people, it must give up the unrealistic twin goals upgrade the trust-building process. To chip of nuclearization and away at the deep-rooted economic development. suspicion between the Instead, it must abide by two Koreas, we will North Korea unilaterally canceled the reunion international norms and work to strengthen of separated families only a few days before the behave predictably if it inter-Korean dialogue agreed date, breaking the hearts of those who is to get along with its and discuss matters had long been eagerly awaiting it. North Korea neighbors and become prudentially while then resumed its slander and threats against us. a credible partner. keeping promises on Following the recent purge of Jang Sung-taek, Bringing North Korea what is agreed. known as the North’s ‘second man,’ the political in from the cold is My government will situation on the peninsula has spurred further important to our foreign devise various measures concern among Koreans and the international policy in a broader to expand the scope of community, serving as a reminder of how context as well. That is South-North dialogue unpredictable the current situation is – and thus why I have proposed and co-operation. how diﬃcult it has become to develop the Eurasian Initiative, And we will continue inter-Korean relations which envisions providing humanitarian connecting the Eurasian assistance to the North, continent’s divided logistics networks and as well as maintaining efforts to hold reunions removing obstacles that hinder exchanges to make of separated families and to resolve the issue of the continent a viable single entity. Furthermore, prisoners of war and abductees who have been it is linked to my plan for peace and co-operation kept in the North. in Northeast Asia. To make this initiative succeed, In addition, we will increase the transparency the Korean Peninsula must be the first to dismantle of our North Korea policies. Of course, the wall of distrust, for it is the gateway that links considering the nature of inter-Korean relations, Eurasia and the Pacific. not all matters can be disclosed in full detail. The project to build a World Peace Park in But providing as much accurate information as the DMZ (demilitarized zone) that divides the possible to the public is the best way to ensure Korean Peninsula could be a starting point. From firm popular support for these policies and their here, the countries of the continent and the effective implementation. ocean together with the two Koreas must build Third, Korea will seek denuclearization of the trust and promote co-operation, and disseminate North as a means to pursue joint progress on the such practices to other areas. Korean Peninsula and across Northeast Asia. As such, the Korean Peninsula would be Indeed, inter-Korean relations can properly able to cast off its old role as a stumbling block progress when the North forswears nuclear and revive itself as a steppingstone for peace in development and joins the South in a partnership Eurasia and Northeast Asia. based on mutual confidence. 22

OPINION

Mo Ibrahim —•—

Africa: In Search of a Law villagers draw up proper titles to their communal lands, helping to secure their economic future. In Kenya, community groups have used freedom of information laws to ensure that money earmarked for local school construction is properly disbursed. This is the rule of law in action at the local level, and it is building, often from scratch, a culture in which disputes are settled peacefully and benefits distributed transparently. The alternative – recourse to violence in the face of unequal access to resources – has led to a cycle of political instability in many countries, with the consequent lack of economic development that has come to characterize much of Africa’s recent history. As the debate on the post-2015 Sustainable Development Goals unfolds at the United Nations this year, it is my fervent hope that African governments will endorse the inclusion within these goals of measurable targets for access to justice. To be sure, the dominant themes that are emerging in the UN discussions – jobs, economic growth, infrastructure development, and poverty reduction – are all still desperately needed across the continent. But the rule of law is a fundamental principle that does more than promote economic growth, and it would be a serious mistake not to include it in the SDG agenda. Indeed, acknowledging that all must be equal in the eyes and practice of the law is a prerequisite for strengthening the social contract between the state and its citizens. Without greater fidelity to the rule of law, too many African citizens will continue to see their futures blighted and their countries’ resources wasted. If we are to build grassroots respect for the institutions and processes that constitute democracy, the state must treat its citizens as real citizens, rather than as subjects. We cannot expect loyalty to an unjust regime. The state and its elites must be subject, in theory and in practice, to the same laws that its poorest citizens are.

My career as a businessman in Africa has turned me into an activist for better, cleaner government and for the rule of law. But promoting good governance is not just a matter of encouraging good leadership at the top (although I believe that definitely helps); it also requires all of us to be able to fulfill our responsibilities as citizens, and realize our rights. In several African countries, there are impressive legal instruments in terms of independent court systems; the challenge consists in impartial implementation. Democratic accountability requires that citizens can use the law, as well as be subject to it. For example, these countries have laws that prohibit seizures of land without due process and compensation for the owner; that bar public servants from accepting bribes; and that require government funds to be spent on the public good, not for private gain. In the countries that currently do well on the Ibrahim Index of African Governance – Botswana, Ghana, South Africa, and others – citizens can use the law to protect themselves and their property from illicit encroachment, and to resolve their disputes in an impartial setting. For those at the bottom – Somalia, the Democratic Republic of Congo, and the Central African Republic – the rule of law is a fiction that must be made real. This work is already being carried out in places: in Sierra Leone, a country recovering from a brutal civil war, community-based paralegals are helping villagers to settle disputes peacefully; in Malawi, they are helping to reduce unnecessary imprisonment. In Mozambique, local legal experts have helped Mo Ibrahim is chairman of the Mo Ibrahim Foundation, and founder of Celtel.

The founder of the famous Index of African Governance talks about the continent’s main deﬁcit.

Adve Ad Adv A dverti d rtis rt tissem ti emen eme e men me m en e nt

OPINION

Pankaj Ghemawat —•—

Fathoming the Depth Despite their heavyweight presence in international trade, the BRICS countries are barely integrated into global ﬁnancial and human ﬂows and interact with one another on an exceedingly limited scale. Yet Pankaj Ghemawat, who co-authored the Depth Index of Globalization, believes that this state of affairs still offers great opportunities. If the BRICS decide to seriously tackle globalization issues, they stand to tap into new and powerful growth points.

the recovery in international portfolio equity, the gradual increase in international people flows, and the more rapid increase in cross-border information flows paint a more positive picture than a narrow focus on trade and FDI would imply. Looking beyond only trends over the past year, globalization was hit hard at the onset of the crisis in 2008 and, despite a partial recovery since then, the world remains less deeply globalized than it was before the crisis began. The world, in absolute terms, is also far less globalized than commonly presumed. Surveys of business executives I have conducted indicate that even experienced international business leaders tend to overestimate the depth of trade, capital, information, and people flows by three times or more. The share of the world’s population who are first generation immigrants, for example, is only three percent – the same as it was in 1910! Western Europeans guess immigrants make up 25% of their countries’ populations, about twice the correct answer of 12%. Americans are even further off, guessing 42% (versus the correct answer of 14%). Turning then specifically to the BRICS countries, these large emerging economies rank near the bottom of the index, but that result should not be viewed with as much alarm as one might initially suppose. Large economies tend to have a higher proportion of their economic activity taking place within their national borders rather than spanning across them. Also, emerging economies generally tend to be less globalized than advanced economies: they trade about as intensively, but are only one-quarter as tied into international capital and people flows and one-ninth as connected to international information flows. Nonetheless, the

BRICS Business Magazine describes its “supreme purpose” as “to offer a direct information nexus between key BRICS cities” rather than the typical indirect path that “reaches the developing world through the developed markets.” The Depth Index of Globalization (DIG) 2013 (free download at www.ghemawat.com/dig), which I co-developed with Steven A. Altman, sheds light both on the limited direct interactions between the BRICS countries as well as the limited depth of their international activity on a global basis. DIG was assembled based entirely on hard data, and extends beyond only information flows to also capture the trade, capital, and people flows (the report’s four ‘pillars’ of globalization) among 139 countries that together account for 99% of the world’s GDP and 95% of its population. Before delving into the BRICS countries specifically, let us start with some perspective on the state of globalization worldwide. World trade as a percentage of GDP dipped slightly in 2012 – although rounded off, it remained at 32%, slightly below its all-time (pre-crisis) peak. And foreign direct investment (FDI) dropped by 18%. But

Pankaj Ghemawat is Anselmo Rubiralta Professor of Global Strategy at IESE Business School and Distinguished Visiting Professor of Global Management at Stern School of Business, New York University. Between 1983 and 2008, he was on the faculty at the Harvard Business School where, in 1991, he became the youngest person in the school’s history to be appointed a full professor. 26

Fathoming the Depth

BRICS countries’ results generally do indicate very substantial untapped opportunities for this group of economies to strengthen and benefit more from globalization. Brazil ranks 130th out of 139 countries on this year’s depth index, which is unchanged from the previous year. But beyond that, there are three key findings worth noting. The country performs very poorly on the people pillar and is substantially below average on the information pillar. Also, Brazil ranks last in the world on trade depth: Merchandise exports and imports each account for only 10% of the country’s GDP. Contrast this with Russia, which derives 26% of its GDP from merchandise exports (more than twice as much as Brazil) and continues to run a trade surplus equal to about seven percent of GDP – half the levels of 2005/6, but still substantial. Russia also performs marginally better than the others on capital. However, inbound FDI is a particular area of weakness for Russia. Among the 39 countries analyzed in the European region, Russia ranks last (95th out of 139 countries on this year’s DIG). India ranked 123rd out of 139 countries worldwide (eighth out of 12 in the South & Central Asia region). Performance was marginally better on the capital pillar than on the other pillars although, even there, India ranked very low in terms of inbound FDI. The region in which India is located, South & Central Asia, averaged the second-largest increase in depth scores from 2011 to 2012, with its gains driven by the information and capital pillars. However, the region averaged the lowest scores on the DIG. China fared only slightly better, ranking 122nd (17th out of 19 in the East Asia & Pacific region), unchanged from last year. The country ranks particularly poorly on people and, to a lesser extent, trade flows, but does relatively better on capital flows. On both trade and FDI, China ranks

HOW MUCH MORE GLOBALIZED ARE ADVANCED ECONOMIES THAN EMERGING MARKETS?

Exports (% of GDP)

Advanced

Emerging

nearly equal

FDI outﬂows (% of gross ﬁxed capital formation)

4x more globilized

International internet bandwidth (per internet user)

6.6x more globalized

International tourist arrival (per capita) Even experienced international business leaders tend to overestimate the depth of trade, capital, information, and people ﬂows by three times or more. The share of the world’s population who are ﬁrst generation immigrants, for example, is only three percent – the same as it was in 1910!

№1(5), 2014

7.4x more globilized

OPINION

The intensity of Brazilians’ and Indians’ phone calls to the US is roughly 90 times the intensity of their calls to China, and South Africans call the UK at about 150 times the intensity they call Indians! While the BRICS countries share some economic similarities as the world’s largest emerging economies, other differences continue to pose challenges to building up direct informational links among them

the rule; its actual depth score is slightly higher than the score expected based on its structural factors. In addition to subpar depth scores overall, the BRICS countries also have significant potential to improve connectedness with each other – which continues to be limited except in terms of merchandise trade. For instance, the intensity of Brazilians’ and Indians’ phone calls to the US is roughly 90 times the intensity of their calls to China, and South Africans call the UK at about 150 times the intensity they call Indians! While the BRICS countries share some economic similarities as the world’s largest emerging economies, other differences continue to pose challenges to building up direct informational links among them. Despite stalled globalization in 2012, recent downward global growth forecast revisions, and the low depth scores of the BRICS countries, the outlook for globalization is not bleak. The world economy is still projected to grow faster between 2012 and 2018 than in the 1980s, the 1990s or the first decade of this century. This implies that the largest threat to globalization actually comes from policy fumbles rather than macroeconomic fundamentals. If policymakers make the right choices, the potential for greater globalization – and greater prosperity – can become a reality.

more highly on outward flows than inward flows. That said, the country has rebalanced its trade significantly: exports are down from 36% of GDP in 2006 to 25% of GDP in 2012, and the merchandise trade surplus from seven percent to three percent of GDP over the same period. South Africa, the smallest of the BRICS, ranked the highest among them: 83rd overall (eighth out of the 29 countries analyzed in the Sub-Saharan Africa region). Its performance is relatively stronger on the capital pillar, where it holds the 33rd position out of 116 countries and, in particular, ranks in the top quartile on both inward and outward portfolio equity stocks, behind only Mauritius in the Sub-Saharan region in this regard. And it is comparatively weak on trade depth. The common untapped potential for the BRICS countries to participate more in globalization is reflected in a comparison of their actual scores to estimates of their expected scores based on structural factors such as their populations, GDP per capita, etc. All four of the larger BRICS countries’ actual scores fall short of their expected scores. Brazil’s shortfall is the largest, followed by Russia’s. India and China’s results are much closer to what one would expect given their structural conditions, with China almost matching the model’s prediction. South Africa is the exception to 28

Fathoming the Depth

BR AZIL EXPORTS

BRICS Exports Maps COUNTRIES SIZED BASED ON THEIR SHARE OF THE BRICS COUNTRIES’ EXPORTS, AND COLORED BASED ON THE BRICS’ SHARES OF THEIR IMPORTS

50%

20%

10%

0.5%

unknown

30%

10%

unknown

12%

unknown

SOUTH AFRICA EXPORTS

unknown

20%

China’s share of partners’ imports

№1(5), 2014

0.1%

India’s share of partners’ imports

CHINA EXPORTS

15%

0.5%

INDIA EXPORTS

Russia’s share of partners’ imports

30%

Brazil’s share of partners’ imports

RUSSIA EXPORTS

30%

South Africa’s share of partners’ imports

unknown

OPINION

Jack A. Goldstone —•—

The Demography Rules Aging and low fertility rates are making it an absolute necessity for Europe to attract more migration from the emerging world. But instead of taking an alarmist stance on the inevitable growth of its foreign-born population and on losing its identity, the European community should better bet on assimilating immigrants and developing a citizenship model based on who people are, not where they have come from, Jack A. Goldstone tells the Gaidar Forum in Moscow.

The numbers here are quite striking. For example, the Muslim population in such countries as the Netherlands, Germany and France has grown by a factor of four, six or even ten over the last 30 years. Europe thus very quickly moved from having hardly any resident Muslim population to having a significant minority, such that you can see evidence of the Muslim community everywhere. And so the growth may seem to be ‘Oh my God, they are going to swallow us up.’ In fact, the growth is now slowing down for several reasons. One is that you can’t grow quite as rapidly once you have a larger base. But, in addition, the fertility rate of Muslims around the world is going down. And in particular, when immigrants come to countries of low fertility, they tend to adapt to the lower fertility typical of the country into which they are moving. Thus, although the Muslim population in Europe is going to keep growing substantially in the medium term, and will likely double in such countries as Sweden or the UK by 2030, as projected by the Pew Research Center, the percentage of Muslims in the population even in these countries will remain under 10% of the total population. In other European states the growth is expected to be much more modest. As a whole, the Muslim section of the population in Europe over the next 20 years will increase from roughly 6% today to 8 to 10%. But the growth of the Muslim population is only a part of a much broader movement into and

There is a lot of anxiety in Europe about immigration. Much of it has to do with concerns that migrants are coming from very different cultures, such as an Islamic culture, and that this will change the values, the laws, and family structures in Europe. Such concerns lead to what has been coined as ‘Islamophobia’ in the EU – a fear of Islamic influence and Muslim immigrants – as people are frightened by what is different. However, there are arguments that the real reason for concern in Europe is not the growth of the Muslim population, which at least in the short term will be moderate. The real problem is the shrinking and aging of the European population. In fact, part of the reason for Europeans’ anxiety about immigration is that Europe is not used to being a place that people move to. Since Columbus led a party of three boats across the Atlantic to the New World roughly 500 years ago, Europeans have been moving outward and settling new lands – in the Americas, Australasia and Africa. However, in just the last 30 years, in one generation, this flow has reversed. For the first time in living memory, many more people are moving into Europe than are moving out. Jack A. Goldstone (PhD, Harvard) is Virginia E. and John T. Hazel, Jr. Professor of Public Policy at George Mason University, and head of the International Laboratory for Political Demography and Macrosociological Dynamics at Moscow’s RANEPA. 30

The Demography Rules

In fact, part of the reason for Europeans’ anxiety about immigration is that Europe is not used to being a place that people move to. Since Columbus led a party of three boats across the Atlantic to the New World roughly 500 years ago, Europeans have been moving outward and settling new lands – in the Americas, Australasia and Africa. However, in just the last 30 years, in one generation, this ﬂow has reversed. For the ﬁrst time in living memory, many more people are moving into Europe than are moving out. The Muslim population in such countries as the Netherlands, Germany and France has grown by a factor of four, six or even ten over the last 30 years

the US, with a very large number of foreign-born residents. And they are going to face a question as to whether they want those foreign-born residents to become citizens. Europeans could answer this question negatively, as they have in the past, and say that their identity is a matter of our blood, our nationality, our culture, our sacred diet. Those things that make us Germans, or French, or Italian or Spanish are things that come down across generations. And that therefore it will not be possible to survive as a country with so many foreigners, so let us put up barriers for migrants. But their demography is such that unless there is a big change, unless every country all of a sudden decides to have more children – at least two or three instead of one or none – Europe is going to face an absolute necessity for more migration. So it will have to decide whether it can establish – as the US has done – a community of citizens based on common values rather than on a common background. There is no reason to think this problem shouldn’t be solved, as most of the world seems to be attracted by European values, such as liberty, democracy, the rule of law, accountability, and the freedom to choose a career and where you live. So I hope Europeans will rediscover the importance of these values and will develop a citizenship based on who people are, not where they have come from, because dealing with many more people coming from different places is going to be inevitable.

across European borders, as people are also coming from non-Muslim parts of Africa, the Middle East, South Asia and East Asia. And, in particular, there is a huge migration from the newly admitted EU countries into Western Europe. Another issue here is that the indigenous population of Europe is shrinking. In particular, Europe is facing a demographic dip in the younger age group. So with no migration, by 2061 the group of persons aged 15-39 with a national background will decrease to about 50-60 million from roughly 140 million, as projected by Eurostat. That is almost a two-thirds reduction. The main reason for this is a very sharp contraction in fertility in a number of European countries, to the point where a European woman does not have two but closer to 1.2–1.4 children on average. Moreover, their children are showing no signs of changing that pattern, as they are also having very few kids. If not reversed in two or three generations, the trend will inevitably lead us to a sharp drop in the labor force in Europe. And if you combine this low fertility with the growing number of immigrants, you are going to have a very high percentage of foreign-born people. That said, what Europe has to really worry about is that a quickly aging and shrinking population will require higher migration so that the local economy and the pension system are not overwhelmed by a very large number of elderly people and too few workers. Thus the real problem for European countries is that inevitably they are bound to become like №1(5), 2014

OPINION

Oliver Stuenkel —•—

One Should Socialize More Oliver Stuenkel ﬁrmly believes that if ordinary Brazilians, South Africans, Indians, Russians and Chinese people spent an evening in each other’s company over a glass of wine, they could bring the BRICS countries closer together better than any efforts by diplomats.

While focusing on reducing trade barriers is important, what matters even more is simply facilitating people-to-people interactions. Over the past years, impressive progress has been made in this sense. A visa waiver agreement between Brazil and Russia, in effect since 2010, has allowed tourism between the two countries to increase markedly. A similar agreement has made travel between Brazil and South Africa easier as well. Since early 2013, citizens from Brazil and Russia have been able to spend 72 hours in Beijing or Shanghai without a visa. These examples show that political willingness can go a long way in allaying concerns about security and illegal migration. The next step should be a visa waiver program between all BRICS countries, allowing tourists, business travelers and academics to stay up to three months in any BRICS country without applying for a visa before their trip. Aside from boosting trade ties, stronger peopleto-people ties are important to identify areas for strategic co-operation. Just as much as trade and travel is limited between the BRICS, the mutual flow of ideas is also scarce. These shortcomings can only be addressed in a meaningful way if governments do even more to bring their citizens together by promoting student exchanges, organizing cultural events in each other’s countries and increasing travel and trade routes. It is easy to mock the idea of meetings for the sake of meetings. But they can create webs of mutual trust and friendship that leaders, businesspeople and academics can draw on in a crisis – and conversations over late-night drinks can do more to draw countries together than all the diplomats in the world. If BRICS leaders seize the opportunity, the Sixth BRICS Summit in Fortaleza, Brazil, in July 2014 will be another important step towards strengthening people-to-people ties between Brazil, Russia, India, China and South Africa.

One of the major challenges the BRICS face is that their societies remain relatively isolated from each other. This is due to a number of historical and structural factors that are not easy to change. As a consequence, investors, academics and even government officials are often unaware of the potential for co-operation. Except for China, which has strong economic ties with all the other BRICS, intra-BRICS trade is surprisingly low. Brazil’s trade with India, for example, is a mere $10 billion, seven times smaller than Brazil’s economic ties with China. The same applies to the other BRICS, whose trade is dominated by China. Intra-BRICS trade in total is smaller than the BRICS’ trade with Africa, showing how disunited the BRICS are on the economic front. In response, intra-BRICS co-operation today ranges from public health, trade facilitation, agriculture, cities, and the revenue office, to statistics, co-operatives, academia, the judiciary and defense. In a specific attempt to deal with low economic cooperation, BRICS governments have set up a series of initiatives to tackle the problem and find ways to increase trade. Four stand out: regular meetings between BRICS trade ministers; BRICS competition authorities; the BRICS cooperatives forum; and the BRICS Business Forum (along with a Business Council). What can all these initiatives achieve? It is unlikely that we will see any grand projects such as a BRICS free-trade agreement. Rather, policymakers will focus on bureaucratic issues such as visa and customs procedures, promoting more frequent flight and shipping connections and the use of each other’s currencies in intraBRICS trade. Oliver Stuenkel is Professor of International Relations at the Getúlio Vargas Foundation (FGV) in São Paulo, Brazil. 32

OPINION

Michael Spence —•—

Next Steps for Emerging Economies Economists’ and investors’ frustration with developing countries is certainly not unfounded, but things are not as bad as they might appear at ﬁrst glance. We may again witness impressive economic growth in this part of the world as early as 2015.

emerging economies tend to pass these tests and hence be adaptive and resilient. For good reasons, much attention focuses on China. Its performance, one way or the other, will affect the rest of the global economy. The aggressive and comprehensive reform program announced in November and detailed in December, if implemented, is likely to transform the Chinese growth model and sustain future growth in the seven-percent-plus range. There is some risk in the current year that there will be a dip as unregulated leverage and excess low-return investment is reined in and the growth drivers associated with consumption and a liberalized service sector kick into high gear. That may make markets nervous, but does not imply a major defect in the plan. In fact, it is the opposite: a commitment to use whatever policy levers are available to sustain growth above, say, eight percent, would surely risk stalling the structural transformation of the economy. India and Brazil are both approaching important elections, which will affect the direction and vigor of growth-oriented policies. In both cases, growth potential is high. With India, the challenge is to reverse the pattern of political gridlock and unleash a set of reforms and investments that will restore confidence and trigger new growth potential in

Most of the financial commentary on emerging markets has turned negative. This reflects a combination of uncertainties about growth in emerging markets, associated with continued slow growth in advanced economies; possible overvaluations resulting from past optimistic expectations, now being revised; and anticipated capital flows out of emerging markets associated with a tapering and eventual normalization of the interest rate environments in the United States and Europe. This view from the asset allocation perspective probably paints a more pessimistic picture than is justified with respect to growth alone. Indeed, in a period of unconventional policies, divergences between asset price performance and underlying economic fundamentals have become quite common. One way to assess growth prospects is to ask whether economies in various classes have the resources, policy expertise and political will to take decisions that restore or alter growth patterns to adapt to the current environment. In general, Michael Spence, a Nobel laureate, is William R. Berkley Professor in Economics and Business at the NYU Stern School of Business, New York. He participated in the World Economic Forum’s Annual Meeting 2014. 34

Next Steps for Emerging Economies

Sourse: www.weforum.org

As a group, developing countries are not heavily indebted. They have resources and a growing level of sophisticated policy expertise. They do not have the beneﬁts of sustained growth in advanced countries, which still account for half the global economy. That surely reduces their potential growth to some extent. But the huge and growing Chinese market is a partial counterweight and the still partial recovery in the US is helping

resource sectors alone. Their global market shares are not yet large enough that global slowdowns led by advanced countries will inevitably slow growth. More of a medium-term challenge would be technologies that supersede labor-intensive production and bring back manufacturing and assembly closer to their markets. As a group, developing countries are not heavily indebted. They have resources and a growing level of sophisticated policy expertise. They do not have the benefits of sustained growth in advanced countries, which still account for half the global economy. That surely reduces their potential growth to some extent. But the huge and growing Chinese market is a partial counterweight, and the still partial recovery in the US is helping. As has been true of a wide range of countries – advanced and developing – for some time, the principal uncertainties are associated with political will and legitimacy, and social consensus. My overall impression is that developing-country growth will be somewhat uneven in 2014 across countries and regions but is, on balance, likely to surprise in a positive direction with an expected acceleration in 2015 and beyond. This presumes negligible growth but no catastrophic reversal in Europe and a continuation of the structural rebalancing of the US economy.

a wide variety of areas, including manufacturing. India should still benefit from China’s middleincome transition – its per capita income is about a third of China’s, and it can still play in laborintensive, lower-valued space, absorbing labor from rural areas. Brazil has focused resources on inclusivity, especially through education, with the goal of eliminating the dual economy structure. This is an important continuing agenda. To it needs to be added a higher level of public sector investment in infrastructure, which will, over time, help to elevate the investment rate above 18% of GDP, the latter not being sufficient to sustain high growth. A number of emerging markets (India, Brazil, Indonesia and Turkey to name a few) are experiencing transitory slowdowns associated with rebalancing to the withdrawal of low-cost capital, a process that accelerated last spring with the tapering announcement and a normalizing interest rate environment. Current account deficits will come down, and the question is whether investment will fall or savings rise, and in what combination. Many Sub-Saharan African countries continue to sustain growth and reform momentum, diversifying from dominant dependence on natural №1(5), 2014

BUSINESS

The Cult of Courage of Wang Jianlin Guo Haifei “Innovation means continually breaking the old pattern,” says China’s richest man. But apart from innovation, his enormous successes in business are predicated on audacity.

really good at physical activities such as attacking, creeping and crossing obstacles. “What helped me to endure the hardship of training was my firm belief in revolution and communism,” he says. “I was a fervent advocate of how communism can liberate oneself, as well as all mankind.” Meanwhile, China was quietly undergoing tremendous change. Deng Xiaoping became leader and led the country toward a market economy. But Wang wasn’t involved in these reforms until 1986. A year before that Deng had ordered China’s military personnel to be reduced by one million, so Wang had changed career track and become an office administrator for Dalian’s city government. Two years later, in 1988, Wang took over the governmentaffiliated and heavily indebted Xigang Housing Development Corporation. He then obtained a loan from an old comrade working in a bank and made his first big money reconstructing the city’s slums. As the state-owned Xigang Housing Development Corporation was being transformed into a jointstock limited company, Wang became general manager and plunged into China’s real estate boom.

Wang Jianlin, chairman of Dalian Wanda Group, calmly states that he has set a goal of $99 billion (600 billion yuan) in revenue by 2020 for his real estate development company. Just as calmly, he then adds that he’ll retire that year to write his memoirs. In mid-December, in front of dozens of reporters who had showed up for a press conference on the Wanda Guilin City project, Wang’s sparse hair and bloodshot eyes betrayed a tired man. But he was announcing the launch of a colossal four-billiondollar (24-billion-yuan) cultural and tourism real estate project that includes cinemas, a shopping mall, a theme park and luxurious hotels. It is the group’s third such project after others in Harbin and Nanchang. Already, his company has constructed 83 Wanda Plazas – multi-functional malls with entertainment, dining, shopping, hotels and housing – all over China. It also operates more than 50 five-star hotels. Last year, Wanda had a turnover of $23.3 billion (141.7 billion yuan), with net profit over $1.65 billion (10 billion yuan). Meanwhile, the 59-year-old Wang has been ranked the wealthiest man in China, with $14.4 billion (86 billion yuan) in personal wealth.

HUMILIATION STIMUL ATED COUR AGE

But the good thing didn’t last long. Seeing overheated property speculation and wishing to suppress excessive real estate investment, the Chinese government intervened and stopped providing real estate financing nationwide. “In 1992, seeking one loan, I visited the same bank more than 50 times,” Wang recalls. “I stood outside the bank director’s office at least ten times and the longest time was the whole day. Eventually this still resulted in nothing. It’s impossible to wipe away such a memory in one’s life after suffering so much humiliation. So I told myself I’d be strong, make a brand, and vindicate myself one day.”

PLUNGING INTO THE BUSINESS ARENA

Like his father, Wang became a soldier at the tender age of 15. “It was really tough because I happened to be called for the yeying-lalian military movement, a sort of large-scale winter field training advocated by Chairman Mao at that time and in which youngsters had to endure long marches and camping to hone their body and mind,” Wang says. “In two months, we walked 1,200 kilometers!” In 1978, Wang was promoted to platoon leader and was recommended to study at a military institute. Though a very determined soldier, Wang was never 36

The Cult of Courage of Wang Jianlin

Guo Haifei / Economic Observer / The Interview People

In 1992, seeking one loan, I visited the same bank more than 50 times. I stood outside the bank director’s oﬃce at least ten times and the longest time was the whole day. Eventually this still resulted in nothing. It’s impossible to wipe away such a memory in one’s life after suffering so much humiliation. So I told myself I’d be strong, make a brand, and vindicate myself one day

“Otherwise, it is the private company supporting the SOE,” he says. “I am not that dumb.”

He credits his 17 years of military training for his perseverance. “Without those years of experience, I probably wouldn’t have had so much anti-stress capability and so firm a determination.” To this day, Wang maintains a kind of military discipline. He goes to bed at 11 p.m. and, unlike many Chinese businessmen, he neither smokes nor drinks. Apart from being known for singing Tibetan and Mongolian folk songs in the style of military songs at Wanda’s corporate meetings, he has few hobbies and doesn’t engage in any particular sports. Obviously, Wang has long since avenged the humiliation. These days, many local governments ask Wanda to come and held them develop. Wang claims that his principle is to “only deal with the officials who pursue a better city.” He also says his company is honest and straightforward. “We don’t bribe officials and, while being close to the government, we stay away from politics,” he says. When asked his opinion about the Chinese authorities’ recent promotion of ‘diverse ownership’ to boost state-owned enterprise (SOE) reform, Wang says bluntly that private companies should have bigger shares or at least equal shares to SOEs. №1(5), 2014

WEALTH COMES FROM AN ADVENTUROUS SPIRIT

“Whether or not you make it to Tsinghua and Peking University, or Harvard and Yale, guts are what counts and makes one strong,” Wang told a group of Harvard University students last year. “Wealth comes from the spirit of adventure.” He went on to describe the importance of perseverance, underscoring the point by describing the failure of Wanda’s first commercial real estate project in 2003. In 2006, the company began cultural tourism projects, which marked a transformation. Further restructuring in 2011 transformed it into a multinational corporation. In 2012, it spent $2.75 billion to acquire AMC Theatres and became the world’s biggest cinema owner. In 2013, Wanda snapped up the UK’s Sunseeker Yachts company and started another hotel building project in London, investing a total of one billion pounds ($1.7 billion). Summing up, Wang declares: “Innovation means continually breaking the old pattern.” 37

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Fail Early, Fail Often Shailesh R ao How to build a company with innovation in its DNA? A key thing is to nourish a culture of accepting failure.

That said, there are several fundamental elements that make a company innovative. First, you must have a mission that is so grand, so inspiring and so broad that whenever people in your company think of it, they are struck by how amazing its possibilities are. If you look at Google’s mission, for example, it is to organize the world’s information and make it universally accessible and useful. It is a truly inspiring mission. Second, everybody in the organization has to feel that he or she has a voice in determining the company’s future. At Google, every employee has a voice. We are a very open organization. The third critical part of being innovative is that you have to create a culture where all processes are transparent and information is not hidden in layers of the organization. Google is a very transparent company. Every week we have what is called Thank Google It’s Friday (TGIF) meetings

Making innovation a systemic process in an organization cannot be done by saying to an employee or a team, “You are in charge of innovations, and everybody else is not involved.” Innovation can’t be done by just one person or group of people. Innovation is the responsibility of everybody in a company and everyone has to feel that he or she is a part of it.

Shailesh Rao is Head of Google’s Cloud Global Business Unit, Director of new products and solutions at Google Enterprise.

This article was written in the aisles of the Open Innovations Forum, Moscow.

Fail Early, Fail Often

barriers between countries are becoming blurred. attended by all colleagues. Different groups will As a result, one has to think of and be able to come and do their presentations, and then Larry create an environment and investment climate Page and Sergey Brin are there to answer questions to attract the best and the most innovative every week. So we in Google don’t feel like we are people from anywhere and everywhere. If there separated from the top of the company and the is somebody in some other country who figured executive leadership. out a way to, for example, make oil and gas Once you have that, the rest comes down to exploration much easier, an energy-rich country allowing people to take risks, because innovation such as Russia has to make sure that it will be fundamentally is about taking risks. And of course this person’s first choice. it should be OK to fail. Larry frequently says, “Fail One may say an oil and gas company doesn’t need early, fail often.” Thus the culture of accepting to be more efficient, at least when it comes to the failure, recognizing that failure is fundamental to drilling. But today not only does a company have to innovation, is a crucial point. think of improving productive efficiency, it also has All these principles are universal and apply to consider a much bigger across all sectors. It is picture – environmental a clear misconception issues, for example, when that innovation has to it comes to fossil fuels. An happen only in high-tech At a country level, I believe it is easy to remove industries. By definition, barriers and create a culture where it is OK to fail. oil company may be very innovation is the process If you create a culture where everyone is just trying efficient in extracting or the result of taking to be comfortable, there will be no innovation. You oil and gas, but can it a problem that exists, and need to make people feel uncomfortably excited all innovate further so that finding a solution that is the time to create a culture that spurs innovation. it can extract in a more environmentally friendly dramatically better than Not just going crazy in different directions, but way? There could be a lot what existed before. So, it focusing, thinking so big that you are always of innovation coming is not about making tenrestless because you have more to do from that area, although percent improvements. It it may appear that it isn’t is about making tenfold directly related to the improvements. And there core activities of the company. are opportunities to do that in every industry, The hot issue of environmental protection is depending on the problem. not the only reason why oil and gas organizations The same blueprints can be drawn up for should be looking to innovate. Another reason is a country willing to build innovation into its DNA. that they need to be wary of losing their long-term In general, for a state to be innovative – just like market share to other innovators. In ten to 15 years’ a company – it needs to be easy to do business with. time there could well be an alternative form of If a country removes or dramatically lowers existing energy that will make traditional fossil fuels less barriers to doing business, it automatically attracts attractive. people, because they want to be part of a system that So, every industry has to think about innovation. allows, encourages and nurtures an entrepreneurial And at a country level, I believe it is easy to remove spirit. barriers and create a culture where it is OK to fail. Of course it can be very difficult. At Google we If you create a culture where everyone is just trying dedicate a lot of time and energy to maintaining to be comfortable, there will be no innovation. You our agility because that is what helps us grow and need to make people feel uncomfortably excited all bring magic to our users everywhere. And we also the time to create a culture that spurs innovation. spend a lot of time making sure that people we Not just going crazy in different directions, but hire and promote fit the culture of innovation and focusing, thinking so big that you are always restless entrepreneurship we want to maintain. because you have more to do. And this can be done To cultivate innovation in a country you if you are an individual, a family, a company or even have to be very aware that the planet is a global a country. There is no excuse but the excuse itself. marketplace. The world is getting flat, and №1(5), 2014

BUSINESS

Emerging Market Meltdown? It’s Time for Action, Not Distraction Joel Whitaker As currencies and stock markets have tumbled in emerging markets this year, the business media has been dominated by cries of an ‘Emerging-Markets Crisis.’ In this case, however, corporate executives would do well to turn off the television.

While it is true that multinational companies (MNCs) have their work cut out, they should take a second look at their 2014 plans, and this requires separating the signal from the noise to focus on the most important management challenges.

The media uses ‘emerging-markets crisis’ as a shorthand, but recent market turmoil actually involved relatively few countries. For those of us who work on the ground in emerging markets, or who follow them closely, few of the headlines were all that startling. Yes, there are real reasons for MNCs to be concerned about political instability in Turkey, Ukraine and Venezuela, and economic policies in Argentina and China – all of which have

Joel Whitaker is Senior Vice President and Global Head of Research at Frontier Strategy Group.

Emerging Market Meltdown?

occupied the front pages recently. But these risks were known months ago. Last fall, for example, it was clear Ukraine, Turkey and Argentina were most vulnerable to a liquidity crisis because of their high levels of short-term external debt. For such countries, even moderate changes in investor sentiment cause major currency movements. Unfortunately, the media tends to gloss over key differences in their market fundamentals, especially the ones that matter to companies. In order to gain a clear view of this ‘crisis,’ let’s clarify what has really been happening in the markets, and what is truly relevant to corporate leaders.

At times like this, when the media tend to sensationalize risks in emerging markets, it is essential for business executives to keep their eyes on the true drivers of their company’s success and the longer-term timeframe in which they are committed to deliver results. Cooler heads will prevail

May. The peso has further to fall but timing is difficult to predict, so contingency planning is the order of the day. Turkey: The political crisis surrounding Prime Minister Erdoğan made the country a target for currency traders. It is likely that instability and currency depreciation will continue despite Turkey’s recent aggressive interest rate hike, contributing to softened demand in the first half of 2014. That said, 2014 disruptions are unlikely to diminish mediumterm growth, presenting an opportunity to ‘buy low.’ Ukraine: Ukraine’s mass protests, followed by a stand-off with Russia over Crimea, have destabilized the Ukrainian market since November 2013. However, the basis for ongoing business disruptions was visible more than a year ago, prompting our analysts to forecast a devalued hryvnia, liquidity crunches, and delayed public investment well before the protests themselves reached their revolutionary potential. China: Slower growth is not a crisis, even though many financial analysts cite it as a reason for the market churn felt at the end of January 2014. Slower growth is in fact evidence of a transition from an overextended investment-led economic model to a sustainable consumer-led one. The excessive bad debt in China’s shadow banking system, however, could lead to a real crisis, and has to be considered one of the top risks to business in emerging markets in 2014.

Corporate investment in emerging markets remains strong, despite capital-market volatility. Companies with global ambitions are doubling down on developing markets, not retreating. More than 60% of corporate foreign direct investment went to emerging markets in 2013, despite portfolio ‘hot money’ moving in the opposite direction. Frontier Strategy Group’s MNC sentiment tracking shows that interest in frontier markets has doubled in the past year, indicating likely direct-investment increases in even riskier (and still fast-growing) markets. The crisis today is one of confidence among money managers, as the tapering of the US Federal Reserve’s quantitative easing program increases the cost of capital. A lower risk appetite has naturally reversed the flow of capital into emerging markets that surged in 2009. The economic fundamentals of most emerging markets have not changed notably, other than in the effects of the currency volatility itself. The Fed will further reduce stimulus over time, which means that further pullbacks from higherrisk markets are inevitable.

Don’t let fear of ‘contagion’ cloud your analysis of emerging-market opportunities. Currently the markets that are most troubled do not have tightly linked financial markets. Trade links generally connect emerging economies more tightly with developed markets than with each other (with China as a notable exception). With this in mind, corporate planners should be less concerned

While the media has referenced a general emerging market crisis, we can isolate relatively few countries that showed signs of crisis earlier in the past year. Argentina: Argentina’s devaluation was the spark that lit currency turmoil in late January. In fact, a post-election devaluation was forecast last №1(5), 2014

BUSINESS

about an emerging market contagion, and more concerned about downward pressure on emergingmarkets growth resulting from linkages with the stagnant Eurozone, where industrial production only reached 89% of pre-crisis capacity as of October 2013 and is trending downward.

The most serious risk is not of contagion collapsing currencies across emerging markets, but rather of repeat bouts of currency volatility driven by fund-manager portfolio reallocation and herd mentality. This can have deeply disruptive effects. Currency volatility is one of the top causes of 2014 plans going awry

Managing currency volatility should be a top priority for MNC leaders in 2014. The most serious risk is not of contagion collapsing currencies across emerging markets, but rather of repeat bouts of currency volatility driven by fund-manager portfolio reallocation and herd mentality. This can have deeply disruptive effects. Currency volatility is one of the top causes of 2014 plans going awry.

an arms-length relationship into an affordable acquisition opportunity. < Evaluate product localization: MNCs can consider adopting a localization strategy to mitigate the impact of these possible scenarios by producing and sourcing locally. Factoring in currency impacts to market-share gains and government incentives may change previous cost-benefit assessments of going local. < Consider investing more aggressively in frontier markets: Smart companies are adjusting their geographic footprint by assessing regional opportunity at the level of provinces (e.g. in ASEAN countries and Latin America), country opportunity at the level of cities (e.g. in Russia and India), and considering previously untapped frontier markets (Peru, Nigeria, Kazakhstan).

MNCs should take action now to mitigate the impact of currency volatility on 2014 performance. Currency volatility may wreak havoc on internal operations and among business partners, but its effects can be mitigated. A multifunctional approach to contingency planning ensures that all key domains – from sales to supply chain, from talent to finance – are prepared for the next bout of turbulence. The question for emerging-market leaders is how to manage volatility, not how to avoid it:

Executives in emerging markets must aggressively manage perception and expectations at the corporate center. When investors get nervous, the board, the CEO and the CFO have to justify their investments in emerging markets that they may not even think about on a regular basis. When that happens, it’s essential that expectations and assumptions are well aligned between the corporate center and leaders in the regions.

< Formulate contingency plans for profit repatriation: Emerging-market operations are vulnerable to currency depreciation and capital controls, either of which can make a successful business look like a failure to the corporate center when it can’t repatriate its earnings in hard currency. Given the recent ‘pivot to profitability’ in how emergingmarket executives’ targets are set (as opposed to traditional revenue targets), regional general managers’ careers may suffer if they lack a backup plan to get profits home. < Support local partners: Most MNCs depend on local distributors, suppliers, and other partners who lack the scale or sophistication to manage an extended period of currency volatility. Proactively providing liquidity, attractive repayment terms, and temporary discounts could earn enduring loyalty – and even turn

Don’t let Wall Street turmoil distract from effective execution. At times like this, when the media tend to sensationalize risks in emerging markets, it is essential for business executives to keep their eyes on the true drivers of their company’s success and the longer-term timeframe in which they are committed to deliver results. Cooler heads will prevail. 42

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The Challenges of a Post-Crisis World Artem Konstandyan and Pierre Casse As a result of the global ﬁnancial crisis people no longer trust banks. This means that the time has come to revisit some of the fundamental principles underlying the operations of the banking sector. It also means that only those ﬁnancial institutions that act responsibly and ethically in pursuing their goals and objectives are likely to survive this sobering challenge.

1. People brought their money to the banks expecting them to act reasonably and to protect their property from excessively risky speculations. 2. Bankers acted recklessly and rushed to the ‘casino.’ 3. They used other people’s money to place generous bets, and lost. Yet they made sure they would be paid their commission regardless of whether they stood to win or lose.

In recent years banks have been at the centre of everyone’s attention: many people believe that today’s global economic crisis was a result of their adventurist policies. Putting it bluntly, public trust in the banking system has been undermined. In the eyes of ordinary citizens the modern financial system is exceedingly complex, and most people view the evolution of the global financial crisis as follows: Artem Konstandyan is President and

Pierre Casse is Professor of Leadership

Chairman of Promsvyazbank.

at the Moscow School of Management SKOLKOVO.

The Challenges of a Post- Crisis World

adopt a tougher stance vis-à-vis the banks. Many investors have sought an alternative to banking services, while many enterprises have tried to do away with bank loans. In summary, it would be safe to say that the leaders of today’s banking sector have to invent a new approach to enable banks to achieve business goals and objectives through responsible and ethical means. Such a plan should meet the following requirements: < Rules of ethics for bank clerks. Since people trust bank clerks to handle their money, the latter should adopt a responsible attitude towards their work. Their level of responsibility should be regulated. < Transparency and the straightforward exchange of information. Bank employees must be prepared to explain at any time both investment opportunities and the risks associated with them. < New governance mechanisms in the banking sector. Since banks enjoy such considerable influence in society, we need to set up sustainable mechanisms to make sure this influence is not abused. < Standards of corporate social responsibility. Banks enjoy a unique position as profit-driven commercial organisations and at the same time key infrastructural institutions. For that reason, banks should operate taking into account the interests of the local community they strive to serve. < A new approach to work. Banks and their employees must adjust their approach to their work in a timely manner, to account for current trends and to forecast potential needs in the future. This should be manifested not only in the introduction of innovative services, but also in the acquisition by employees of new skills. Banking transactions involve much more than merely managing cash flows – such an approach would be too narrow. Banking transactions are one of the most innovative tools that we have ever come up with to enable us to constantly improve our quality of life and pursue our dreams and aspirations for a better future. Today, the time has come to accomplish another breakthrough and turn our banks into the financial institutions of the future.

4. As a result of this reckless policy, banks went bust, forcing governments to intervene and help them, using taxpayers’ money to save the economic system from total collapse. 5. However, it seems that bankers came out of it unscathed. Despite the detrimental outcome of their actions on the economy as a whole, they continue to collect their huge bonuses scot-free. Is it really surprising that the public began to doubt the bank’s role in the life of society? The time has come to revisit some of the fundamental principles underlying the operations of the banking sector, to restore public trust and confidence. Money is still the best medium of exchange and the best means of cost accounting and value conservation. We may have failed at finding a more acceptable alternative, but this could change at any moment. Technologies continue to evolve at a breathtaking pace and it would behove us to continuously revisit this premise. We should not be blinded by customary assumptions if we do not want to miss out on new opportunities. For example, the digital currency Bitcoin has been created out of nothing. Nowadays, it is mined as if it were a natural resource. This currency is secured by nothing but demand. In 2009, one virtual coin was worth six US cents; in December 2013, it was valued at around 1,147 dollars. There is nothing wrong with making money out of money, neglecting the actual value added. The market waved its ‘invisible hand’ to send a clear-cut signal: If we want to get rich without creating any value we stand to damage the very fabric of our society and people will inevitably suffer. Making money out of thin air cannot possibly contribute towards long-term wellbeing and prosperity. Once upon a time we relied upon gold as a universal common denominator and a common measurement unit. This approach remained effective for some time. In today’s world the only reliable point of reference can come in the form of the goods and services that we create. The banking system is the best mechanism for channelling investments into efficient enterprises at the best possible time. Because of the events that have unfolded over the last six years, the level of public trust in the banking system has gone down, and pressure has been brought to bear upon governments to overhaul banking regulations and №1(5), 2014

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Beyond Violence Rodrigo Canales Although violence remains a relevant instrument for Mexican drug cartels, they have mastered an impressive arsenal of softer tools such as social inclusion, family ties, and creative organizational designs, to better pursue their criminal interests across the Americas and beyond. This article, based on his original TED talk, has been exclusively adapted for BRICS Business Magazine by the author.

an open battlefield. During a particularly intense encounter it was presumed that the leader of La Familia Michoacana, Nazario Moreno González, was killed. In response to this terrifying violence, the mayor of Apatzingán decided to call the citizens to march for peace. The idea was to ask for a softer approach to criminality in the state. On the day of the scheduled procession thousands of people showed up. As the mayor was preparing to deliver a speech to kick off the march, his team noticed that, while half of the participants were properly dressed in white and wearing banners asking for peace, the other half was actually marching in support of the criminal organization and its now presumably defunct leader. Shocked, the mayor and his team decided to step aside rather than participate in or

In December of 2013 the city of Apatzingán, in the coastal state of Michoacán in Mexico, awoke to gunfire. For two straight days the city became an open battlefield between the federal forces and a well-organized group, presumably from the local criminal organization La Familia Michoacana, or the Michoacán Family. The citizens didn’t only experience ceaseless gunfire but also explosions and burning trucks used as barricades across the city, which was turned into Rodrigo Canales is Associate Professor of Organizational Behavior at Yale School of Management.

Beyond Violence

Because of the nature of the product, the business model to address the market requires you to guarantee to your producers that the product will be reliably placed in the markets where it is consumed. And the only way to do this, because it is illegal, is to have an absolute control of the traffic corridors that are used to transport drugs – hence the violence. If you look at the map of cartel influence and violence you will see that it almost perfectly aligns with the most efficient routes of drug transportation

lead a procession that was ostensibly in support of organized crime. The two marches joined together and continued on their path towards the state’s capital. This story of horrific violence, followed by a fumbled approach by federal and local authorities as they tried to engage a civil society that had been very well engaged by criminal organizations, is a perfect metaphor of what is happening in Mexico today. What we see is that our current understanding of drug violence and what leads to it is probably, at the very least, incomplete. If you decided to spend 30 minutes trying to figure out what is going on with drug violence in Mexico today by just researching online, the first thing you would find is that the laws state that all Mexican citizens are equal. But in fact there are some who are more equal and some who are much less equal than others. You would quickly find out that in the past six years anywhere between 60,000 and 100,000 people have lost their lives in drugrelated violence in Mexico. To put that in perspective, 60,000 is eight times larger than the total number of coalition casualties in the Iraq and Afghanistan wars combined. And it is also shockingly close to the number of people who have died in the active Syrian civil war. But this is happening just south of the US border. №1(5), 2014

SO FAR FROM GOD

As you read all this, you will quickly become numb to the numbers of deaths because you will see they are presented as abstract numbers of faceless, nameless dead people. Implicitly or explicitly, there is a narrative that all the people who are now dying are somehow involved in the drug trade. We infer this because they were either tortured, executed in a professional manner, or most likely both. Thus clearly they were criminals because of the way they died. And so the narrative is that somehow these people have received what they deserved. They were the bad guys. And that creates some form of comfort for a lot of people, since it is easier to think of us – the citizens, the police, the army – as the good guys, and of them – the narcos, the cartels – as the bad guys. But if you think about it, the latter are only providing a service to the former. Whether we like it or not, the US is the largest market for illegal substances in the world, accounting for more than half of global demand. It shares thousands of miles of border with Mexico, which is the only route of access from the south. As the former dictator of Mexico, Porfirio Díaz, used to say, “Poor Mexico: so far from God and so close to the US.” The UN estimates that that there are 55 million users of illegal drugs in the United States. Using 47

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is a fragile plant that can only grow in certain latitudes. This means that the business model to address this market requires decentralized, international production. It also requires good quality control because people need a good high that is not going to kill them. And it has to be delivered where they need it. This means that you need to secure production and quality control in the south and you need to ensure that you have effective and efficient distribution channels in the markets where these drugs are consumed. I urge you – but only a little bit, because I don’t want to get you into trouble – just to ask around and see how difficult it would be to get whatever drug you want, whenever you want, wherever you want in the US. Some of you may be surprised to know that there are many dealers offering guaranteed delivery of drugs in 30 minutes or less. Just think about it for a second. Think of the complexity of the distribution network that I just described. It is very difficult to reconcile this with the image of faceless, ignorant, dumb criminals who are randomly shooting each other.

very conservative assumptions, this yields a yearly drug retail market worth between $30 billion and $150 billion. Even if we assume that the narcos just have access to the wholesale market, which we know is false, that still leads to yearly revenues of between $15 billion and $60 billion. To put these numbers in perspective, Microsoft has yearly revenues of around $60 billion. And it so happens that because of the nature of the product, the business model to address the market requires you to guarantee to your producers that the product will be reliably placed in the markets where it is consumed. And the only way to do this, because it is illegal, is to have an absolute control of the traffic corridors that are used to transport drugs – hence the violence. If you look at the map of cartel influence and violence you will see that it almost perfectly aligns with the most efficient routes of drug transportation from the south to the north. The only thing the cartels are doing is trying to protect their business model. It is not only a multi-billion-dollar market, but also a complex one. For example, the coca plant 48

Beyond Violence

better promotion paths – not to mention much better food. The way they operate is that when they arrive in a locality, they let people know that they are there. And they go to the most powerful local gang and say, “I invite you to be the local representative of the Los Zetas brand.” If they agree (and we don’t want to know what happens if they don’t), they supervise them and train them in how to run the most efficient criminal operations for that town in exchange for royalties. This kind of business model obviously depends entirely on having a very effective brand of fear. And so Los Zetas carefully stage active violence that is spectacular in nature, especially when they first arrive in a city. But again this is just a brand strategy. I am not saying they are not violent. They definitely are. But what I am actually saying is that, even though you will read of Los Zetas as the most violent organization, the body counts across different organizations is actually not that different.

BR AND OF FEAR

As any business professor will tell you, an effective organization requires an integrated strategy that includes a good organizational structure, aligned incentives, a solid identity, and brand management. This leads us to the second thing you would learn in your 30-minute internet exploration of drug violence in Mexico. You would quickly realize – and perhaps be confused by the fact – that there are three organizations that are constantly named in articles. You will hear about Los Zetas, the Knights Templar, which is a new brand for La Familia Michoacana, and the Sinaloa Federation. You will read that Los Zetas are an assortment of sociopaths that terrify the cities they enter and silence the press. This is somewhat true, or mostly true. But this is a result of a very careful branding and business strategy. Los Zetas is not just a random crowd of individuals, but was actually created by another criminal organization, the Gulf Cartel, that used to control the eastern corridor of Mexico. When that corridor became contested, the Gulf Cartel decided that they wanted to recruit a professional enforcement arm. So they recruited Los Zetas from a unit of elite paratroopers of the Mexican army. They were incredibly effective as enforcers for the Gulf Cartel, so much so that at some point they decided just to take over the operations. That is why I ask you never to keep tigers as pets: they grow up. Given that Los Zetas as an organization was founded in treason, it lost some of its links to the production and distribution networks in the most profitable markets like cocaine. What Los Zetas did have, and this is again based on their military origin, was a perfectly structured chain of command with a very clear hierarchy and a very clear promotion path, which allowed them to supervise and operate across many markets effectively – the essence of what chains of command seek to do. When Los Zetas lost access to more profitable markets, it pushed them and gave them an opportunity to diversify into other forms of crime. These include kidnapping, prostitution, local drug dealing, and human trafficking – including of migrants from the south to the US. What they currently run is truly and quite literally a franchise business. They focus most of their recruiting efforts on the army, openly advertising better salaries, better benefits, and №1(5), 2014

SOCIAL ENTERPRISE

In contrast to Los Zetas, the Knights Templar that arose in Michoacán emerged in reaction to the incursion of Los Zetas into the state of Michoacán. It is geographically a strategic state because it has one of the largest ports in Mexico and very direct routes to the center of the country, giving direct access to the US. The Knights Templar realized very quickly that they couldn’t control Los Zetas with violence alone. And so they developed a strategy as a social enterprise. They brand themselves as representatives and protectors of the citizens of Michoacán against organized crime. Their brand as a social enterprise means they require a lot of citizen engagement. So they invest heavily to provide local services like dealing with domestic violence, going after petty criminals, treating addicts, and keeping drugs out of the local markets – and of course protecting people against other criminal organizations. They kill a lot of people too. But when they kill them, they provide very careful narratives describing why they did it, through newspaper insertions, YouTube videos, and billboards that explain that people “were killed because they represented a threat. Not to us as organization, of course, but to you as citizens. And so we are actually here to protect you.” As social enterprises do, they 49

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have created a moral and ethical code that they advertise, and they have strict recruiting practices. They have actually retained access to the profitable drug trade, but they leverage that to, for example, trade legally extracted iron from Michoacán with illegal ephedrine from China, which is a critical component of the methamphetamines they produce. And then they have partnerships with other organizations that place their product in the US.

The Sinaloa Federation protects its brand by outsourcing the most questionable part of its business model. For example, when it has to engage in violence against other criminal organizations, it recruits gangs and other smaller players to do the job. And, to remain discreet, it tries to separate its operations from the worst forms of violence

going under the border. They have invented narco submarines and boats that are not detected by radar. They have experimented with drones to transport drugs, and catapults, and so on. One of the leaders of the Sinaloa Federation, Joaquín Guzmán Loera, actually made the Forbes list as one of the most powerful people in the world. The magazine ranked him as the 10th richest man in Mexico in 2011, with a net worth of roughly one billion US dollars. Like any multinational company, the Sinaloa Federation has specialized and focused on the most profitable parts of its business: high-margin drugs like cocaine, heroin, and methamphetamines. Like any traditional Latin American multinational company, the way it controls all its operations is through family ties. When it enters a new market, it sends a family member to supervise. Or if it

UNDER THE R ADAR

When we read about the Sinaloa Federation, we can often detect a tone of reverence and admiration, because they are the most integrated and the largest of all the Mexican organizations. They started as a transport organization specializing in smuggling between the US and Mexico. But now they have grown into a truly integrated multinational corporation that has partnerships in production in the south and partnerships in global distribution across the planet. They have cultivated a brand of professionalism, business acumen, and innovation. They have designed new drug products and new drug processes, as well as state-of-the-art ‘narco tunnels’ 50

Beyond Violence

One of the leaders of the Sinaloa Federation, Joaquín Guzmán Loera, actually made the Forbes list as one of the most powerful people in the world. The magazine ranked him as the 10th richest man in Mexico in 2011, with a net worth of roughly one billion US dollars. Like any multinational company, the Sinaloa Federation has specialized and focused on the most proﬁtable parts of its business: high-margin drugs like cocaine, heroin, and methamphetamines

is actually the result of a huge market, and an institutional structure that forces the servicing of this market to necessitate violence to guarantee delivery routes. Second, these are sophisticated, coherent organizations that are actually business organizations. Analyzing them and treating them as such is probably a useful approach. Third, even though we are more comfortable with the idea of ‘them,’ a set of bad guys, separated from ‘us,’ we are actually their accomplices, either through direct consumption, or through an acceptance of the inconsistencies between our policies of prohibition and our actual behavior – our tolerance or even our encouragement of consumption. These organizations service, recruit from, and operate within our communities. As a result, they necessarily are much more integrated within them than we comfortably acknowledge. And so the question is not whether these dynamics will continue the way they have. We see that the nature of this phenomenon guarantees that they will. The question is whether we are willing to continue our support of a failed strategy based on our stubborn, blissful, voluntary ignorance at the cost of the deaths of thousands of our young.

partners with a new organization, it creates family ties either through marriage or other types of links. Like any other multinational company, it protects its brand by outsourcing the most questionable part of its business model. For example, when the Sinaloa Federation has to engage in violence against other criminal organizations, it recruits gangs and other smaller players to do the job. And, to remain discreet, it tries to separate its operations from the worst forms of violence. To further strengthen its brand, the organization actually has professional PR firms that shape how the press talks about them. It has professional videographers on its staff. And it has incredibly productive ties with the security organizations on both sides of the border. LESSONS TO LEARN

Differences aside, what these three organizations share is a very clear understanding that institutions cannot be imposed from the top. Rather, they are built from the bottom up, one interaction at a time. They have created extremely coherent structures that they use to show the inconsistencies in government policies. And so three things should be remembered from what has been said. First, the drug violence №1(5), 2014

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Tomorrow’s Agenda Vladislav Inozemtsev To become a truly inﬂuential international force the BRICS not only have to strengthen their weak internal bonds but also make proposals to lay the foundations for a global agenda, remaining equally vital both for developed and developing countries. This task is not as daunting as it seems, and the agenda items have been talked about for a long time.

antagonists during the Cold War; India and Brazil during different periods of their history were colonised by European powers; and South Africa served as a symbol of a local population’s struggle against invading outsiders. On the other hand they remain heavily dependent on the West, and complement its economic system. China rose to economic prominence thanks to exports of cheap industrial products to the developed world; India’s growth is predicated on technological outsourcing; Russia and South Africa bill themselves as mere donors of raw materials for the benefit of Europe and the United States. If these countries truly intend to become economic trendsetters on a global scale in the next 30 to 40 years, they will have to use this time to take the lead with respect to issues that currently dominate the global political landscape, not by emerging as winners in a fierce

Over the last decade China, India, Russia and Brazil began to view themselves as countries that share both economic interests and similar goals. Whether the expectations placed upon them are going to be met remains to be seen, but one thing remains certain today: These nations, along with the recent addition of South Africa, are proactively contemplating the price tags on the economic and political issues that could become their contribution to the global agenda. On the one hand, this process is important because the BRICS are perceived as a nonWestern force. Russia and China were the West’s Vladislav Inozemtsev holds a PhD in Economics. He is Head of the Public Administration Department at Moscow State University, and Director of Moscow’s Centre for Post-Industrial Studies.

Tomorrow’s Agenda

world’s largest producer of energy resources, and confrontation with leading powers, but through another, China, is the world’s greatest consumer the creative development of existing trends. of these resources. This could be a key issue, Given this backdrop, a BRICS agenda that would enabling the BRICS countries to take the lead enable the alliance to secure the status of prominent in the discourse on sustainable development, the agent in the global political and intellectual arena format of which will undergo inevitable changes should combine several elements. First and foremost, in the next couple of years, with the deadline for it should include the areas in which these countries the UN Millennium Goals coming up in 2015. play a particularly significant role: energy, exports of The topic of atmospheric emissions from fossilnatural resources, industrial development, and so on. fuel combustion is also important for the BRICS. Secondly, these topics should be raised in a defensive, In purely quantitative not offensive, manner, terms, neither China placing greater emphasis not only on the achieve- One of the BRICS’ initiatives could be reformulating nor India appears capaments these countries the entire agenda on global warming. The financial ble of catching up with Western countries for per boast but also on their resources of these countries, coupled with capita energy consumpdevelopment potential, European technological breakthroughs, could in tion. Therefore, it is the and focusing not only on 15 to 20 years leave the United States as the last BRICS countries themtheir rights but also their stronghold of energy inefficiency, showing the selves who should make responsibilities. Thirdly, gap between the US and the rest of the world energy consumption their the key topics in global to be the result of egotistical policy. The BRICS discourse should not be countries could emphasise their developing nature own pet project. Today developing counreduced to North-South in this area, which makes it impossible to replicate relations, nor should they Western consumption standards, and on the other tries are not taking part in carry any non-Western hand capitalise on the high profile of this problem the Kyoto Protocol, citing connotation. From the to galvanise international efforts and channel them as a reason the need to ensure their economic develvery outset they should towards areas that are most important to them opment. However, if this be billed as global in nadevelopment does not ture. Fourthly, the BRICS require the countries to reduce their emission levels countries should also bring up issues that the leading below a specific threshold, they still have to take propowers do not expect to see on the agenda. active efforts to make their economies more energy In other words, they need to remain in sync efficient and create new energy technologies. In the with the current discourse, emphasise the fact past several decades European countries have inthat the initiators of these discussions enjoy variably been the leaders in this area, but now other a special status – and not just in a positive way – countries have a chance to play that role. China and ultimately come up with a short list of top needs energy efficiency to prevent its agriculture issues that potential opponents believe to be sliding into an environmental disaster of air and their sole and undisputed domain. water pollution; India needs it to accelerate industrialisation and maintain a competitive edge; and ALTERNATIVES TO GLOBAL WARMING Russia needs it to maintain its levels of raw materiThe environment is one issue that the West seems als exports by way of reducing domestic consumpmost keen to impose as an item on the global agenda. tion. Brazil in this case finds itself in a rather unique Without denying the value and significance of this position, as a country blazing the trail in biofuels issue, it should be noted that one of its elements – production. so called ‘global warming’ – has been increasingly So, one of the BRICS’ key initiatives could contested by experts who believe that this process be reformulating the entire agenda on global is part of a more prolonged natural wave of climate warming and the environment in general. change, and that no global warming is actually The enormous financial resources of these taking place. countries, coupled with European technological In any event, the BRICS cannot afford to ignore breakthroughs, could in 15 to 20 years leave the this issue because one of them, Russia, is the №1(5), 2014

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could turn the BRICS into intellectual, if not de facto, leaders on the question of sustainable development.

United States as the last stronghold of energy inefficiency, showing the gap between the US and the rest of the world to be the result of egotistical and short-sighted policy. In other words, the BRICS countries could on the one hand emphasise their developing nature in this area, which makes it impossible to replicate Western consumption standards, and on the other hand capitalise on the high profile of this perennial problem to galvanise international efforts and channel them towards areas that are most important to them. They could even take it a step further and expand their focus from energy efficiency to resource efficiency in general. The BRICS, including the positive examples of China and Brazil as much as the negative example of Russia, prove that it is large-scale industrialisation, and not niche development, that serves as the key to overcoming poverty and transitioning to a stable middle-class society. Linking the environment to efficiency and replacing global warming with a worldwide programme to improve resource efficiency

RETHINKING FINANCIAL IMBAL ANCES

It is equally important for the BRICS countries to advocate initiatives to tackle the root causes of the financial situation that has plagued the world over recent years. One of the key aspects of this situation is the gigantic imbalances that have emerged in economic relations between the developed world and the BRICS. Back in the mid-1990s the West still acted as the global creditor, and countries on the periphery were busy overcoming either the 1980s crisis or the break-up of the Soviet bloc. Today, America and Europe increasingly appear as dubious debtors, and China (including Hong Kong), Russia, India, Brazil and South Africa boast foreign currency reserves totalling $5.2 trillion (as of late November 2013). However, this gives the BRICS countries the kind of self-confidence that could backfire. On the one hand, one should not forget that Chinaâ&#x20AC;&#x2122;s quick rise to prominence was in many ways predicated on the fact that, on 54

Tomorrow’s Agenda

As a second step an agreement could be reached that the debts of Western countries (for instance, to the extent held by other nations for a period of more than five years) could be used to purchase tangible assets located in these countries (possibly even discounting the debt). As a result the existing restrictions on investments from the BRICS countries to Europe and the United States could be lifted, while the debt burden on the leading powers could be drastically reduced (along with the reserves held by the developing nations), which would ensure accelerated economic growth across the globe. Finally, if the BRICS managed to secure equal opportunities to invest in the leading economies of the world, they would be viewed as natural leaders by other countries on the periphery that are striving to achieve the same goal. In other words, both politically and economically, it is exceedingly important for the BRICS countries to offer the West a respectable and efficient way of resolving the current debt crisis. The existing financial imbalances should not be treated as a proof that the BRICS have triumphed over the United States and the EU; that would be reminiscent of the arms race era, and a triumph of ‘mutually assured destruction,’ occurring regardless of who first strays from responsible financial policy. A BRICS initiative in this area would be extremely unexpected given the current situation, and is unlikely to be rejected. If realised, such an initiative could spell a dominant trend in international finance for the decades to come.

the heels of the 1997 crisis in Asia, the United States and Western Europe never introduced any protectionist measures against the countries which chose to drastically lower their foreign exchange rates, putting the West in an a priori unfavourable position. The same can be said about oil prices. Their growth could have been arrested back in the mid-2000s but the United States and Europe never made any effort to that effect, therefore contributing to the rise of Russia and Saudi Arabia. In many ways the phenomenal growth achieved by the BRICS countries over the last decade has been made possible by the West’s ‘sloppy attitude.’ These global imbalances were not caused by the desire of developed countries to borrow money as much as the desire of developing countries to create reserves they could fall back on in case of another crisis. On the other hand, one should remain cognisant of the fact that developed countries can afford to depreciate their currencies, accelerate inflation, and one way or another devalue the reserves accumulated by the BRICS countries. Just like in 1971, they would run no risk whatsoever. That is why the newly rich countries do not in the least seem self-sufficient, and global imbalances threaten them to a far greater extent than they do Europe or the United States. A drop in the dollar and the euro exchange rate could prove more than beneficial for the issuers of these currencies, but it would spell disaster for the global periphery. In this situation it would behove the BRICS countries to beat other nations to the punch in raising the issue of overcoming global financial imbalances – taking care not to present it as an ultimatum to the West, but rather as a proposed gradual and rational solution to a problem. The first step in this direction could be the recognition that the imbalances in question have resulted from the economic policies of both the West and the periphery; that in the late 1990s and throughout the first decade of the 21st century the West did a lot to contribute to the growth of the BRICS by maintaining demand; and that, ultimately, the BRICS countries have today come to realise they need to support a West that finds itself in a very difficult position. This could herald a radical change in the attitude of the developed nations and the rest of the world towards the BRICS countries both economically and politically. №1(5), 2014

THE PROBLEM OF CORRUPTION AND TR ANSPARENCY

Developed nations tend to reproach the BRICS for insufficient economic transparency, a widespread dominance of state-owned enterprises, and a dovetailing of the interests of the business community and government officials which ultimately results in large-scale corruption. In the Corruption Perceptions Index published annually by Transparency International, Brazil and South Africa are both ranked 72nd in the list of countries least tolerant of corruption. China is currently in 80th place, with India ranked 94th and Russia 127th. It seems as though the BRICS countries are constantly on the defensive in this 55

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Source: Transparency International

The Corruption Perceptions Index 2013 R ANK

COU NTRY

SCORE

DEN MARK

N E W ZE AL AN D

FINL AND

SWEDEN

NORWAY

SINGAPORE

SWITZERL AN D

NETHERL ANDS

AUSTR ALIA

CANADA

LUXEM BOU RG

G ERMANY

ICEL AN D

U NITED KING DOM

BARBADOS

B ELG I U M

HONG KONG

JAPAN

U NITED STATES

U RUGUAY

IREL AN D

BAHAMAS

CHILE

FR ANCE

SAINT LUCIA

AUSTRIA

U NITED AR AB EMIR ATES

ESTONIA

Q ATAR

BOTSWANA

B R AZIL

SOUTH AFRICA

CHINA

INDIA

127

RUSSIA

respect, whereas the West enjoys the status of a society that has reached the highest level of governance and responsibility. There is no doubt that corruption is a problem in developing countries. What is more, on a global level its acute nature is in many ways predicated on the sheer scale of corruption in periphery countries. However, today it should be recognised that the fight against corruption in individual countries is impossible against the backdrop of pervasive globalisation. Such efforts may prove successful in eradicating corruption at the grass-roots level, involving small fry, but when it comes to embezzling funds from government budgets, awarding contracts to large international companies, or corruption within the entourage of heads of state and governments and so forth, it appears that such forms of abuse can only exist where there is close interaction between domestic and international financial systems. Making it impossible to legalise one’s wealth abroad and put it beyond the reach of national law enforcement agencies or new governments would serve as the greatest deterrent to corruption one can imagine in today’s world. As an aside, the sheer scale of interaction between the corrupt elites of developing countries and Western financial institutions is mind boggling. According to some sources the average annual volume of financial transfers from countries of the South to banks in the North is well over a trillion US dollars, while corruption reduces the GDP of developing nations by about 4-8% annually. If Western financial institutions had not strived to benefit from this situation, if large international companies had not lined their pockets by way of taking part in deals involving such corrupt practices as ‘kickbacks’ abroad, and if real estate owners in the most prestigious cities of the world had not been interested in maintaining a high level of demand for elite properties, corruption on a state-wide scale would have been impossible in the developing countries. Faced with such an environment, the BRICS could come up with a practical initiative to unite the efforts of periphery and developed nations in fighting corruption. Such an initiative could radically step up efforts to fight corruption inside

71 69

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Tomorrow’s Agenda

In this situation, in order to preserve the the BRICS, through civil society mechanisms BRICS as an alliance and strengthen the sense and monitoring. Meanwhile, the West could do of solidarity and common identity between the away with offshore jurisdictions and introduce countries of the bloc, it is critical that they should a total ban on transfers of significant amounts come up with a number of initiatives in the next from developing nations to banks in the United couple of years capable of revolutionising the States and Europe. global political landscape. All such initiatives, Today such an initiative looks realistic for two however, should share a number of attributes. reasons. Firstly, the elites of the BRICS have seFirst and foremost, they should deal with topics cured significant control over the economy of their that are the centre of attention for Western politicountries for many years to come and are now cians: the environment, more interested in prehuman rights, corruption, serving their wealth, and ensuring that the state The average annual volume of financial transfers international security, and apparatus functions well, from countries of the South to banks in the North sustainable development, than in maintaining their is well over a trillion US dollars, while corruption including economic dismoney-grubbing behav- reduces the GDP of developing nations by about proportions and imbalances. iour on a permanent ba4-8% annually. If Western financial institutions Secondly, these initiasis. Secondly, it is corruphad not strived to benefit from this situation, if tion that poses one of the large international companies had not lined their tives should recognise that developing nations should greatest threats to ecopockets by way of taking part in deals involving assume an equal share of nomic growth today in such corrupt practices as ‘kickbacks’ abroad, the developing countries. and if real estate owners in the most prestigious responsibility for what is going on; that they must In these places growth is cities of the world had not been interested in badly needed to main- maintaining a high level of demand, corruption on go a certain way to meet tain the social contract a state-wide scale would have been impossible in specific standards; that they want to join ranks with debetween elites and the the developing countries veloped nations to improve broader public which is the state of the world. still in effect in the maThirdly, their implementation must have sigjority of countries that are not entirely democratic. nificant benefits either for the BRICS themIn this case, as in the instances addressed above, selves, or for nations allied or sharing common if the BRICS act swiftly and decisively they stand economic interests with them, or for countries a chance of overtaking the West and resolving one that the BRICS are most interested in developof the most vital and topical problems of our time. ing relations with. Lastly, and perhaps most importantly, all such GENER AL CONSIDER ATIONS initiatives formally put forward as a part of the Today the BRICS are on the verge of a crisis ‘Western’ agenda must contain proposals that affecting the development of relations between the West would find extremely hard to accept. them. None of the countries in the bloc can be In that case the BRICS countries win no matter called a leading trading or investment partner of how events unfold. any other one; their trade share in one another’s Obviously all this does not necessarily mean that economies barely reaches 6.5% of the total in the long run the BRICS will manage to form turnover. Politically and socially these countries a single powerful bloc – in my view they remain too could not be more different, and their attitude different, and are pursuing divergent interests. But to the Western world cannot be described as at least such a paradigm could bring them closer homogenous either. Some of them are both large together for some years, and mitigate potential exporters and importers of resources; some have tensions inside the countries themselves – if not the undergone the process of industrialisation; others global contradictions between them. This in itself are still striving to reach that stage. Geopolitically would be a major achievement; anything beyond some countries of the bloc are in direct competition that would be but a dream. with one another. №1(5), 2014

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Introverted Economy Marcos Troyjo Brazil needs a new trade and investment strategy, but so far the country seems to prioritise politics over economics.

with bringing the United Nations system up to date: becoming a permanent member of the Security Council, strengthening ties among Latin American countries, and praising the benefits of South-South cooperation; in short, a foreign policy permeated by ‘good intentions’ and ‘balanced’ relations with the world’s top players. But the fact is that recent attempts by Brazil to build strategic political partnerships that could bring economic benefits, such as with China or France, have been unilateral in most cases. Brazil’s bilateral trade with China has increased tenfold in the past decade. But that has been mostly driven by dramatic growth in China’s infrastructure and consumer market, and its consequent voracious appetite for the mineral and agricultural commodities in which Brazil has clear comparative advantages. The result? One ton of Brazilian exports to China is worth about $200. One ton of Chinese exports to Brazil is worth more than $2,000. That could hardly be called a partnership. Brazil’s interests in Africa are overshadowed by the expanding outreach of Chinese corporations. UN reform is nowhere near the horizon. And the various geometries fostered by Brazil in Latin America, either using Mercosur, the Union of South American Nations, or the Community of Latin American and Caribbean States, yield plenty of speeches on how the world should be made more

Brazil’s strategy for growth over the past decade has favored more than just consumption over investment, and more than ad hoc fiscal incentives for companies and sectors blessed by the country’s ‘local content’ industrial policy. At its core, Brazil’s economic strategy is the expression of an approach that is mostly insular and which prioritizes its domestic market over a more incisive interaction with the global economy. From an international relations perspective, this approach reveals a great deal about Brazil’s lack of a sophisticated project in terms of both influence and prosperity. Present-day Brazil, where significant economic expansion has been kept at bay for more than three years, is the result of a political economy of ideological preferences, with a strong accent on political affinities and less attention to economic pragmatism. Globally, Brazil’s political discourse has sounded much louder over the past decade than have its cross-border economic achievements. The country’s idea of its global reputation is intertwined primarily

Marcos Troyjo is Director of the BRICLab at Columbia University, where he teaches international affairs.

Introverted Economy

As for further access to Europe’s markets, Brazil’s negotiating position is rendered less mobile by the limits imposed under its membership of Mercosur. The diametrically opposed views of the Mercosur and European Union countries – especially when it comes to agriculture – prevent negotiations from advancing to other areas. Were Brazil to make its local content requirements more flexible, particularly in areas related to infrastructure, transport and logistics, a new phase in Brazil’s economic relations with Europe could be launched. But that would be going against Brazil’s current industrial policy mantra. When it comes to the BRICs, Brazil certainly revels in China’s demand for its low-value-added exports. But Brazilian industry lacks the stamina to face China’s hypercompetitiveness – so no FTA in sight here. Russia and India have great potential as trading partners, but they lack the complementarities in both geography and natural resources that are conducive to forming economic blocs. The BRICS will coordinate common positions in economic and political forums. They will certainly trade more among themselves. They may even come up with preferential credit lines, or even a BRICS Bank, to help finance infrastructure projects. But given the scale of the issues in which their interests do not converge, the bloc will never form an FTA, much less a vertical, deeply integrated economic zone. As a consequence, Brazil, especially in comparative terms, will keep a low profile in global economic statistics. The country’s share of international trade is only about one percent. The sum of all its imports and exports represents 18% of Brazil’s GDP. Its share of world GDP, at 2.9%, is unchanged since 2002. With the watershed event of the US-EU Transatlantic FTA now in the making, Brazil should get its act together and add some urgency to the idea of defining its place on the map of 21st century trade and investment. If Brazil made the right choices now, it could no doubt use the productivity and competitiveness of its agro-energy sector to help foster a techintensive, globally connected economy. Otherwise, if it continues to shun interaction with the most important markets of the world, it will be rendered an ever less relevant, ‘bloc-less’ economic player.

equitable – and few, if any, tangible economic results. Brazil’s global agenda has prioritized its political objectives – modulated by the ideological preferences of the day – over economic initiatives that might have included more bilateral free-trade agreements. Since Mercosur was created in the early 1990s, Brazil has only concluded three FTAs (with Egypt, Israel and Palestine), while Mexico, since NAFTA, has put more than 40 FTAs in place. Brazil’s ideological biases over the past decade – coupled with the finest breed of protectionismprone conservatives in the US – have helped put the idea of a Free Trade Area of the Americas to rest. The low priority Brazil has put on its foreign economic goals has prevented a more aggressive stance in trade and investment promotion. Brazil should have strengthened and expanded its ambitious APEX – a trade and investment promotion agency founded during the Fernando Henrique Cardoso administration in the 1990s – which now consists of a few dozen officials based mostly in Brasília. Instead of setting up muscular business bureaus in the global cities of North America, Europe or Asia, Brazilian strategists believed themselves to be taking steps toward greater global stature by opening diplomatic posts in cities like Baku, Belmopan, Basse-Terre, Castries, Conakry, Cotonou, Khartoum, Gaborone, Malabo, Nouakchott, Roseau, St George’s, St John’s, and Ouagadougou. Seemingly clueless of – or oblivious to – the forces driving the global economy, Brazil was recently surprised to learn that the United States and the European Union were working toward an FTA to come into force in 2015. As news of the plan came out, a high-ranking official in Brazil’s presidency told newspapers Brazil had been following ongoing negotiations “without the hastiness of a subordinate.” Brazil should decide whether it wants trade to be a driver of its economic development. The country’s economic relations with its Latin American cousins, given their small scale as buying markets, represent a low ceiling. Meanwhile, the more dynamic economies of Latin America – Colombia, Peru, Chile and Mexico – are reconfiguring their strategies and joining forces in an FTA of their own, one that will entertain an open trade dialogue with the US. №1(5), 2014

STR ATEGY

Steppe Change Kristel Van der Elst and Trudi Lang Mongolia’s future is in many ways predicated on the strategic choices of its neighbors, and primarily those of China. Today it can choose from at least three development scenarios but each of them will require systematic efforts to improve the investment climate.

Kristel Van der Elst is Head of the World

Trudi Lang is Associate Director in the

Economic Forum’s Strategic Foresight team.

World Economic Forum’s Strategic Foresight team.

Source: www.weforum.org

Changes in the Steppe

high-end organic food products and solar and Often unnoticed, Mongolia is one of the wind power generation in the expanses of the Gobi world’s fastest-growing economies, with doubleDesert. digit growth thanks to the discovery of vast mineral Regardless of which scenario develops, they resources, especially copper and coking coal. By all point to a need for common policy responses some estimates this windfall is worth $3 trillion – to strategic decisions, such as developing a good equivalent to one million dollars for every one of investment and business climate for minerals and Mongolia’s near three million people. other sectors, designing a form of sovereign wealth While this has been a boom to this remote, fund that can operate as an investment fund or landlocked nation, there are risks if it is not development fund as needed, and actively engaging managed wisely. How can the mining industry and with neighbours in the region to forge strong its revenues best be developed and managed while political and economic relationships. charting a course towards long-term sustainable The last couple of years have already shown the and diversified growth? What forms of economic dangers of neglecting diversification should be these priorities. Calls for pursued? What trade and investment relationships How can the mining industry and its revenues best renegotiation of the Oyu will be needed to achieve be developed and managed while charting a course Tolgoi copper and gold mine (currently owned both? towards long-term sustainable and diversified 66% by Rio Tinto and No one can predict the growth? What forms of economic diversification 34% by the government of future, but three scenarios should be pursued? What trade and investment envisaged by the World relationships will be needed to achieve both? No one Mongolia), and the passEconomic Forum show can predict the future, but three scenarios envisaged ing of laws – motivated by possible ways to guide by the World Economic Forum show possible ways fears of foreign enterprises controlling strategic naMongolia as it makes to guide Mongolia as it makes strategic decisions tional assets – combined strategic decisions that that will define the country’s future to spook investors and will define the country’s caused FDI to plummet. future. Since embarking on this scenarios project in The first scenario, called ‘Regional Renaissance,’ collaboration with the World Economic Forum, paints a picture of increasing economic and politithe Mongolian government has already started to cal integration in north-east Asia, including North take a more strategic long-term view, for example Korea, China and Russia. Right in the middle of this replacing the above law with a new one giving more is Mongolia, which benefits from strong demand for security to investors. its minerals, as well as other opportunities to diverThe individual scenarios also suggest interesting sify its economy. choices for Mongolia to consider: for example, ‘Resource Tensions,’ the second scenario, facilitating cross-border infrastructure for regional postulates the opposite – a rise in nationalist economic co-operation in ‘Regional Renaissance’; sentiment and territorial disputes, with access to joining regional supply chains for green and resources often used as a strategic weapon. In this sustainable industries in ‘China Greening’; and scenario, Mongolia’s vast mineral wealth risks being locking in long-term contracts to hedge against stranded in the ground while opportunities to regional instability in the ‘Resource Tensions’ diversify its economy are severely curtailed. scenario. The third scenario, ‘China Greening,’ envisages Mongolia is a major success story which should that by 2040 China has become a world leader in not be taken for granted. In just over two decades green technologies and the circular economy. In it has transitioned away from Soviet influence this future path, a shift in environmental attitudes to a democratic and open system of governance, in China results in a concerted push for energy which upholds human rights and is making efficiency and the pioneering of new products positive strides to curb corruption. With vision and services. This scenario sees reduced demand and determination, Mongolia’s future can be for Mongolia’s main minerals, but opens up new brighter still. export possibilities for the country, such as niche, №1(5), 2014

SOF T POWER

Soft Power: A Double-Edged Sword? Bryane Michael, Christopher Hartwell, and Bulat Nureev

increased, so too has the understanding both of its components and its limitations. The purpose of this article is to examine the issue of soft power particularly in reference to emerging markets, but also to explore three specific issues. In the first instance, we examine the role of technology and how it can contribute to extending a countryâ&#x20AC;&#x2122;s influence. Secondly, we look at the constraints of soft power, and how its pursuit may not always bring good results. Finally, with regard to the emerging global conception of soft power, we note how our index will also change to capture these new facets.

In 2012, the SKOLKOVO Institute for Emerging Market Studies (SIEMS) released its first Index of Soft Power, examining an increasingly popular concept in the context of emerging economies. As shown below (on pages 58 to 60), in the intervening time since it was published, the performance of various countries has changed relative to others, causing a change in the rankings. However, from an analytical standpoint, the more important change that has occurred over the past two years has been an evolution in the thinking about soft power and what it encapsulates. As international attention toward the concept has Bryane Michael is Non-Resident Senior

Christopher Hartwell is Head of global

Bulat Nureev is Deputy director,

Research Fellow, SKOLKOVO Institute

markets and institutional research,

SKOLKOVO Institute for Emerging

forÂ Emerging Market Studies

SKOLKOVO Institute for Emerging Market

Market Studies

Studies 62

Soft Power: A Double-Edged Sword?

But like a tree falling in the forest – only making a sound if there is someone to hear it – soft power must be witnessed to be effective. If a country is successful in business or in achieving higher levels of cleanliness or protecting the rule of law, these successes will not translate into greater soft power unless they are communicated to others.‡ And in an increasingly globalized world, this generally means a need to have as many connections with the outside world as possible. This concept, called ‘digital density,’ refers to the permanent connections to the internet that a country has, a statistic that goes beyond mere landline internet connections to encompass the new digital world of smartphones, tablets, laptops, and multi-purpose technologies. In short, digital density means being connected wherever you are, and countries that are more connected have a higher probability of transmitting influence than those that don’t. This is one big difference (amongst many others) between North and South Korea, for example. A simple picture of various countries’ internet use can graphically illustrate this point, showing the way that influence builds and passes between countries; internet usage is a good rough proxy for digital density. As the map below shows, there is a high correlation between countries generally accepted to wield greater soft power (and which are, not coincidentally, ranked higher in our index) and internet usage. Even comparatively smaller countries like Estonia and Ukraine have

DIGITAL DENSIT Y AND ITS CORREL ATION WITH SOFT POWER

Perhaps the first and most important question is: What exactly do we mean when we talk about ‘soft power’? This elusive and evolving concept can be traced back nearly a quarter of century, and generally refers to the ability of a state to influence the actions of others through persuasion or attraction, rather than brute force or coercion. As we mention in our 2012 index report, “the ability of a nation to influence others tends to be associated with intangible assets such as an attractive personality, culture, political values, and institutions and policies that are seen as legitimate or having moral authority.”† For example, Russia’s encouragement of China and other countries to seek a peaceful solution in Syria, versus the use of military force, is a prime example of soft power. This ability to influence the world by virtue of who you are (rather than what you do) gives countries like France, the UK, Germany, Switzerland, and Sweden influence in both economics and politics far above what their GDP or even their population size would suggest. Moreover, given the multipolar and complex world in which we live, with the higher visibility of non-state actors and a corresponding increase in the power of multinational companies, hard power has been increasingly more difficult for a nation to exercise. With ‘gunboat diplomacy’ now a less effective (or even counter-productive) tool, and governments around the world facing budget difficulties as a result of the lingering global financial crisis, soft power can be seen as an important substitute indicator of national strength.

†

Rapid Growth Markets Soft Power Index.

‡

Of course, there are intrinsic beneﬁts to better rule of law or

business success, but the emphasis here is on how they translate into gains in soft power.

Internet usage provides a proxy for soft power Soft power describes the way countries and the people in them inﬂuence others. In today’s world, the internet represents a key carrier of such inﬂuence. Countries ranked higher in our soft power list have more people logging on and using the internet. Compare Estonia and the Ukraine with Argentina and Indonesia: the former are lit up, the latter relatively dark.

№1(5), 2014

SOF T POWER

high internet usage, and these countries exercise levels of soft power greater than countries in North Africa, which have correspondingly lower levels of connectivity. Moreover, there seems to be a ‘neighborhood effect’ with regard to digital density and soft power, but not just geographically. While Figure 1 does show concentrations on the map of digital density (especially in Europe) that could then translate to increased soft power, the key point to consider is that it takes two to tango; that is, countries that are plugged into the world both transmit and receive soft power more easily. Countries that are off the grid, as in the heart of Africa or in Central Asia, may not have much soft power globally, but nor are they as influenced by China or Brazil as countries that are connected. It is this reality, that digital density is connected with both transmission and receipt of soft power, which could be a major reason why the concept of soft power is a relatively recent one.

Soft power, like all power, has its good and bad sides Ukraine illustrates the paradoxes and prospects of soft power. It ranks in our top 20, compiled just before the recent unrest. Its soft power has made it attractive to both the EU and Russia, but has also made it the cynosure of all eyes, leading to a internal struggle for the rewards of that

THE PERIL S OF SOFT POWER

power. BRICS economies – and those learning from them,

While digital density may show how soft power is spread, the reality of soft power and its exercise is a complex issue. In much of the research, and especially in the popular press, soft power is shown as an unmitigated good: a country wants to have soft power, it should acquire soft power, and it improves its standing in the world through the exercise of soft power. However, it is possible that soft power may hurt, as well as help, a country, especially if its acquisition obscures the need to cultivate hard power as well. Additionally, soft power could lull a country’s leaders into a false sense of security. While being respected abroad may help to smooth over some difficulties, it can also lead to complacency. As the English adages have it, countries should not believe their own press, or rest on their laurels. This reality has been observed both in the trends in our data, as well as in the real-life example of Ukraine. Ukraine has seen an increase in international soft power since its independence in 1991, carefully balancing Russian and European Union interests but drawing on its location, large population, and large foreign émigré base to give the country a voice in international affairs larger than its GDP alone may warrant. Even as the country itself has endured political and economic stagnation, the reputation of Ukraine as a bridge between East and West has survived. Successes such as the peaceful separation

like Ukraine – must learn how to manage the risks as well as the returns that soft power provides, both at home and abroad.

from the Soviet Union, coupled with ultimately successful negotiations to denuclearize the country, have also raised Ukraine’s visibility in the world. For example, Ukraine was the first former Soviet republic to co-host the UEFA European Championship, along with the more westernized Poland. Yet, while Ukraine’s soft power has been directed externally and raised the country’s standing in the eyes of the world, a successive run of Ukrainian leaders could not translate this international standing into tangible successes within the country. Like countries further east that have been plagued with political instability, Ukraine has seen itself undergo two political revolutions, the first leaving it even worse off economically than before. In terms of its economy, the country has stagnated due to corruption, lack of structural reforms, and a reliance on Soviet-era heavy manufacturing – all issues which have led to discontent and a disconnect with the country’s image abroad. The current turmoil in the country, which appears to be split along geographic lines, also appears to be a result of the source of Ukraine’s 64

Soft Power: A Double-Edged Sword?

SHANG-JIN WEI,

SIMEON DJANKOV,

Director, the Chazen Institute,

Rector, the New Economic School,

and N. T. Wang Professor of Chinese Business

Moscow, and visiting professor,

and Economy at Columbia Business School

Harvard Kennedy School

While soft power is to some degree separate

Every time I think of soft power, I am reminded of travelling abroad

from hard power, through the inﬂuence of

and being asked by customs oﬃcials or taxi drivers which country

philosophy, religion and culture, it is also

I come from. When I say Bulgaria, they usually reply “Stoichkov” or

dependent on hard power. The world is more

“Berbatov,” depending on their age, referring to our best-known

likely to pay attention to the soft power of a

soccer players. Some would add “weight lifting” or “wrestling,”

country already possessing a certain amount of

referring to the old glory of Bulgaria in producing many Olympic

hard power.

champions in these sports. The reference points are different when

Of course, there are plenty of countries

you meet people from other professions. They vary from “great opera

whose ranks in combined soft and hard power

singers” to “you saved the Jews from the Nazis” to “nice resorts on

are above or below their rank in hard power

the Black Sea,” to “the best yoghurt” to “Christo,” the environmental

alone. But it is an illusion to think that a country

artist who wraps large buildings, bridges and rivers in canvas.

can develop much outsized soft power without

Note that none of these references have to do with national income

having a minimum amount of decent hard

or economic growth or average life expectancy, the statistics most

power.

often used when ranking countries on economic power or national hard

well-being. To me, they best exemplify the concept of soft power –

power can have a voice that is more than

what comes to the mind of people from other countries when they

proportionate to their hard power. Some of the

hear your country’s name. There is a clear pattern: Sports and art are

Nordic countries in the last 30 years are great

truly international due to their global coverage, and hence soft power

examples of this. Their actions suggest that

is highly associated with these two. History, as long as it has made it

they also realize that they are more effective

into the international history books, is next. Success in international

when acting in concert with other countries

politics, usually the domain of large countries, also matters. Science,

with a lot of both hard and soft power.

including Nobel Prize winners, have a disproportionately large effect

Small

countries

with

very

limited

While the term ‘soft power’ in English is

on forming people’s opinion about a country. Ireland is known as the

relatively recent (due to Joe Nye), the substance

country with most Nobel Prize winners in literature per capita, and

of the notion far predates the English language

proudly markets itself as such.

term. The Confucian notion of ‘using virtue

There is, of course, a correlation between soft and hard power.

to govern,’ the associated body of teaching,

Richer countries can afford to spend money on promoting their arts

and the meritorious system of selecting civil

and sciences, on developing sports and memorable resorts. But the

servants, are a form of soft power. The culture

correlation is far from perfect – as shown in the Bulgarian example.

and political systems of Vietnam, Korea, Japan,

Hristo Stoichkov, Bulgaria’s soccer legend, belongs to a generation

etc., were all inﬂuenced by Confucian ideas.

of sportspeople who did their work during the most diﬃcult years of

The inﬂuence of Confucianism, Buddhism,

the post-communist economic transition.

Christianity, and Muslim went far beyond their

For this reason it is useful to capture the main characteristics of

countries of origin; they are powerful early

soft power and document their development over time. This can tell

examples of soft power.

us a lot about how others perceive us.

№1(5), 2014

SOF T POWER

soft power. The same balancing act between the EU and Russia which gave Ukraine its soft power internationally looks ready to tear the country apart. Like all investments, those in soft power have both risks and returns, but in Ukraine’s case the reality of the country has diverged from its image abroad. Unfortunately, in such a situation, reality always wins. Ukraine’s trouble in aligning hard power with soft power shows that the latter doesn’t necessarily equal a good image internationally. In some instances, it’s better to be seen and not heard. The case of India is instructive here, as it may benefit both from a relatively lower profile than other BRICS countries regarding many of its foibles – with correspondingly lower-key successes too – and by being the world’s largest democracy. As Alex Lo wrote in Hong Kong’s South China Morning Post last year, “India largely gets a free pass while China is scrutinised with its every move. That’s India’s soft power that Beijing can learn from.” Apart from cultural heritage (Hinduism, Buddhism, yoga, Indian cuisine and so on), it is India’s successful 60-year democratic tradition that helps New Delhi to be regarded as an example for post-colonial and developing countries. Any nation willing to build a transparent and democratic society is more likely to follow India’s footsteps than China’s. And, given the post-Cold War prevalence of free-market democracies, to be accepted as a partner a country should be either democratic or have considerable economic prowess. Finally, by being accepted as democratic, a country is less likely to be sanctioned in the name of spreading democratic values.

more and different ways in which soft power may be quantified. As the very idea of soft power changes, so too must our index. In this sense, our first attempt at a soft power index was just that, a first attempt, and revisions to it will follow in the footsteps of other well-used indices and rankings. For example, the World Bank’s Doing Business index helps businesses choose countries to trade and invest in, and undergoes periodic revisions to take into account the changing face of a country’s investment climate. Similarly, FutureBrand’s Future Fifteen index is a new, collaborative effort focusing on the future drivers of country brand strength, and as such must also evolve as market conditions change. Our goal is thus to create an index on a par with these other widely used indices, but capturing an aspect of the global business and political landscape that is currently missing. In the next edition of our Soft Power Index, we will focus on indicators that policymakers (in the public and private sectors) can change, as well as longerterm trends that are the consequence of past choices. We will also be expanding the range of countries we cover, perhaps including the OECD countries and emerging markets. In this way, BRICS countries would be able see how they fare compared to the US or Thailand. We may also include other facets of soft power already captured by other agencies, such as the UN’s Human Development Index, as a way to encompass a broader range of indicators. Finally, we will make better connections with users of the index, particularly through Facebook. While the revised methodology is currently under development, we predict that the anticipated changes will have an impact on our previous rankings. The most dramatic difference will likely be that smaller countries rise in the rankings. China, India and Russia currently rise to the top of our rankings mainly because of their size – a reality that may be more attributed to hard, rather than soft, power. For the next edition, it would not be surprising if our alterations meant that the BRICS lost their top-tier ranking. By looking at soft power on per capita and other comparable bases, we hope to make lessons from our index more applicable across all countries – BRICS and non-BRICS alike. The smaller Eastern European countries will probably decrease significantly in rank, while powerhouses in the Middle East (such

REFLECTING CHANGES: THE EVOLVING CONCEPT OF SOFT POWER AND THE AGENDA FOR THE FUTURE

These different ideas of soft power and how it manifests itself are but a few parts of how the concept has changed and how we understand the channels through which it works. Our original soft power index in 2012 created an academically rigorous baseline, showing which countries had soft power – and why – and we have retained the methodology utilized in that paper for our new rankings. However, given the evolving nature of the concept of soft power itself, along with the heightened awareness of its limitations, our team is striving to revise the index to better encompass 66

Soft Power: A Double-Edged Sword?

is a perfect example of this). In speciﬁc

loudspeakers.

and localized contexts, it is easy to

of social networks, the environment

imagine where people would always

became more transparent, more tools

consider soft power more important

became available with open access,

than hard power.

and

After

information

the

started

emergence

spread

I do not think that digital technologies

faster. And while anybody can throw an

could be considered a stand-alone

idea into a social network, it is unclear

leading factor of soft power, as they

whether this idea will be disseminated.

EVGENY KAGANER,

are but a part of a greater global social

The range of stakeholders who can

Professor of Information Systems,

context. This context consists of a set

inject information is virtually unlimited.

IESE Business School, Barcelona

of ideas that shape human behaviour,

one

were

measure

the

and today’s digital technologies in

quantitative impact of digital factors in

The concept of soft power should be

many ways facilitate the ability to

assessing the soft power of a speciﬁc

treated seriously. Power can be based

formulate and propagate these ideas

country, one would have to start with

either on access to resources and

(or remove technical barriers that hinder

measuring the level of internet or

control over them, or on convictions and

the ability to introduce them). Before

mobile internet penetration and the

ideas – in other words, on something

the digital era, mass media played

percentage of the country’s population

that people believe in. We cannot fully

the role of a mouthpiece transmitting

using social networks. A more in-depth

detach ourselves from the resources

information to the masses, where it

analysis would require research into

that we need to sustain our livelihood.

was absorbed and became a part of

the country’s population present in

between

the social environment. The number

various social networks, broken down

resources and ideas, it is perhaps the

of these sources of information was

by demographics, age, and the amount

resources that would nearly always

limited, as most communication bubbles

of time they spend there. An even

have the upper hand. However, when

were isolated from each other; there

deeper analysis would focus on the key

we begin to mix and match resources

was no horizontal ﬂow of information.

topics discussed: in selected countries,

and ideas in different proportions the

Today such mouthpieces still play a role

discussions in social networks tend to

situation tends to change: perhaps

but there are numerous capillary-like

revolve more around political factors,

strong

weak

links between them that could be used

while in others, around cultural and

resources can win after all (the Vatican

both with and without these major

sporting events or personal lives.

this

hypothetical

ideas

clash

augmented

By our rankings, the BRICS economies remain key soft-power actors, but it will be interesting to see how recent events and our revised methodology change their position vis-à-vis others. In the future, will China be able to maintain its soft power, given the continuing worries about its economy and its image abroad (especially regarding pollution in its cities and aggressive military moves in the region)? Will Russia be buoyed by the Olympics and Putin’s apparent political successes of 2013, or will events in Ukraine conspire to continue Russia’s relative slide in soft power? Can Brazil emerge as a soft-power player outside of Latin America? Our revised methodology, implemented over the coming months, will allow us to continue to track these developments and stay abreast of this key metric, while incorporating some of the issues that were discussed here.

as the UAE, Egypt and Saudi Arabia) will rise. Third, we will likely measure soft power by what it achieves in financial/economic terms, taking into account not only the benefits, but also the costs – as noted earlier in the case of Ukraine. We will likely measure the way changes in soft power correlate with changes in investment, output, public budgets and trade. In that way, we can measure the costs, risks, and benefits of developing and using soft power. CONCLUSION

Soft power represents more than just some fuzzy abstraction, of interest only to academics and international relations majors, but it is still evolving as a concept. It helps countries and companies obtain financial and other benefits without the expense or danger of aggressive policies but, as shown above, it may have its own consequences as well. №1(5), 2014

SOF T POWER

Components of soft power in our index < FREEDOM – the extent to which individuals in a country can trade freely < MEDIA GOODS – a country’s ability to generate intellectual capital gives it more opportunities to inﬂuence global debates < RULE OF LAW – the rule of law ensures a level

Who Has the Power?

playing ﬁeld, both within and between countries < TOP UNIVERSITY RANKING – top universities broadcast a country’s values and culture, and inﬂuence generations of young foreigners

Utilizing the methodology from our original index, but with data updated through 2012 and 2013 (where available), there is little relative change in the top four emerging-market soft power leaders. The emerging economies we study, as a group, increased their soft power index scores; but a steady increase by most countries led to little change in the relative rankings. China – once again – tops the list of emergingmarket countries with the soft power needed to influence world affairs, with India and Russia right behind. Some countries, particularly South Africa, have made large strides in the rankings while also improving their underlying scores; other countries have either kept their relative position despite some improvement in their scores (such as Russia and Hungary), or have seen such a deterioration in their scores that they have moved down the list (as in the case of Turkey).

< OLYMPIC SUCCESS – while countries are impersonal entities, athletes help put a face to a name, especially gold medalists < IMMIGRATION – softly powerful countries are magnets for other people looking to start a new life. < TOURIST ARRIVALS – tourism is a main vector for spreading ideas, inﬂuence and goodwill, and countries with more soft power can be expected to attract more tourists < REDUCTIONS IN CO2 EMISSIONS – a measure of environmental cleanliness, used as a proxy for pollution levels < TIME MOST INFLUENTIAL PEOPLE – in the world of inﬂuential persons, a country’s soft power is bolstered by its public personalities

Soft Power: A Double-Edged Sword?

CHINA

27.51

SOUTH AFRICA

14.09

As in 2012, China tops our list, but the country saw a 10% decline

South Africa saw the highest gain in raw score (nearly 4 points),

in its base score over the past two years. Despite issues such

and also saw the biggest leap in the rankings, from 7th to 5th

as pollution, corruption, and continued territorial disputes

place. Like Brazil, South Africa’s Olympic successes, coupled

involving Tibet and Taiwan (Chinese Taipei), China’s soft

with substantial increases in immigration, also translated to

power has remained strong, in tandem with its hard power in

a favorable change in its soft power score. Other tailwinds

the region. Much of the change is attributable to increases in

assisted in its emergence as well – see below.

immigration, tourism, and the success of Chinese companies

6. MEXICO

around the world.

13.82

21.74

Mexico has the third-largest gain in raw scores in the soft power

Also unchanged from our earlier rankings, India remains in the

crime and drug-related violence, improvements in its overall

2nd spot after many improvements in its cultural soft power.

level of economic freedom, the rule of law, and immigration,

Actor and ﬁlmmaker Aamir Khan’s photo sits on the cover of

allowed it to add 2.34 points to its base score. However, the

the 2013 edition of Time magazine’s 100 Most Inﬂuential People

emergence of South Africa kept Mexico in 6th place, albeit by

in the World, while Mukesh Ambani, head of Reliance Industries

less than a third of a point.

2. INDIA

rankings this year. Despite continued worries about organized

(one of the world’s great diversiﬁed conglomerates), has shown

inﬂux of tourists in the past two years, as well as a doubling

Turkey slipped two places in our ranking for 2013, due mainly

of its Olympic success rate. These triumphs have offset some

to a decline in the rule of law, less success in the Olympics, and

setbacks in environmental cleanliness and rule of law, keeping

an increase in pollution relative to other countries. Regionally,

India ﬁrmly placed at number two.

however, it still remains inﬂuential, and with 4.6% of the world’s

RUSSIA

TURKEY

12.45

that India can compete globally. India has also seen a great

Muslims, it is the highest-placed majority-Muslim country in our

18.60

rankings.

With a small gain in its absolute score, Russia remains in 3 rd

11.73

place in the index rankings. On the negative side, rule of law

8. HUNGARY

declined, pollution worsened, and fewer foreigners decided

Hungary saw an increase of 1.76 points in its base score from

to call Russia home. On the other hand, top Russian political

2012 to 2013, but remained in 8th place due to the advances of

and business leaders continued to appear in the international

Mexico and South Africa. In a year where Hungary’s hard power

media, and tourism increased by 12%. With a heady 2013 of both

was challenged by continuing ﬁscal and banking crises, it still

progress and retreat, the outlook for Russia in the coming years

saw an increase in immigration, tourism, Olympic success and

is uncertain. (See below.)

environmental cleanliness.

4. BR AZIL

14.20

9. CZECH REPUBLIC

10.12

Brazil’s 2013 base score was up slightly from the 2012 index,

The Czech Republic saw a slight increase in its base score for

keeping it in 4th place – although with South Africa coming up

2013, due mainly to improvements in the rule of law. In most

strong behind it. Brazil’s success was mainly attributable to an

other categories the Czechs were standing still, as a year-long

increase in its media component, as well as a better showing

political succession played itself out in Prague. While this may

in the Summer Olympics in London than in previous Olympics.

not be directly relatable to our categories, the uncertainty may have contributed to only small increases (of one to two percent) in tourism, immigration, and media goods. In a year such as this, with many countries making larger gains, the Czech Republic’s 0.6-point increase was not enough to move them forward.

№1(5), 2014

SOF T POWER

10. POL AND

9.23

15. CHILE

7.32

Poland’s continuing resilience in the face of the Eurozone crisis,

Chile fell one place in our rankings despite having a statistically

as well as its rapid recovery from the global ﬁnancial crisis, gave

insigniﬁcant decline in its overall score (from 7.35 to 7.32). In a

its economic policy approaches generally favorable press over

world of soft power, standing still means falling behind.

the past two years and has improved the country’s image. With

7.19

regards to our rankings, while Poland actually gained a small

16. LITHUANIA

part of its base score through improvements in the rule of law

While population-wise it is a giant next to fellow Baltic state

(counterbalanced by outmigration), the score for neighboring

Estonia, Lithuania has a level of soft power that is surprising

Slovakia fell even further, meaning the two countries switched

given its still small size. Like many other countries here,

places in our 2013 rankings.

Lithuania improved its absolute scores slightly due to tourism

11. SLOVAKIA

and immigration gains, but kept the same relative position.

8.52

6.57

Improvements by Slovakia in some of the constituent

17. CROATIA

categories in our index, including immigration and tourism,

Although Croatia acceded to the European Union in 2013, its

were counterbalanced by declines in other components

score in soft power actually fell over 2012-13, with a decline in

(notably CO2 emissions and media royalties). Thus, with a drop

the rule of law – but also a slight uptick in tourism. It remains

of three percent in its base score, Slovakia fell one place in this

to be seen if EU membership will increase the country’s soft

year’s index to number 11.

power – through ease of access – or mean that Croatia’s national

8.50

brand is subsumed into the broader EU label. In either instance,

Estonia’s ranking was unchanged in 2013, although its base

highly dependent upon a concerted effort to increase soft

score improved somewhat due to small improvements in the

power.

12. ESTONIA

Croatia’s position in the top 20 next year is not assured but

rule of law and a larger inﬂux of tourists. Given its size, Estonia’s

18. ARGENTINA

continued high ranking remains an amazing feat. See below.

6.22

8.26

Argentina is another country that shows the distinctness of soft

The political turmoil in Ukraine occurred too late in 2013 to show

moving closer to its authoritarian past, Argentina improved its

up in this year’s index, and as a result, the country remains in

score in media and environmental cleanliness to stay in the top

13th place, the same as 2012. Ukraine’s improvement came in

20.

13. UKR AINE

from hard power. With an economy in freefall and a society

environmental cleanliness, which was counterbalanced (not

4.40

surprisingly) by a rapid decline in the rule of law. It is obvious

19. COSTA RICA

that Ukraine’s position in our rankings will change in the future,

The 4th entry from South America, and by far the smallest,

although the direction of this change (for the better or the

Costa Rica stayed ﬁrmly in place from 2012 to 2013, with barely

worse) will be dependent upon the resolution of the current

any movement in raw scores. This translated directly into no

unrest.

movement in the rankings.

14. ROMANIA

7.34

20. INDONESIA

4.10

Like many other countries, Romania saw a slight improvement in

Indonesia saw an increase in its raw soft power score from

its base score – enough to move it up one place in front of Chile.

our 2012 index, but the small adjustment of three-quarters

Improvements in immigration were somewhat offset by media

of a point, due mainly to improvements in the rule of law and

declines and a relatively poorer showing in environmental

immigration, was not enough to move it out of 20th place.

cleanliness, leading to a net gain of 0.34 points.

As the world’s largest Muslim country, however, it still wields considerable inﬂuence.

Soft Power: A Double-Edged Sword?

Highlights —•—

RUSSIA: A FIVE-YEAR PL AN FOR SOFT POWER?

Although Russia remains in third place in our rankings, the result appears to be in spite of the press coverage of the country. International analysts generally have few nice things to say about Russia, but this could be because, as James Sherr noted in his recent book on Russia’s influence, that the country relies on “brutal” instruments of influence – such as its government, the Orthodox Church, and energy – to drive both hard and soft power. However, even brutal instruments can be utilized to mobilize soft power, as in the generally acknowledged Russian diplomatic success in Syria in 2013, where President Putin’s proposals forestalled military action. Other international controversies, involving Greenpeace, Edward Snowden, the imprisonment of Pussy Riot, and ‘anti-gay’ legislation, have also kept Russia to the fore in news coverage, meaning its soft power is the proverbial bear in the dacha: the country is perhaps helpful, perhaps a nuisance, perhaps dangerous, but impossible to ignore. In the case of Russia, the data seems to support the popular adage that ‘there is no such thing as bad publicity.’ This move towards raising Russia’s visibility has come about through a concerted effort to pursue soft power, with a zest for the game going back to 2007. That year, two appearances by Putin set the tone for Russia’s soft power agenda for the next five years, focusing on the areas that the Russian government felt were ripe for influence. The first was a speech (in English) at the 119th International Olympic Committee Meeting in Guatemala, where Russia won the bid for the 2014 Winter Olympics, an attempt to show the world that Russia was back as an important power player in international sport. This success was reinforced by Russia also being awarded to host the FIFA 2018 World Cup. The second appearance, at the 43rd Munich Conference on Security Policy, set up Putin as diametrically №1(5), 2014

opposed to current trends in the world, positing Russia as perhaps the source of new ideas on hard power in the global order. These successes, put together with the controversies that Russia has been undergoing, mean a possible hard truth about soft power for the country: the utility of official soft power efforts might be waning. Russia has already grabbed many of the low-hanging fruits of soft power, and is getting only hungrier, with many of its soft power successes coming in reaction to crises in other major powers rather than being truly home-grown. As Harvard professor Joseph S. Nye has noted, “For China and Russia to succeed, they will need to ... be self-critical, and unleash the full talents of their civil societies.” While there has been an attempt to utilize the Russian Orthodox Church as a civil society partner in soft power, the Church’s inherent conservatism has also alienated some of the target audience for Russian soft power. Thus it appears that Russia’s challenge for the next five years is how to include other civil society and nonofficial channels in the development of soft power. This might include the continuing modernization and globalization of Russian universities, which are an important way to forge links amongst youth and promote cultural ideas. Additionally, the support and promotion of entrepreneurship rather than a focus on state-controlled national champions would also help Russia to display a soft power that is not just connected 71

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with the Russian state. To actually operationalize these approaches, however, will mean less of an emphasis on the one or two megaprojects that Russia seems to rely on, but rather the ‘self-critical’ activities of different stakeholders within society. In this scenario, the Russian state would be more of a moderator – or even absent – rather than leading the charge. This does not mean there will not be an impact from official sources in the coming years, including the odd mega-project. Of course, the 2014 Winter Olympics in Sochi will surely have an impact on Russian soft power going forward, as they represented an enormous infrastructure investment almost from nothing – brand new stadiums, hotels, sports courses, roads, railroads, airports, and power plants and gridlines – as well as a chance for Russia to show off its prowess in hosting an international event. Similarly, the country’s leap in the World Bank Doing Business Index (from 111th to 92nd place out of 189 countries), to become the highest-scoring BRICS country apart from South Africa (ranked 41st), was a direct result of Russian government attempts to improve the business environment. The question is whether Russia can continue to develop soft power independent of government or, given recent events, in spite of its use of hard power. Influence in the form of soft power is based not on potential capability but on linkages, relationships and interactions; and while Russia may traditionally be more inclined towards isolation, it is better placed than China or Brazil to continue to forge these linkages.

SOUTH AFRICA: COMING INTO ITS OWN

South Africa, the smallest of the BRICS in both population and economy size, is still the only African representative in our rankings, highlighting both the country’s successes and the low level of soft power throughout the rest of the continent. Moreover, South Africa’s high levels of soft power are coming at a time when its economy is slowing down; burdened by high levels of unionization, and falling commodity prices around the world, it is unlikely that the country will break free of its relative underperformance (for example, exports only grew by 0.6% annually from 2005-2011). However, South Africa has many positives that are lacking throughout the rest of Africa, and which continue to make it a producer of soft power. In the first instance, South Africa has had leadership – something that has been absent in much of the continent: South Africa’s soft power has been encapsulated in the visage of Nelson Mandela, a leader who was imprisoned under the apartheid regime and, instead of settling scores, embarked on a path to unite his country once again. Indeed, Mandela’s moral suasion was the very embodiment of soft power, and shows how one person can act as an ambassador for a country’s beliefs and ideals. Mandela was a product of an earlier legacy that has also contributed to South Africa’s soft power: the fact that South Africa was colonized by the British. There is a large literature in economics on the relative benefits of having been colonized by the

Soft Power: A Double-Edged Sword?

British versus the French or Portuguese, with the British colonies coming out on top in each instance. The British experience in South Africa left the country both with a more developed legal system and stronger links to the home country than other countries in Africa. (Indeed, Mandela received his undergraduate degree from the University of South Africa, originally created as an examining institution for Oxford and Cambridge.) These links in language, and especially to the British education system, help South Africans to access UK and other anglophone universities, thus aiding their integration into the global community. Additionally, the collapse of the apartheid regime in the 1990s allowed the country a ‘do-over,’ in that many of its political and economic mistakes were removed as part of a general transition. As part of this transformation, South Africa proved it was able to handle large-scale international events: the 1995 Rugby World Cup (immortalized in the Hollywood film Invictus) saw the hosts triumph, and the 2010 FIFA World Cup was the first time the tournament had been held in Africa. These changes have also helped to arrest the ‘white flight’ that occurred in the 1990s, and South Africa is once again a destination for immigrants. With the world’s attention once again on South Africa following the death of Nelson Mandela, and given its population of over 51 million people, and its cultural influence in the region, it is likely that South Africa will remain in the top ten of our index for 2014.

soft power is in large part due to its rule of law and commitment to economic freedom , acknowledged by developed countries when Estonia became a member of the OECD (being the first country from the USSR to join the organization). This has translated into outstanding success internationally in business, although the reality may be that few using Skype today know that it was developed by Estonians (with nearly half of the workforce still located there). Indeed, Skype’s success is another manifestation of Estonia’s risk appetite in business, as Estonia has more business startups per capita than any other country in Europe. The business acumen cultivated in the country has been helped by the presence of world-class academic institutions such as the University of Tartu, which acts as a magnet for students throughout the Baltics and the Nordic states. Moreover, entry to the European Union, and now the Eurozone, has made travel to Estonia easier, meaning more western Europeans have been able to experience the charm of Tallinn. Estonia is now a popular destination for British young people, given its relatively lower prices. This has gone hand in hand with Estonia’s cultural exports to the world, including a win in the 2001 Eurovision Song Contest – the first by an exSoviet country. It appears that, on a per capita basis, Estonia has the largest amount of soft power in our index, a trend that is likely to continue into 2014 and well beyond.

ESTONIA: SMALL IS BEAUTIFUL

As the smallest country in the top 20, Estonia is the perfect example of soft power being divorced from hard power. With an active military of only approximately 3,000 soldiers, and a nominal GDP ranked 104th in the world by the United Nations, it is difficult to see how Estonia would have any influence in world affairs. But only in a country such as Estonia could the president get into a Twitter fight with Nobel Prize winner Paul Krugman – and only in tiny Estonia could the president get the better of the economist. Admired throughout the region for its successful transition from communism to capitalism, as well as its relatively better economic performance during the global financial and Eurozone crises, Estonia’s №1(5), 2014

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Straddling Journalism and Propaganda How Russian Public Diplomacy Utilizes the Media Eugene Abov While soft power and media provide signiﬁcant opportunities to improve a country’s image abroad, they also pose hidden risks and additional challenges.

Joseph Nye, a professor at Harvard Kennedy School, introduced and legitimized the term ‘soft power’ in 1990. Afterwards, it was used to describe a country’s ability and potential to be attractive for others because of its culture, education or the activities of its population. Considering the controversial attitudes towards Russia abroad, the idea of soft power is becoming increasingly popular among the country’s diplomats and politicians. Given that the Ukraine crisis and its devastating implications for Russia’s image abroad were exacerbated by external information attacks, soft power tools are becoming increasingly relevant for Russia.

With the media revolution in full swing, new fertile soil is being created for information attacks when the image of a country, its leaders or even its people may be at stake. This is why the concept of public diplomacy (or soft power) is becoming increasingly relevant today. In fact, it is a very delicate tool that creates both opportunities and risks. Eugene Abov is publisher of Russia Beyond the Headlines.

Straddling Journalism and Propaganda

Post, The Wall Street Journal, The New York Konstantin Kosachev, head of the Federal Times, The Daily Telegraph, Le Figaro, El País and Agency for the Affairs of the Commonwealth of La Repubblica. Independent States, Compatriots Living Abroad In its everyday work as a cross-border media and International Humanitarian Cooperation resource, RBTH clearly separates opinion from (Rossotrudnichestvo) sees soft power as a tool ideological statements and good analysis from that will inform those “willing to listen.” It is his propaganda, taking into account the cultural, political, agency that is responsible for coordinating public economic, educational and linguistic specifics and diplomacy efforts. traditions of the audience of each national paper. According to Kosachev, in the information RBTH believes this to be the best way to quickly and age, people’s sympathies do matter. “The era of efficiently contribute to the creation of a positive and diplomats and summits is gradually transforming more authentic image of the country. into a dialogue between different cultures and Marina Lebedeva, the head of the Department nations,” he says. “Russia is experiencing certain of World Politics at Mosdifficulties with forming cow State Institute of its image right now. International Relations Sometimes in countries (MGIMO), believes that with a well-developed Propaganda may “dis-guise” some inconvenient “the concept of soft power media environment, truth about a country’s life. It stems from the is too general and vague, the attitude toward us incongruity between “external” and “internal” while the efforts targeted is worse than toward attractiveness. Marina Lebedeva compares certain dictatorships. propaganda with a tasteless candy in an attractive at improving a country’s We have no intention of wrapper. “The candy may be initially attractive. But image should be targeted, altering or glossing up such attractiveness can’t be long-lasting,” she says, precise and focused beRussian realities, we are warning that it may result in distrust in the future. cause there are different merely trying to deliver This is the problem with Russia’s public diplomacy social, professional groups truthful information efforts. Lebedeva believes that Russia “should shift and different countries to everyone willing to the focus from the cover to the candy” to improve and regions that have a different attitude toward listen.” its internal attractiveness Russia.” Public diplomacy was This is the main feature initially seen as a eupheof Russia Beyond the mism for propaganda Headlines – it establishes long-term trust-based in the wake of the Cold War. However, the term communication with well-educated, high-status quickly evolved. readers of the world’s most influential newspapers, Russia Beyond the Headlines (RBTH), an adjusting to their varying political, cultural, international information project funded by linguistic, and educa-tional specifics. Rossiyskaya Gazeta, may be regarded as an example Thus, while the supplement printed and of a new soft power media tool which takes public distributed with The New York Times in the US diplomacy beyond the purely propagandistic realm primarily deals with politics, society, economics of the familiar euphemism. and bilateral relations, the one for The Washington Today, RBTH maintains 18 websites in Post focuses more on culture, history, education 16 languages, an iPad app in English and German, and diplomacy. Meanwhile, the supplement digital magazines and an analytical resource for expert distributed with The Wall Street Journal covers communities called Russia Direct. But RBTH’s main business, finance, economics, investments and a bit unique product is its monthly supplements about of lifestyle. The RBTH editors responsible for each Russia that are currently published in 28 newspapers of these supplements adjust the stories to a specific in 22 countries, including the US, the UK, France, audience. Belgium, Italy, Spain, Serbia, China, Japan, South So far, RBTH is performing well. The share Korea, Brazil, Argentina, Australia and the UAE. of regular readers of Russian supplements in The supplements are distributed as a pullout its partner newspapers’ audiences, according to in such influential newspapers as The Washington №1(5), 2014

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president of the New Eurasia Foundation and their own surveys, is 35-60%, which is at times the general director of the Russian International higher than readership figures for other niche Affairs Council, argues that “to propagandize supplements distributed by the same newspapers. a country’s achievements, advantages and One of the main problems encountered during potential is extremely important, as long as there the launch of RBTH was a deficit of competent are alternative sources of information.” journalists and editors capable of writing material According to Joseph Nye, self-criticism, the to the format and standard familiar to Western readiness to contemplate one’s own defects, is readers. After the collapse of the USSR, not all “often a way to establish credibility” for a media Russian journalists managed to successfully adapt to source. “Witness the BBC, which is government the liberal model of journalism, with the pluralism funded, but often willing to bite the hand that and diversity of opinion that make it so poorly feeds it,” he says, pointing out that some Russian compatible with propaganda. soft power projects such as state broadcasting and We at RBTH had to learn how to integrate media “seems to fall short of the standards.” Western standards with Russian journalistic Marina Lebedeva from MGIMO agrees. She traditions as we went along. It took about a year to argues that propaganda may “disguise” some resolve the problem, by hiring very young Russian inconvenient truth about a country’s life. It stems editors and assigning them professional mentors from the incongruity (sub-editors) from between “external” and partner newspapers that, “internal” attractiveness. by working remotely, Lebedeva compares brought certain materials propaganda with a tasteand pages in our According to Kosachev, in the information age, less candy in an attractive supplements up to the people’s sympathies do matter. “The era of wrapper. “The candy may desired level. diplomats and summits is gradually transforming be initially attractive. But After that, RBTH supinto a dialogue between different cultures and such attractiveness can’t plements began to be acnations,” he says. “Russia is experiencing certain be long-lasting,” she says, cepted for publication by diﬃculties with forming its image right now. warning that it may result the world’s leading newsSometimes in countries with a well-developed papers, traditionally con- media environment, the attitude toward us is worse in distrust in the future. This is the problem with sidered to be the flagships than toward certain dictatorships. We have no of quality journalism. We intention of altering or glossing up Russian realities, Russia’s public diplomacy started getting publica- we are merely trying to deliver truthful information efforts. Lebedeva believes that Russia “should shift tion offers from various to everyone willing to listen.” the focus from the cover newspapers all around to the candy” to improve the world, without any its internal attractiveness. onerous conditions. This advice is imporNevertheless, the tant not only for those who deal with external inproblem is that any efforts ultimately targeted at formation: Maximum openness, self irony and selfcreating a positive image for a country abroad are criticism can often play a decisive role in earning likely to initially be treated with distrust and labeled credibility. as propaganda. “Propaganda is rarely credible for Obviously, traditional propaganda in the mass long. Thus, it is not effective in producing soft media is hardly compatible with high-quality power,” Joseph Nye wrote in an email message to journalism, as it is frequently associated with Russia Direct, the special RBTH resource targeted one-sided evaluative judgments, prejudices, bias, at the professional expert community. slanted coverage and exaggeration – ultimately, It is worth noting that the term ‘propaganda’ with misleading the audience. Unlike opinion, does not have solely negative connotations in propaganda lacks tolerance towards others, and this Russian. Historically, propaganda has been seen is very dangerous in a world in which we need more in Russia as a tool with which to popularize compromise and common sense. the nation’s achievements. Andrei Kortunov, 76

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Marketing Manual Basics A smart government puts on good pair of marketing shoes if it wants to add value to its country brand. In the global Vanity Fair, the right question is not how to become more famous, but how to become more relevant to consumers – as Simon Anholt and Sergey Mitrofanov discuss in a peer-to-peer Q&A.

there just to see an opening ceremony, and the only thing they will really notice is whether they enjoy it or not. You know, using a major event as an instrument of propaganda, or an instrument of communications, is incredibly difficult. It is a very inaccurate instrument for communication, and also very, very short term. I have been researching the images of countries since 2005 with the Nation Brands Index survey which uses a very, very large pool of people around the world. It is a measure of their perceptions of other countries. And generally speaking I find that major events – even the Summer Olympics – generally have very little impact on the images of countries.

Sergey Mitrofanov: More or less, what we see today in the world is that people are talking about country branding. For a kind of warm-up, let me invite you to talk shortly about the latest Olympic Games in Sochi. From different sources we have heard that it is a kind of new image of Russia. What is your feeling about that? From my point of view I saw an opportunity, with good storytelling about Russian history in the opening ceremony – but unfortunately I didn’t see any future messages. Simon Anholt: I think it is very difficult to send specific messages with a major event because, in the end, 99.9% of the audience are not going

Simon Anholt is independent policy

Sergey Mitrofanov is Head of the Moscow

advisor who helps national, regional and

oﬃce of Brandﬂight (Sweden) and the

city governments develop and implement

founder of Mitrofanov & Partners, is an

strategies for enhanced economic, political

international expert in brand strategy,

and cultural engagement with other

seeding companies, and business

countries. He is the author of the Nation

development in Russia and the CIS.

Brands Index, and winner of the 2009 Nobels Colloquia Prize for Leadership on Business and Economic Thinking. 78

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aren’t very concerned about the rest of the world. And when they do have an impact, it almost never As to the reason why so many governments lasts for more than three or four months. want to do this thing called branding – well, that’s SM: Could you explain why? very obvious. When I wrote my first essay on this SA: The reality is that most of us never think about subject in 1998, it was a little paper in the Journal other countries. The human race is not a naturally of Brand Management called ‘Nation Brands of the cosmopolitan species. The people who know about, 21st Century.’ This is, I believe, the first time the and care about, and think about, foreign countries are a tiny minority. And the vast majority of humanity is expression ‘nation brand’ was ever used in print. interested not even in their own country, but in their It was a very naïve kind of essay, but it simply own town, their own village, their own family. And said, “In the age of globalisation, all countries are this is the reason why we think of other countries in competing with each other, and the only way in terms of simple clichés. which consumers can distinguish between them And even if a country does succeed in sending is on the basis of their images.” For this reason, out some completely different message, using the governments, if they want more trade, more Olympics or some other means, it is only a matter of tourism, more talent, more profitable engagements time, and usually a very short time, before everybody with other countries, need to understand what their else then reverts to the image is, and they need to previous cliché, because try to improve it. And I that is simpler for them and think that point is now The reason why people don’t think about more comfortable. It is an very well understood – countries is because they have no reason to. effort to change your mind They are not interested because the country has it has taken roughly about another country and no impact on them. South Korea, one of the most 15 years but now almost nobody wants to do it. extraordinary success stories of the last 60 years, every government has got SM: By the way, I see is a country that has managed to achieve a high it – that a good national a lot of interest in such reputation is a prerequisite standard of development, and wealth, and branding on the part of for profitable trade with prosperity, and stability, and peace, almost developing countries unequalled in human history. And yet it still only other countries. But the rather than developed ranks 33rd out of 50 in the Nation Brands Index. second stage – how you ones. For example, Asian can get a good reputation – Why? Because Korea’s success is only states, which are also is not understood as well. of interest to Koreans trying to come onto the That is the point on global arena, are pursuing which, I think, we are all investment in their country branding. And more stuck. And this is the stage also on which my choice and more I hear from different regions – not only of vocabulary was unfortunate, because I used the single countries – they would like to invest in term ‘brand’ and it turned into ‘branding.’ It made branding to be perceived in a certain way on the everybody assume that the way to get a better global scene. reputation is to somehow communicate your way SA: There is some evidence in my survey to to a better reputation, which is an assumption suggest that this is true. People who live in poorer, that comes from product marketing. I have spent or less successful, or less happy countries do tend a lot of the last 15 years trying to undo the damage to think about other countries a bit more than that I did by coining that phrase, ‘nation brand,’ by people who live in very rich, or very successful saying to people, “Yes, you have got a brand image. countries. But it is only a marginal difference. Yes, it is important to you. But you can’t change it I don’t think it is true that rich people only think through messages, or propaganda, or advertising, about themselves and poor people think about or public relations. It is not a media problem, and other countries. I think there’s a small proportion therefore the solution isn’t a media solution.” of the population in every country that is naturally SM: I agree with you 100%, because when more internationally focused, that is interested in I worked in corporate branding I also felt that we other people and other populations. But the vast started with the logo and design, and only then majority just feel a general sense of superiority and went down to the corporate culture. In these №1(5), 2014

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terms, while we are talking about the country image, from my perspective it is important for these governments not to spend money on the media – the worst kind of propaganda – but maybe to make some changes inside the country. You once mentioned the Gross Happiness Index (GHI), which is more and more important today to describe a country’s success, not GDP. It is very difficult to improve the GHI through propaganda or communications. You need to take certain steps to make people happy. And happy citizens will promote your state more effectively than media or PR agencies. SA: Yes, there we agree. Or at least I don’t disagree with you. But that sounds to me like an extremely long way of achieving a better reputation for a country. I think your approach is logical, and I also think it would probably work. If you start from the inside – you make a better country, a more perfectly functioning state with more peace, more justice, more tolerance, and more education – then you get happier citizens, and they will naturally

Using a major event as an instrument of propaganda, or an instrument of communications, is incredibly diﬃcult. It is a very inaccurate instrument for communication, and also very, very short term. Major events – even the Olympics – generally have very little impact on the images of countries

communicate that around the world. You are probably right. But I think you’re talking about a process that would take generations. I am not saying it is a wrong thing to do, but I think that there is a quicker way of achieving a good reputation. It is not a shortcut, but I believe that it is likely to have a much quicker impact. SM: How do you see it specifically? SA: I see the thing in a different way. Of course, I agree with you 100% that countries that are not working domestically shouldn’t even be thinking about their reputation. I think countries that have got serious problems connected with the rule of law, or justice, or tolerance, or all the factors that create happiness, should be fixing that first – there is no question about it. 80

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development, and wealth, and prosperity, and But if a country is basically fine in the sense that stability, and peace, almost unequalled in human it is well governed, it is reasonably stable – whether history. And yet it still only ranks 33rd out of 50 in it is rich or poor – it can start to earn a reputation much more quickly by focusing on the outside my Index. rather than the inside. SM: Why? SM: What do you mean by that? S.A. Because Korea’s success is only of interest SA: What I mean is: understanding exactly to Koreans. It only benefited them. And if you live where reputation comes from. Reputation does in Russia, or Britain, or Uruguay, or Kazakhstan, not come from success. And this is the biggest the success of Korea is of little interest to you. By misunderstanding that I find when I am talking to definition, everybody out there has got a perfectly governments. good country of their own and they are not looking In the last 15 years, I have advised 53 governments for a new one. So they don’t care how successful on issues of national reputation. Every single one other countries are. What they care about is of them, during our first meetings, was under the whether that country benefits them. impression that they deserved a better reputation So, very often when people say to me, “How do because they were successful countries. And all you measure success in national image terms?” I say, of my research shows that actually people are “The only measure of success is when you interview not interested in how people around the world, successful a country they should say, ‘I’m glad is. They’re not really that your country exists.’” One of the things that I always encourage interested in whether it That is the only measure countries to do, particularly smaller countries, is rich, or whether it is is to ﬁnd a problem that everybody recognises – that means anything. beautiful, or whether it be it corruption, climate change, pandemics or So the technique, as far is advanced, or whether human rights – where you have some particular as I am concerned, is a very it is strong. They are only simple one. You look at the expertise or ambition to develop expertise, interested in what that things that people around and focus on that. Make a difference, and stop country does for them. the world really care about, worrying about your image and wasting your This is something that the problems that they are money on media relations, advertisements should be familiar to you concerned with like climate or propaganda from the commercial marchange, or intolerance, or ketplace. It is basic marketdrug-trafficking, or whating. People don’t care about your product nearly ever it is. Then you say, “OK, we as a country are goas much as they care about themselves. So a good ing to dedicate a significant part of our resources to marketer will start by analysing the consumer and fixing that problem for our own benefit and for the asking, “What does the consumer lack? What benefit of the rest of humanity. And we are not going does he or she miss in their own life that I could to worry about our image, because that is just vanity. provide, to consequently make myself relevant to We are going to try to fix this problem.” them?” And I get phone calls every week from governments around the world saying basically, in difCountry-of-origin effect ferent words, “What can we say to make ourselves SM: Very interesting. The case of South Korea more famous?” That’s the wrong question. There’s is also very instructive. But let me take a slightly nothing you can say to make yourself more famous. different angle and discuss how a country’s The question should be, “What can we do to make image affects our consumer behaviour. For ourselves more relevant?” example, for many years we have been afraid The reason why people don’t think about of the ‘Made in China,’ or the ‘Made in Korea’ countries is because they have no reason to. They are label. But today we see Samsung in almost half not interested because the country has no impact on the population’s hands and apartments. It also them. South Korea, one of the most extraordinary influences me as a consumer. When I see ‘Made success stories of the last 60 years, is a country in China’ today, I am afraid neither of the quality that has managed to achieve a high standard of nor the product, in consumer electronics first of №1(5), 2014

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the products. Everything that a country makes, all. And in the automotive industry we also see does, sells or teaches is potentially an ambassador China is coming to the market, while Korea has to the rest of the world. made a huge impact on consumers in Europe And your attraction to South Korean products and developed countries. This is important to is the most simple and straightforward, the easiest me as a consumer. Then I start to think about illustration of what I mean by the principle of this country. Then, when I try to choose a bottle South Korea doing something to make it admired. of wine, I start with the French, for example, What it is doing, in a very small, very simple way, and then go down, not in quality but down in is providing people with the products – the daily price. I may go down to Italy, or Spain, or Chile, products – that make their lives easier or more or the US. So we have a kind of perception that enjoyable. And that is the starting point. influences our life somehow. SM: What else can South Korea do beyond SA: I absolutely agree. And if you look back to that that in terms of improving its image? first paper I wrote in 1998, the concept of the nation SA: It can do culture. So, Gangnam Style is brand, as I described it then, came directly out of this a video that in a tiny, tiny way makes people’s lives so called ‘country-of-origin effect.’ I talked about the more enjoyable. And if people know that it comes examples of Switzerland, and particularly Germany from Korea, it enhances the country’s image. and Japan – three examples of countries whose imThere is a big ‘if ’ there, by the way, because the ages are significantly dictated by consumer percepmajority of the world’s population still thinks it is tions of their exported products and particularly their Japanese. There is unfortunately an assumption that consumer brands. I told the story of how Japan and electronics companies are Germany not very long ago all Japanese. But if people – just 60 years ago – were know that the culture both pariahs. If I had been If you look at, for example, the Human Values and the product are from doing the Nation Brands Insurvey, and cluster together all the questions Korea, then, of course, dex in 1946, we would have relating to conservative versus liberal values, that will improve their seen Japan and Germany and do a simple calculation, it becomes clear at the bottom, where Iran that the vast majority of the world’s population – perception of the country. South Korea a few years is today. And yet, 60 years roughly 80% – have broadly conservative ago, partly as a result of later – and that is not very rather than broadly liberal values. And, my encouragement to long – they are at the other consequently, issues like legislation against end of the Index. Japan and propaganda about non-traditional relationships, them, quadrupled their foreign assistance budget. Germany are now two of and these kinds of policies, are actually not Previously it was a rich the most admired countries criticised but supported by the majority of the country that gave much, on the planet. world’s population much less than the UN SM: How have they target of 0.7% of GDP in achieved that? overseas development assistance. Consequently, SA: Well, very significantly, they showed the there are now large numbers of people in the world how to trust them, through their products. developing world – mainly in Sub-Saharan And one of the ways in which I have described this Africa – who feel glad that Korea exists, because process to governments over the years is as a kind it is providing them with a lot of development of advanced, multi-faceted, 360° public diplomacy. assistance. So, in a thousand different ways, it is The reason why diplomacy is a useful framework about doing things for other people. for looking at this is because you begin to realise SM: I absolutely agree. Then we have these five that many things other than diplomats can perform other emerging countries, under one brand – a diplomatic function. BRICS – who in fact are absolutely different Products, for example, are very powerful countries with different individual branding. ambassadors for a country’s image, as we have just For example, China is going to be another centre described. And that was indeed my starting point of power in the world. And Russia is trying to when I started thinking and writing about nation recover from these 20 years of changes. brands. But my observation was that it wasn’t just 82

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India is a completely different type. When I travelled to India last summer I was really surprised at how their economy was developing and how they produced their new products. Unfortunately, I have never been to South Africa, but I have a lot of friends out there. And I feel this country is also in a period of turbulence today. But it has a lot of opportunities. And Brazil, which in terms of technology is now a very developed country, on the other hand has this problem with crime in favelas and a lot of supplementary problems in connection with the Olympics and the soccer World Cup it is hosting over the next two years. So, these five nations seem to be going their own way towards a stronger brand. In the meantime, Russia made the greatest progress in the latest 2013 Nation Brands Index. Can you say why? SA: It is very interesting to see what is happening to Russia’s image. In the Western world, so-called liberal values are so deeply entrenched in the culture that we tend to assume that they are the №1(5), 2014

There is no question in my mind that rapid social change presents enormous dangers. And one of the problems of rapid economic growth in a globalised world is that it forces societies to change faster than is really comfortable for them

predominant global culture. So we are very puzzled when we see what goes on in the Nation Brands Index. People look at Russia’s image improving and they say, “How could this be?” because it seems as if every time the Russian government passes a law which is regarded in the West as being illiberal, conservative Russia’s image seems to improve. But to me it is perfectly obvious why that is. If you look at, for example, the Human Values survey, and cluster together all the questions relating to conservative versus liberal values, and do a simple calculation, it becomes clear that the vast majority of the world’s population – roughly 80% – have broadly conservative rather than broadly liberal values. And, consequently, issues like legislation against propaganda about non-traditional relationships, and these kinds of policies, are 83

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Now we see a process in Europe – the developing of the European Union. I feel that they more or less erase this competitive identity from nation branding. And the new generation, the ‘millenniumers,’ are more or less similar in developed and developing countries: they have access to the net, they are listening to similar music, they are wearing similar clothes, most of them speak English – bad English

a characteristic of a conservative society, while liberal cultures, which are more peculiar to Anglo-Saxon communities, are more about discussion and conversation. That is why the perception at the first stage, when we make statements, is “Right, I’ll be like this.” And we try to understand it with no comments, no explanations. From a conservative society that is sometimes perceived as aggression. SA: Right. And, of course, the problem here is that both sides of this eternal political debate have devoted over the centuries so much time and effort to black propaganda against the other side. And so, in the eyes of both sides, this whole debate takes a moral and an ethical turn rather than simply a political or a social one. Intrinsically, conservatism and liberalism both can be good – and both can be bad. Both can

actually not criticised but supported by the majority of the world’s population. I still don’t know whether this appeal to the 80% is a deliberate strategy or not. I suspect it is more instinct than planning. The two-speed world

SM: I feel that it is more instinct. And I also believe that the result comes about because Russia now has a clear, open position that it plans to be a kind of conservative country. And you’ve mentioned this 80%. Indeed, we hear the most active voices in the media. Sometimes these conservative people are not so active in communications, and that is why we don’t hear their voices so much. Then there is a problem of how we communicate the ideas. I mean we do it in statements rather than in the form of dialogue. Maybe that is also 84

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and it produces that same change in the form of be ethically positive, and both can be ethically revolution in another. negative. It simply depends on how one interprets SM: What do you mean by that? them. SA: Take acceptance or tolerance of The liberal side has done such a good job of homosexuality in the UK or the US as your associating conservatism with cruelty, or with starting point. This is a concept which, I guess, my persecution of minorities and so on, which grandparents would have found as difficult to deal conservatism doesn’t necessarily have to employ. with as the majority of Russians do today. To many, And, vice versa, conservatives have spent so much it is a seriously disturbing concept. But gradually, time and effort branding liberalism as being over the years, because the trend has been towards immoral, decadent and distasteful. the liberalisation of society, the liberalisation of The fact is that what ought to be a neutral views, the celebration of individual rights, and so political debate – and it is a very important debate on, we are now at the stage where to my children because it is about the future of human society – the question of sexual preference is genuinely, has become so emotionally charged that it is almost profoundly immaterial. impossible to have the debate. And this is one of the They regard it as being simply irrelevant. They just greatest challenges that we face at the moment. If don’t care whether someyou look at the way that body else prefers men or Russia is presented in the women. It has taken this Western media, it is 90% Governments, if they want more trade, more emotional, and vice versa. tourism, more talent, more proﬁtable engagements society three generations of evolution of attitudes SM: Absolutely. I with other countries, need to understand what to get to that point. But track the media in diftheir image is, and they need to try to improve thanks to globalisation, ferent regions, not only it. And that point is now very well understood – in Europe but also in it has taken roughly 15 years but now almost every the consequences of that slow evolution visit othSouth America, and I government has got it – that a good national see that kind of emo- reputation is a prerequisite for proﬁtable trade with er countries like Russia overnight. And the Rustional communication. other countries. But the second stage – how you sians, who have not been It is also part of our life. can get a good reputation – is not through this process of Journalists try to present understood as well evolution, are presented the emotional part of with the end point of this some advanced activity, long evolution, and so in Russia it takes a revoluand try to make money by adding emotion to intionary form. This is the challenge of globalisation: formation. a two-speed world. SA: One other point that I think is really worth SM: Yes, it squeezes the processes of accepting making here is that it is increasingly looking as if or not accepting some ideas that are coming from the topic which is right at the heart of this debate other countries. is homosexuality. And it is not by accident that this SA: There is no question in my mind that rapid topic is at the centre of it, because it is one of the social change presents enormous dangers. And most profoundly controversial topics which human one of the problems of rapid economic growth beings can imagine. in a globalised world is that it forces societies to Homosexuality is a topic that will literally split the change faster than is really comfortable for them. world. Because, you know, when it comes to other And when a country, a society, is dragged through critical issues like violence against women or social a hundred years of social progress – let us call it inequality, broadly speaking everybody agrees. But progress – in the space of ten or 20 years, of course homosexuality is one of those issues where it simply there are going to be casualties and frictions. And, takes generations before a society will change its of course, there is a danger to that society: can it view. And this to me is a wonderful illustration of remain whole or will it simply shatter? the main challenge, the main danger if you like, On a related point, I’m more and more concerned of globalisation. Because what globalisation does about the idea of competition between countries. is that it takes evolutionary change in one society №1(5), 2014

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Sciences Po, works in Silicon Valley, lectures by internet in Singapore, and so on. If you go up to them and say, “Sri Lanka is a bad country because of the way in which the government has treated Erasing identities the Tamils,” the cupboard door will fly open, SM: You’ve raised an interesting topic, about and that person will start defending their own the globalised world. Now we see a process in country. Europe – the developing of the European Union. It is just human nature that the further you travel I feel that they more or less erase this competitive away from home, the more experience you have of identity from nation branding. And the new other people, the more important your national generation, the ‘millenniumers,’ are more or less identity really becomes to you. It stays private, but similar in developed and developing countries: it becomes more and more important. they have access to the net, they are listening to And what happens is not that they replace their similar music, they are wearing similar clothes, national culture with a global culture, or that they most of them speak English – bad English. Right? forget their national culture and learn a new global SA: Most English is bad English. culture. It is simply that they become bilingual and SM: More or less, English has become a kind of bicultural. They can be Sri Lankan or Afghan, but global communication language. They are more they can also be international. or less similar. When I see these kinds of universiThe only other thing ty teenagers – I have met I would say in response to them in the US, the UK, your comment is that eveSweden, Russia, GeorWhen countries are interested in nation rything you say is right and gia, wherever around the branding or country branding, then of course I recognise it. But don’t world – I notice they are it is absolutely right that they should look not thinking so much at these diplomatic tools, these different forms forget the actual proporabout national identity. of diplomacy, because those are the things that tions of what we are talking They are thinking about work. As long as it is always understood that you about. That band of mobile, internationally mindtheir own selves: their are not trying to project, you are not bragging ed young people is still a development, careers, opabout your assets or your achievements; what very, very small proporportunities to enter other you are trying to do is share them with people tion of humanity. And the markets. In this sense vast majority of the world’s borders might vanish one population today, in 2014, day, so there will be no is still never going to leave the country, or even the need for national identity at all. That is my feeling village or the city they were born in. So actually it today because of the information revolution and is just the very, very margins that are beginning to globalisation, which have come together either for change. It is great, but it is not yet hugely significant. luck or for loss – I don’t know. SM: An important thing is that these young SA: In fact my feeling about that is that the people, or this diaspora, can serve as ambassadors people within that younger global generation of their national cultures. And this is a sort of have not in any real sense abandoned or forgotten soft power, which is used today to promote their national identity. They have simply put countries. National cuisines are also doing this – it away in a part of their mind where it is not I mean promoting the food and the culture, and needed day-to-day. So, if you are a young, mobile, consequently promoting the image of the country. internationally oriented student, your national It is also kind of tool for modern branding. What identity is not a thing that you use every day. Years do you think about it? and years can pass without it being accessed – it is SA: Well, when I was advising Felipe Calderón, just there. It doesn’t vanish or go away, it doesn’t the president of Mexico, two years ago, we spent diminish in power. a lot of time looking at the Mexican diaspora in Take, for example, one of those internationally the US. Here we speak of 12-15 million people. minded students – somebody who was born, say, And that is an incredibly powerful diplomatic in Sri Lanka, speaks perfect French, studied at I think that it risks destroying humanity, and destroying the planet, in the end.

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Homosexuality is a topic that will literally split the world. Because, you know, when it comes to other critical issues like violence against women or social inequality, broadly speaking everybody agrees. But homosexuality is one of those issues where it simply takes generations before a society will change its view

them how wonderful you are can only annoy them. They don’t care, because they don’t live in your country. SM: Drawing our interesting talk to a close, could you just in a nutshell advise a hypothetical government on how to promote its nation brand best, I mean in the most effective way? SA: One of the things that I always encourage countries to do, particularly smaller countries, is to find a problem that everybody recognises – be it corruption, climate change, pandemics or human rights – where you have some particular expertise or ambition to develop expertise, and focus on that. Make a difference, and stop worrying about your image and wasting your money on media relations, advertisements or propaganda. In fact, I’m very, very positive about the world that we live in today, because there is a role for every country, even the tiniest one, as any country can take ownership of a global problem and make a difference.

service. And of course, Mexican cuisine, Chinese cuisine – that’s another form of diplomacy. So, in one way or another, this is how cultures represent themselves abroad. This is how nations form their images over time. And, you know, when countries are interested in nation branding or country branding, then of course it is absolutely right that they should look at these diplomatic tools, these different forms of diplomacy, because those are the things that work. As long as it is always understood that you are not trying to project, you are not bragging about your assets or your achievements; what you are trying to do is share them with people. The joy of culture is in doing culture, not receiving culture. It is about mixing cultures and enjoying the fusion, the cultural excitement which results from that. It is about shared experiences. And this goes right back to my original point that if you want people to like you, you have to engage with them. And simply firing off messages telling №1(5), 2014

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Headspace – The Little App of Calm Polly Vernon How did a former Buddhist monk turn a meditation app into the lifestyle tool of 2014? Polly Vernon meets Andy Puddicombe, the Brit who’s transformed ‘mindfulness’ into a multimilliondollar business.

promises to change your life by leading you through a series of daily meditation practices, all of which are voiced by Puddicombe. “‘Gym membership for your mind,’ that’s how we want people to think of it,” he says. Puddicombe gets a little awkward when attempting to spew out branding buzz terms – he’s not very comfortable with them. He puts that down to all the time he spent in monasteries. He missed the Spice Girls. And “the internet”, he says. “It took a while to catch up.” Headspace is the app of the moment. It’s hot and growing fast. Puddicombe launched it with business partner Rich Pierson as a paid-for app a lit-

Andy Puddicombe is the international poster boy for the modern ‘mindfulness’ movement. He’s 41 (“Unless you want to knock a few years off ?”), a short, muscular surfer who grew up near Bristol, but now lives in the Venice Beach area of Los Angeles, an ex-Buddhist monk (fully ordained) with a degree in circus skills and a particular fondness for “animals which form unlikely friendships with other animals.” Like if a goat befriends a horse? “Exactly.” He’s the co-founder of Headspace: a secular course in meditation and mindfulness that sits on your smartphone in the form of an app, and 88

Polly Vernon / The Times / The Interview People

Headspace – The Little App of Calm

with record suicide rates, runs a pilot project tle under 18 months ago. Since then, Headspace that builds mindfulness into basic training. has achieved more than one million downloads in Corporations have begun offering mindfulness 150-plus countries, three of which were paid for by training as part of their employment packages, to Gwyneth Paltrow, Emma Watson and Davina Mcincrease concentration levels and reduce the time Call. “They found it. We don’t go after celebs,” says employees take off on stress-related sick leave. Puddicombe. Paltrow raved about it on her lifestyle Google has a dedicated mindfulness training camp blog, Goop. Watson tweeted about it (“Downloads in California; employees get access to a sevendoubled immediately afterwards,” Pierson tells me). week training course. Davina McCall tweeted: “It is totally amazing. ReSo what exactly is it? ally really amazing. Sorts my noggin out.” Virgin A Buddhist-developed practice, it promotes Atlantic offers a Headspace channel on inflight enawareness of the moment as an alternative to subtertainment packages; new admissions to the Primerging yourself in painful, stressful, unpleasant ory, the rehab clinic, get Headspace as part of the memories from the past, or anxiety over the future. welcome pack; Puddicombe and Pierson are about It teaches you how to see to close a deal with Haryour thoughts and feelings, vard University that will to observe them as if they mean every new student were road traffic; to not receives the app. “It’s beI’ve done Headspace almost every day, and it coming a valuable thing,” has, without question, Changed My Life. How? over-identify with them, or Puddicombe admits. I’m less stressed, less engaged with the frenzied get caught up in them. If it sounds airy-fairy – “flaky” How valuable? intensity of a life dictated by how many emails as Puddicombe puts it – Puddicombe tells me I can read, how quickly, while simultaneously there’s significant scientific to ask Rich Pierson, who texting a friend, tweeting a thought and fact growing in its favour. ducks the question for failing to meet a deadline. If I wake up in Research into the effectiveas long as he possibly the night, I fall back to sleep quickly. I still ness of mindfulness has can, before reluctantly get anxious, I still get sad, I still get revenge been building since the saying, “It would roughly fantasies (oh yeah), but – they don’t consume middle of the last decade, be valued at $40-$60 me. I drink less coffee and Diet Coke, and I’ve when NICE, the National million.” Wow, I say. almost completely abandoned booze. That’s Institute for Health and But, he adds anxiously, mindfulness for you: it makes it tough to do Care Excellence, first ap“Those are not our the self-destructive stuff proved it for clinical use words; that’s what we’ve in the UK for depression. been told. And this is all In early January this year, fantasy land – you know a report based on the analysis of 47 clinical trials these things are insane and the sums people throw involving 3,000 participants showed that mindabout are ridiculous – and we have never talked fulness produces “measurable improvement of up about this to anyone, even our friends and family. to 20% in symptoms of anxiety and depression… People get so hung up on money.” and can also help alleviate feelings of stress and You could see Headspace’s raging success enhance the quality of life.” as part of society’s renewed interest in a more Still not convinced? Well, there’s me. spiritual kind of wellbeing. “Mindfulness is the I downloaded the free, introductory ten-session new black,” the Huffington Post decreed; Goldie sample of Headspace six months ago. I’m not sure Hawn delivered a speech on its potential at Davos why; this sort of thing isn’t my bag. last month. GPs are increasingly recommending Session one went well. Puddicombe presents it as a way to ease patients off antidepressants. it, and is himself presentable: cheerful, relaxed, Every second person I meet seems to be ‘doing’ it neutral-accented, all checked shirts and easy in some way: mindful eating, mindful parenting, chat. He doesn’t talk slowly, dreamily. (When we mindful loving. meet, he tells me he doesn’t know why anyone Mindfulness is also gaining traction in ever does. “I’ve been in ashrams and stuff with unexpected places. The US Marine Corps, faced №1(5), 2014

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Andy Puddicombe is the international poster boy for the modern ‘mindfulness’ movement, and co-founder of Headspace: a secular course in meditation and mindfulness that sits on your smartphone in the form of an app, and promises to change your life. Headspace’s thing is to get meditation and mindfulness to the kind of audience who’d never normally dabble with it: the cynics, skeptics, and the anti-hippies. And to men, who now represent 55% of Headspace users

“Hedonism? Yeah, it can start to seem a bit like hard work,” Puddicombe tells me. My trip to Los Angeles, to Headspace, is about as close as I’ll ever come to a pilgrimage. I tell Puddicombe and Pierson this. They laugh. Headspace HQ is just off Abbot Kinney, an extremely cool, hipster-colonised street in Venice Beach. Puddicombe takes me for a juice, tells me he’s heard word that “collard is the new kale,” then walks me to the new Headspace office: light and airy and extremely minimal. It adjoins the private office of the man who created Grand Theft Auto, only he isn’t there that much, apparently; and they’re a block away from Gold’s Gym, where Arnold Schwarzenegger trained. Headspace HQ is populated by a smattering of good-humoured employees. I’d wondered if it might feel a bit culty, but no. It feels like a hot new tech start-up. Puddicombe and Pierson are expanding. “There are 20 of us in [the] London [office], and we’ve got ten out here,” says Puddicombe. “Between now and June, we’re hoping to take on 15-20 people for the LA office. Middle of the year, July,

people who always… talk… like… theeeeeeeees… Everyone’s… like… theeeeees… Like an asylum or something.”) And he says things that make sense to me, about the unsettling churn of thought that runs my mind, about the desirability of space from that, about the possibilities of a life lived more lightly. Once I finish the ten-day sample, I’m hooked. I sign up for a year, 365 different audios that lead you through a well-plotted mindfulness “journey.” It costs around £54 [$89]. I’ve done it almost every day since, and it has, without question, Changed My Life. How? I’m less stressed, less engaged with the frenzied intensity of a life dictated by how many emails I can read, how quickly, while simultaneously texting a friend, tweeting a thought and failing to meet a deadline. If I wake up in the night, I fall back to sleep quickly. I still get anxious, I still get sad, I still get revenge fantasies (oh yeah), but – they don’t consume me. I drink less coffee and Diet Coke, and I’ve almost completely abandoned booze. That’s mindfulness for you: it makes it tough to do the self-destructive stuff. 90

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Puddicombe knew nothing about that sort of thing. Aged 22, he’d walked out of a degree in sports science, convinced he should go to India and train to be a Buddhist monk. How does anyone come to that conclusion, I ask. We’ve relocated to a bench just off Venice Beach itself. Surf pounds, the sky’s blue, and Puddicombe is telling me his life story. “It’s really hard to explain. I’d talked about it with a girlfriend who was interested in meditation, and she kept telling me there were these monks and nuns and stuff, and after a while I thought, that’s probably what I need.” How did the girlfriend take that? “Really badly.” He had attended his first meditation class with his mother when he was 11; he’d gone on the understanding he’d learn kung fu. “But I liked it. I kept on, on and off, for a couple of years.” He gave meditation up for sport in his mid-teens. But then trauma struck at 18. In the same six-month period, four people close to him died. “I was just like, ‘Jeez.’ Didn’t know what to do with it.” He “ran away”, travelled, then began the sports degree. But “there

August, we’ll probably be 50, as a team.” “People normally come to us,” adds Pierson. He’s 33 years old, small and handsome; a bit like a good-looking doll. “They find us.” Pierson grew up in Kent, the son of a self-made businessman and a boutique-owning mother. He spent the early part of the 2000s working as a creative in the London advertising industry, a member of the team at Bartle Bogle Hegarty, “out all the time, drinking a lot, buying a lot of trainers, hanging out with d***heads, probably being the biggest d***head…” as he puts it. At 26, he got promoted and collapsed under the pressure. “I fell into a fit of depression.” In 2007, a friend suggested he see Puddicombe, who was treating depression with meditation courses at a private clinic in the City. The two men got on immediately: “a big old bromance.” Puddicombe was thinking about taking mindfulness techniques to a wider audience, and asked Pierson for advice. “We ended up doing a sort of a skills swap,” says Pierson. “We’d do an hour of meditation, then go across the road to Starbucks, filled with City boys, and do Marketing 101.” №1(5), 2014

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was this nagging stuff, which I just hadn’t dealt with”. One afternoon, at the end of his first year, he concluded that the only way he could deal with it was by becoming a monk. “I went straight into university that afternoon, told my head of year. He said, ‘This is crazy. Get some Prozac. You’re going to regret this decision for the rest of your life.’ ” Do you regret it? “No. Unquestionably, it was the best decision I’ve ever made in my life. Other than marrying my wife.” Puddicombe went to Dharamshala, India, because “that’s where the Dalai Lama was. It seemed like a good place to start.” He “blagged” his way into a retreat, and from there, began his formal training. “Hard. Really, really hard. The first one I did, 18 hours’ meditation a day…” Then there was the celibacy. “That was the real challenge. As a young guy.” After a few years ducking in and out of novice life and monasteries in Tibet and elsewhere, of

A Buddhist-developed practice, it promotes awareness of the moment as an alternative to submerging yourself in painful, stressful, unpleasant memories from the past, or anxiety over the future. It teaches you how to see your thoughts and feelings, to observe them as if they were road traﬃc; to not over-identify with them, or get caught up in them

periods of celibacy interspersed with relationships (while Puddicombe continued to train as a lay person), he was ordained as a full Buddhist monk, and sent to a monastery in Moscow, where he lived and worked for more than four years. While there, “aged about 30, I met this chap, Marcus, who worked with BP. He’d been a Buddhist for about 20 years.” He introduced him to the idea of teaching mindfulness in a corporate environment “and to the idea of not being a monk. Leaving the monastery. He said, ‘I think you could do some really amazing things in the world.’ I thought, ‘What’s more important to me? Being a monk or 92

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Forget the people who are already leaning towards meditation; they’ll find it.’ ” Also, they’re annoying hippies, I say. Puddicombe laughs. So Pierson brought his branding experience to the Headspace table, his awareness of how to target a product at a specific market with language and visuals, and Puddicombe brought the expertise. Who came up with the name? “Richie did the Head. I did the Space.” They started with a series of events four years ago, “Headspace on tour” – monthly eight-hour sessions at a 300-seater venue which cost £250 [$415] a ticket. They were certainly profile-building, but filling three hundred seats at £250 a pop was never going to be easy. Plus, “We started getting requests: ‘Could you give us a few days to take away?’ Or friends started saying, ‘I can’t come to London. Is there something I can use?’ So we started selling what’s now Take Ten [the free Headspace sample], for about a tenner [$17], as an old-fashioned podcast. Then people said, ‘Have you got any more? What do I do after ten days?’ So they sat me in a recording studio…” Puddicombe was resistant to the idea of producing video and audio content. “I wasn’t familiar with being recorded; it was all a bit alien, to sit down with a microphone. I prefer the live stuff.” Also, he is extremely passionate about one very specific aspect of his work. “Lineage. The only reason the teachings work is because they’ve been passed down from one person to the next. The oral tradition. And over many hundreds of years, they’ve been refined and developed.” He was, and remains, anxious that the lineage should not be messed with. “I’m anal about that. Richie’s anal about the colour palette.” Once Pierson had convinced Puddicombe that the future for their company was digital, Puddicombe was required to do around 700 hours of recordings in Soho studios over the course of six months. “Which was hard enough. Only it turned out I had cancer. I didn’t know that then.” Weeks after the pair of them relocated their operation to LA, last March, Puddicombe was diagnosed with a very aggressive form of testicular cancer. “They whipped out one of the jewels, right away. They said, ‘You haven’t got a family.’ Had to do a deposit.”

teaching meditation?’ And by that point, I wasn’t adverse to the idea of having a partner, a wife, maybe a family.” But leaving a Moscow monastery to return to the UK threw up logistical issues. He calculated that he could go to London to study: “Get a student loan, get a grant…” A contact at the Moscow State Circus (“Bear with me, Polly, I know how this sounds…”) suggested he study circus arts, because he was good at “straps, which is where you roll up, you spin round, that malarkey. And balance. I had a young German girl who used to balance on my head.” So he moved to London, studied at circus school during the day, and formulated corporatefriendly meditation courses at night. He got injured in his final year of the degree. “We were doing some photographs for a magazine, and Natalie the German girl was standing on my head. My neck gave way. I ended up on a spinal board, going to hospital, and then I got sent to rehab.” While there, he met a sports physiotherapist called Lucinda, whom he would marry. He also ended up getting treatment at a clinic that would go on to hire him to practise meditation. “I was 34. This was… 2006, 2007. Mindfulness had just been approved by NICE for use in the treatment of depression. There were no clinically trained people, so their only option was to take on people like me, who had no clinical experience but who had trained in mindfulness.” Clients were predominantly “City folk – male and female, but 80% male – who were struggling around the financial crisis.” Did he not find them resistant to the idea of meditation? “Really resistant. But that was brilliant. Because they were such a tough audience, that made me find a language that fed into the Headspace mission and vision. They were the far end of the spectrum, which was perfect.” This, then, is Headspace’s thing: to get meditation and mindfulness to the kind of audience who’d never normally dabble with it: the cynics and sceptics, the anti-hippies such as me. And to men, who now (surprisingly, and to the delight of Rich Pierson in particular) represent 55% of Headspace users. “It was Rich who pushed the boundaries: ‘Let’s try to reach people who’ve never done meditation. №1(5), 2014

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at university, when contemplating becoming a monk: “Like there was no other option available, in the nicest possible way.” “We are also a couple of total optimists,” says Pierson. Their ambitions are vast. Puddicombe says he would like ten million downloads within the next couple of years. “Five years? Rich and I talked, early days. Could we get 100 million doing this? It sounds extravagant, ridiculous but… look at yoga.” But there are complications involved with scaling up their operation. First, they have to find and hire international Andys, people who can voice Headspace for non-English-speaking territories. “We need to find a Juan,” says Puddicombe. On top of which is the issue of his burgeoning fame. “There isn’t any, really,” he says. Well, there is definitely some, I say. I knew who he was before I met him; plus, he’s told me he got spotted three times in the same morning on the streets of Notting Hill over Christmas. And this story: “I was on the Tube, packed carriage, and this man kept staring at me. I wasn’t sure why, ducking out the way behind my Metro… The train pulls into the station, the guy looks at me and says, ‘You changed my life.’ Then gets off. The whole carriage turns to look at me: what did you do to that man?” He loathes the idea of being considered a guru. “In the traditional sense of the word, I am so far off that. Not even in that league. From a Western point of view, there’s so much wrapped up in the self-help movement… When Rich and I sat down and looked at how we were going to do Headspace, we picked out three or four so-called gurus, and we said, ‘Right. This is where we don’t want to be.’ ” Sinister cult-of-personality sort of thing? “Exactly.” I wonder if Headspace is making Puddicombe and Pierson rich, or how they feel about the inevitability that, if it’s as successful as they hope, it soon will. “Well,” says Puddicombe, “it’s still a start-up. So we’re at an interesting stage where we get Silicon Valley venture capitalists, on the phone and on email, every week. We went through a phase, couple of months ago, when we had 20 in the space of a few weeks: ‘Are you looking for investment?’ They’d come down, take us for dinner.” Show you a good time?

That must have been tough. “Pretty tough. Pretty stressful.” Now, less than a year after the diagnosis, Puddicombe appears to be cancer-free. He’s being treated by Lance Armstrong’s doctor – “The cancer one, not the dodgy one” – because he was the only oncologist to offer an alternative to more invasive preventative surgery and chemotherapy. “Now I get scanned regularly, so they can check.” He’s OK, he says. The scans remain clear. “But I don’t feel it’s over. I’m going to get scanned for the next five years. And OK, it’s great at the moment. Don’t get me wrong, I’m really happy that nothing’s coming up. But it doesn’t feel like, right, let’s all go out and get drunk.” The coda to all this is that Lucinda Puddicombe is now pregnant with the couple’s first child. Pierson and Puddicombe never thought Headspace would fail. When they came up with the idea, Puddicombe says he felt as he had 94

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He loves his dressing gown. He found it while staying at an Ace Hotel, hanging in the wardrobe for guest use, and he loved it so much that he bought it. He describes its benefits to me at length, says he has been known to do Headspace recordings while wearing it. “I’ve got a matching one,” says Rich Pierson. Yours is a bromance of epic proportions, I say. “Yes,” Puddicombe says. “No one believes us, because we work together and spend our free time together and we moved to LA together, but we never argue.” “Never,” says Pierson. “But really: how could anyone argue with an ex-monk?” They take me to an afternoon screening of The Wolf of Wall Street by way of a goodbye gesture, which seems hilariously inappropriate given the definitively unmindful content of the film, but which is really fun.

‘‘Weeell… It was OK. [But] some of them! Talk about misreading! Richie and me, we’re normal blokes, but also, given the nature of what we do… We met up with these guys in Paris, where we were doing a talk. A venture capitalist firm wanted to meet us there. And they sat down, American guys, and they’re kind of, ‘Once we invest in someone, we’re really tight with them. We’ll take them to lapdancing clubs! You’d love our offices, they overlook this yoga studio where all these sweaty women come out!’ ” Rich and I are looking at this bloke: you could not have read this more wrong. Even if they’d made us an amazing offer, there’s no way in the world we could have done business with them.” So you’re not rich? “No! My wife would probably be OK about it, if I were. But me. If I can have my surfboard and my juggling balls, I’m pretty happy. Oh, and my dressing gown.” №1(5), 2014

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Has Beijing’s Trojan Horse Developed a Limp? Olga Sorokina, Beijing Ten years ago a network of Confucius Institutes was founded as a soft power tool designed to promote Chinese culture and foster the country’s positive image on a global scale. However, it appears that the institution has not managed to fulﬁl its primary objective, and to an extent has become ‘westernized.’ BRICS Business Magazine interviewed academics closely familiar with the Confucius Institute system to explore the reasons behind this.

Currently, Confucius Institutes are operating at 18 universities in Russia, eight in Brazil, four in South Africa and two in India. The primary objective behind the Hanban initiative is to teach Mandarin Chinese as a foreign language outside of China, to control a single Chinese language testing and certification system, and to foster a positive image of Chinese culture. But as the CI network celebrates its tenth anniversary today, many experts believe that the implementation of the idea was far from perfect, arguing that the institutes have failed in the West primarily because of their close affiliation with the Chinese government structure. Confucius Institutes are accused of attempting to promote the views of China’s governing

The People’s Republic saw the launch of a worldwide network of Confucius Institutes (CIs or Hanban), supervised entirely by China’s Ministry of Education, as a matter of paramount priority for the country. Launched back in 2004 in Seoul, South Korea, branches were soon open in educational institutions in the United States, Germany, France and many other countries. The Chinese government set up a separate budget to finance the CIs. According to various estimates, between 2009 and 2010 it allocated $8.7 billion to improving China’s image abroad as part of its ‘soft power’ doctrine. Education grants were awarded to 265,000 students. In October 2010 CIs went operational in more than 90 countries with 322 institutes, including 80 in the United States alone. 96

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in which I attempted to interpret Chinese ‘untranslatables’ such as shengren† and junzi‡ to make them more understandable for foreigners. Hanban is affiliated with the Ministry of Education. Mr. Ma told me that the Ministry wanted to have my works published by a publishing house of my choice. I chose China’s Foreign Language Press, and Mr. Yang became the project’s supervisor. What would you say has been the biggest achievement of the Confucius Institute over the last few years? The Confucius Institutes were founded in 2004 as a cultural answer to Germany’s Goethe-Institut (founded in 1951), the UK’s British Council (founded in 1934) and France’s Alliance Française (founded in 1883 but based on a somewhat different model). The success of CIs boils down to sheer numbers: there are already 350 CIs operating around the world, about a hundred more than there are Goethe-Instituts or British Councils. While the global market for British and German culture is saturated, Hanban aims to establish 1,000 CIs. But are the CIs really effective? I am not so sure. What are the ‘tools’ the Confucius Institutes are using to raise awareness? There are generous scholarships, free materials and well-trained teachers. Is this is not enough? The CI first wins the hearts and minds of top officials at foreign universities: deans, professors, and administrators. That’s why CIs are associated with foreign universities. That gives China an edge. In addition, any CIs abroad have ‘codirectorships’ – one dean from China and one from another country. That’s a great strategy. I have seen with my own eyes how Western specialists compete for those prestigious posts of ‘Director of the Confucius Institute for X-land at the University of Y.’ It’s inevitably followed by a promotion at the University of Y from unknown professor to the rank of dean. It is because, when dealing with China, no one takes half measures. The perks are obvious: an affiliation with China’s Ministry of Education, easy access to visas, flights, conferences, and wining and dining. Naturally,

Communist Party on such issues as Taiwan and Tibet, of limiting academic freedoms at host universities, of spying on students, and even of taking part in industrial and military espionage on behalf of the People’s Republic. From time to time articles published in the Western press have referred to Confucius Institutes as the ‘Trojan horse’ of the Communist Party of China. As a result of growing criticism, teaching staff at Melbourne University and the University of Chicago spoke out against the development of Confucius Institutes.

Dr. Thorsten Pattberg is German writer, linguist and cultural critic, and author of The East-West Dichotomy, Shengren, and other books. He worked at the Confucius Institute in Beijing until late 2013. Today he lives and works in Tokyo, where he is writing a new book commissioned by the Confucius Institute Headquarters. He is a former Research Fellow at Peking University’s Institute of Advanced Humanistic Studies – one of the largest academic institutions in China.

Dr. Pattberg, how did you manage to get a job at the Confucius Institute? After all, it is common knowledge that the organization is virtually an impenetrable bastion for foreigners. In April last year Peking University sent me to a meeting with two officials from the Confucius Institute – Mr. Ma Jianfei, Deputy Director of Hanban, and Mr. Yang Jincheng, Director of the Division of Teachers, Confucius Institute Headquarters. Hanban is located on Deshengmengwai Street, only 20 minutes by taxi from the Peking University. We met in a café and ordered Pu-erh tea. Both gentlemen were familiar with my essay entitled The End of Translation,

† Shengren is the single most important concept in Chinese civilization, and can be loosely translated as ‘sagehood’ or ‘sainthood.’ The term refers to the sagehood of the Chinese civilization, distinguishing it from foreign ‘barbarians.’ ‡

Junzi – ‘righteous man’ – is a concept of pious conduct in Confucianism.

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Sure, the CIs are financed by the Chinese government, but Goethe-Instituts are also funded by the German government as British Councils are by the British government. They may appear to be non-governmental organizations (NGOs), but only on paper. That also holds true for many Western NGOs in China, such as Germany’s DAAD [the world’s largest academic exchange service, affiliated with the German government]. I always ask my students, “Why do you think those European states are so influential? The answer is simple: it is because they have invented the system that underlies the society we are living in, and they know how to pull all the strings.” The CIs will remain pro-government, with their instructions coming from Hanban and the ministries, but so will their Western counterparts in China, promoting Westernization. There is nothing wrong with upholding one’s principles. But they can coexist peacefully. The only way to avoid further politicization, I think, is dialogue, mutual trust, and more transparency. In his political theory Confucius himself taught: “Settle one difficulty, and you keep a hundred away.”

the newly appointed deans will introduce their students to their CIs. It’s an authoritarian-style top-down approach. What are the reasons behind Confucius Institutes’ setbacks in the West? Frankly, I don’t think the CIs are very successful in promoting Chinese culture. The West brought Western values to China – concepts like democracy, human rights, the rule of law, philosophy, science, economics, capitalism, and communism. That was true soft power. China, on the other hand, has nothing to offer in return. The CIs teach the Chinese language; so students learn the Chinese words for all those Western concepts. They learn how to write democracy in Chinese – ‘minzu zhuyi’. If the Confucius Institutes were GoetheInstituts or British Councils, they would be promoting unique Chinese concepts to the West, concepts like wenming, datong, and rujia (‘essence of civilized society,’ ‘great harmony or unity in the society,’ and ‘ability to govern/benevolence of the people’). But no, the CI textbooks give you nice Western-style ‘translations’: civilization, harmony, and Confucianism. That’s a 1:1 Western reproduction! As long as the Chinese educators haven’t decided on what China should be all about, the CIs themselves will undergo Westernization and suffer defeat. They could open 10,000 more CIs; it would be perceived as something great by the West. The Confucius Institute has faced criticism from Western media and scholars. For instance, some accuse it of promoting Chinese Communist Party values rather than traditional Confucianism. What can you say about the criticism that CIs face in the West? As long as China continues to waste billions in renminbi to fund the CIs, all will be fine. What sense does it make to criticize the sponsor? Also, as I said earlier, at the moment, the demand for CIs from foreign universities isn’t ebbing, as academics and politicians obviously want to raise their profile using this ‘Chinese government connection.’ The Institute has been criticized for its direct affiliation with the Chinese government. The very objective of soft power, which is to promote a nation’s image, no longer makes any sense since the public view it as pro-government propaganda. What do you think?

Dr. Tao Ran is professor in the Department of Economics at the Renmin (People’s) University of China, Beijing.

The Confucius Institute is a part of China’s ‘soft power’ diplomacy aimed at promoting the image of the People’s Republic. In today’s globalized world, in choosing products made in a specific country, people are not only guided by the low prices – they also do it because they find it prestigious to buy something specifically made by this given country. I believe that China will be able to improve its international image and strengthen its soft power when the government becomes fully accountable for its decisions both to Chinese society and the international community, not just continuing to spend its money abroad. 98

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CONFUCIUS INSTITUTES AROUND THE WORLD

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Political scientist Dr. Matthew Ferchen is associate professor

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I worked with various universities in the US and I would be surprised and appalled if any one of them would put up obstacles in the way of Confucius Institutes, or openly accuse CIs of limiting academic freedoms. The reason behind it is simple: the Confucius Institutes act as sponsors. My understanding is that the Confucius Institutes are mostly geared toward teaching Mandarin Chinese. Beyond language teaching in the US, I seriously doubt that the Institutes would be capable of spreading any propaganda to promote the ‘Chinese culture’ or saying something definitive about Confucianism in China. That is because within China itself there is little agreement on what constitutes core cultural values, and this includes agreement on the legacy of Confucius and many other aspects. Probably the best course of action for the Confucius Institutes and their host universities is simply to focus on language training and in so doing try to convey basic elements of the national identity in a more effective way than any government propaganda ever could. Parenthetically, in the BRICS countries and other emerging markets, learning Chinese can be a very effective tool of economic empowerment if it provides people with the skills to do business or otherwise engage with China on their own terms. Ultimately I can say that any efforts by the Chinese government to exercise control or censorship either at home or abroad are by definition selfdefeating.

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The Functions of the Confucius Institute < < <

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Offer Chinese teaching programs to people from all walks of life. Offer Chinese teachers training programs. Organize all kinds of Chinese proﬁciency tests and Chinese teachers qualiﬁcation authentication. Provide information and consultation services about Chinese education, culture and economy. Develop study programs about modern China.

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Strong Softness Celso Amorim Usually it is heads of state and foreign ministers who talk about soft power, not chiefs of defense. Brazil is an exception. The country’s Minister of Defense can freely converse on world affairs – while also managing to build nuclear-powered submarines.

weapons, having signed a comprehensive nuclearsafeguards agreement with Argentina and the International Atomic Energy Agency. Through the Common Market of the South (Mercosur) and the Union of South American Nations (Unasur), Brazil is helping to integrate the region politically, economically, socially, and culturally. But is soft power enough for one of the world’s major emerging countries? To be sure, Brazil’s peaceful foreign policy has served it well. Brazil has used its stature to advance peace and co-operation in South America and beyond. Its constructive stance derives from a worldview that accords pride of place to the values

It is, perhaps, a truism for Brazil’s citizens that their country is and always will be a peaceful one. After all, Brazil has lived with its ten neighbors without conflict for almost 150 years, having settled its borders through negotiation. It last went to war in 1942, after direct aggression by Nazi U-boats in the South Atlantic. It has forsworn nuclear

Celso Amorim is Brazil’s Minister of Defense. He was Minister of Foreign Affairs from 1993 to 1994 and from 2003 to 2010.

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of democracy, social justice, economic development, and environmental protection. Brazil’s unique approach to promoting these ideals is an important source of its soft power, reflected in the broad international support that placed Brazilians atop international institutions like the Food and Agriculture Organization and the World Trade Organization. Yet no country can rely on soft power alone to defend its interests. Indeed, in an unpredictable world, where old threats are compounded by new challenges, policymakers cannot disregard hard power. By deterring threats to national sovereignty, military power supports peace, and, in Brazil’s case, underpins our country’s constructive role in the pursuit of global stability. That role is more necessary than ever. Over the past two decades, unilateral actions in disregard of the UN Security Council’s primary responsibility in matters of war and peace have led to greater uncertainty and instability. Likewise, little progress toward nuclear disarmament has been made, in disregard of the Nuclear NonProliferation Treaty. Brazil’s abundance of energy, food, water, and biodiversity increases its stake in a security environment characterized by rising competition for access to, or control of, natural resources. In order to meet the challenges of this complex reality, Brazil’s peaceful foreign policy must be supported by a robust defense policy. Brazil’s National Defense Strategy, updated in 2012, states that the modernization of the armed forces is intrinsically linked to national development. Thus, it emphasizes the need to strengthen the domestic defense industry. In accordance with the Strategy, Brazil is enhancing its conventional deterrence capabilities, including by building a nuclear-propelled submarine as part of a naval program commensurate with its responsibilities in the South Atlantic. Brazil coordinates closely on defense matters with its neighbors, both bilaterally and through Unasur’s South American Defense Council, which aims to promote confidence-building, transparency, a joint regional defense industry, and, most important, a common defense identity. One potential mechanism for advancing these objectives is a South American Defense College, now under consideration. №1(5), 2014

To be sure, Brazil’s peaceful foreign policy has served it well. Brazil has used its stature to advance peace and co-operation in South America and beyond. Its constructive stance derives from a worldview that accords pride of place to the values of democracy, social justice, economic development, and environmental protection. Brazil’s unique approach to promoting these ideals is an important source of its soft power

South America is becoming a region where war is unthinkable – what the political scientist Karl Deutsch once called a ‘security community.’ Having visited every South American country in my tenure as Defense Minister, I am convinced that the most effective deterrent on the continent is co-operation. At the same time, Brazil is pursuing increased bilateral defense co-operation with African partners. With our neighbors on both shores of the South Atlantic, Brazil is working closely to strengthen the Zone of Peace and Cooperation of the South Atlantic (ZPCSA), which aims to keep the ocean free from rivalries foreign to it, and from nuclear weapons. Brazil is also reaching out to other emerging countries, such as its fellow BRICS, and members of the IBSA Dialogue Forum (India, Brazil, and South Africa). For example, Brazil conducts IBSAMAR, a regular trilateral naval exercise, with South Africa and India. More broadly, we are exploring ways to co-operate in the joint development of defense technologies. Through such endeavors, Brazil hopes to contribute to a more balanced international order, one less subject to hegemonies of any kind, without losing sight of the importance of mutually beneficial partnerships with developed countries. Even as Brazil hardens its soft power, it remains deeply committed to the path of dialogue, conflict prevention, and the negotiated settlement of disputes. The presence of Brazilian peacekeepers in countries like Haiti and Lebanon underscores Brazil’s contribution to maintaining peace and security worldwide. In the 21st century, a truly stable global order will depend on a legitimate and effective UN Security Council, one that reflects the plurality of the emerging multipolar world. 101

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India’s Cinematic Trident

Bollywood, Tollywood and Kollywood Evgeniy Pakhomov If 90% of the information about the world around us that reaches our brain is visual, cinematography should be given credit as one of the most important factors for a country’s ‘soft power.’ No one would dispute that premise in India. While its domestic ﬁlm industry continues to take its lead from Hollywood, it does know a thing or two about making movies, and exporting them at a proﬁt, in its own unique way.

Indian film industry with its South Asian exotic charm, rajas, temples and legends captured on film using European and American cinematographic techniques. In the 1940s the Western press came up with an unflattering definition of the Indian film studios as a ‘Hollywood for the poor.’ The industry, based around Bombay (now Mumbai), came to be known as Bollywood (to draw an analogy with the ‘dream factory’ at the other end of the world). That was back in the 1940s. Today India would hardly qualify as poor, and the film industry in ‘the world’s largest democracy’ has long become

The history of Indian cinematography began in Bombay 100 years ago. It was back in 1913 that one of the industry’s founding fathers – Dadasaheb Phalke – made his debut feature film, Raja Harishchandra. To be fair, India had seen other movies before, usually with a static camera used to film theatrical plays. In contrast, Raja was a genuine feature film, with a storyline based on the ancient Indian epics the Ramayana and the Mahabharata. Phalke, inspired by Western cinematography, used camera techniques previously unseen in India. The movie blazed a trail for the future 102

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a global leader. During Bollywood’s Golden Age in the 1950s, Indian movies made it to cinema screens across the world. At first these films, full of dancing, singing, and the inevitable happy ending, conquered India’s neighboring regions – Southeast Asia and the Arab countries. They then proceeded to penetrate the Iron Curtain and win over people’s hearts in the USSR, before finally making their way to the West. The country’s film industry today has left the rest of the world far behind in terms of the number of movies released (around 1,000 per year in different languages spoken in India). Indian films are shown in nearly 100 countries – and not just in areas with large local Indian communities. And Bollywood has long since ceased to be the country’s only cinematographic centre – indeed, the number of different ‘-woods’ is mind boggling. There is Mollywood, making films in the Malayalam language, Ollywood, using the Oriya language, and Gollywood in the state of Gujarat. However, the country’s largest and best-known centers remain Bollywood, Tollywood – with films in the Telugu language of Andhra-Pradesh (not to be confused with Bengali cinema, also sometimes №1(5), 2014

For many Asian countries Indian movies turned out to be closer than those produced in Hollywood. Surely the culture and traditions also played a role. As a rule, Bollywood celebrates family values and principles that are more in line with tradition. It places characters in situations and social conditions that one can relate to

referred to as Tollywood) – and Kollywood (Tamil cinema based in Chennai). A TRIFURCATED DRIVE

Shashi Tharoor – a well-known Indian politician and writer – is positive that India’s drive to become a world leader should be rooted not only in the country’s economic or military prowess, but also its soft power, which includes its cultural influence and ability to project an image far beyond the boundaries of Hindustan. Tharoor believes that for India this soft power rests on three pillars: cinema, classical culture (dancing, music and so on), and cuisine. One can only agree. After all, chicken curry has already conquered the Western world, and continues to find a way into the hearts of foreigners through their stomachs. Indian music is not far 103

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Charlie Chaplin. But Kapoor was just the tip of the iceberg – even the famous Disco Dancer, so popular among schoolgirls in the former USSR, was clearly inspired by the American-made Saturday Night Fever, and the songs featured in it were plainly based on Western disco hits popular at the time. And Russian audiences have only to watch the popular 2013 Bollywood film I Love New Year to see that the tradition of borrowing storylines is very much alive today in the Indian film industry: they will easily recognize the Soviet blockbuster The Irony of Fate, or Enjoy Your Bath! And yet, is it true that Raj Kapoor was just a copy of Charlie? Not really. His character is a simple-minded attractive Indian man who maybe bears some resemblance to Chaplin. But he is first and foremost an Indian. Many of the heroes of Indian cinema – Dilip Kumar, Mithun Chakraborty, Dharmendra, Amitabh Bachchan, Salman Khan – while obviously influenced by a whole host of Hollywood superstars, from John

behind – we all recall how classical Indian sitars were favored by The Beatles, The Rolling Stones and Shocking Blue, among other bands. And many Western movie stars have dabbled in various forms of Indian dancing. However, it is India’s film industry that is ranked as its most prominent soft power factor, and rightfully so – after all, cinema can serve to promote images, music, dancing and even cooking. Back in 2007 the prime minister, Manmohan Singh, stated that India’s national cinema could influence the world by telling the story of India’s growing role. “No matter where I go – the Middle East or Africa – everywhere people talk about the Indian cinema,” he stated with satisfaction. The Indian film industry is often accused of plagiarism and of ostensibly copying Western films, storylines, music and images. And that may, to an extent, be true. Bollywood is quick to borrow various stories and styles; for instance, the legendary Raj Kapoor was often reproached for imitating 104

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Western markets. Indian cinema is changing, and while it still retains its colorful traits, it has become more appealing to audiences in Europe and the United States. Many names from the new Bollywood generation are well known in the West, and Indian films have been receiving Oscar nominations since the late 1980s. In 1989, there was Salam Bombay! directed by Mira Nair, and in 2002 Ashutosh Gowariker’s Lagaan. (The first Indian movie to receive a nomination was a drama called Mother India, made back in 1958.) In 2001, Mira Nair’s Monsoon Wedding won the Golden Lion award in Venice. The famous director Baz Luhrmann has said that his musical comedy Moulin Rouge! – nominated for an Oscar in 2001 – was inspired by Bollywood films and their music and singing.

Wayne and Paul Newman to Sylvester Stallone, still remain close to their audience, despite their occasional Stetson hats. “The successes achieved by Bollywood and other Indian studios in Asia were predicated largely on the fact that for many neighboring countries these movies turned out to be closer than those produced in Hollywood. Surely the culture and traditions also played a role. For instance, in Western films a couple of teenagers in love would always run away from their parents to the other end of the world, while their Indian counterparts inevitably had to ask for the parents’ blessing. As a rule, Bollywood celebrates family values and principles that are more in line with tradition. It places characters in situations and social conditions that one can relate to,” Arjun Shrey, an Indian journalist who writes about cinema, told me. Another factor contributing to the success of Indian films is that most of them feature singing and dancing, and have a happy ending. The connection with traditional Indian theater is clearly there: In the end, good always triumphs over evil, the village Cinderella becomes a princess, and the poor boy turns out to be a crown prince. It is not by accident that Boris Ivanov – a well-known Russian orientalist who lectures at Moscow State University – jokingly refers to Bollywood as opium for the people: The poor from rural areas and big cities alike are drawn to the silver screen to escape from their day-to-day problems. Naturally, India has its own social and art-house cinema; however, the vast majority of Indian films have nothing to do with real life. Bollywood and its sister studios definitely qualify as ‘dream factories,’ but with an oriental flavor, and certainly without any place for the poor Asian farmer. “Our audiences prefer escapist movies. There has to be music, dancing, singing … It appeals more to our audience than any movie we could make about social problems,” Randhir Kapoor explained to me. Kapoor is the eldest son of Raj Kapoor and an actor, director and producer in his own right. It certainly appears that Indians (or even Asians generally) are not the only audience to find such films appealing. Indian actors and directors were always exceedingly popular in the former Soviet Union. However, in today’s Russia this love affair with Bollywood seems to have run its course and Indian film studios are gaining a firmer foothold in №1(5), 2014

WIDESCREEN DIPLOMACY

The famous Indian film producer Kunal Kohli once told me that in his opinion Indian films were often on a par with those made by Western studios, but that the problem of management still remained: “Hollywood is very proactive and even aggressive in promoting its movies. We haven’t learned to do that yet,” he says. According to Kohli, Bollywood is ready to learn but it will take some time. Once this obstacle is out of the way the popularity of Indian films is likely to grow at a much higher pace. All of this is ever more important for India. In recent years the country has come to view its film industry not just as a tool to support its economic and political ambitions, but also as a weapon against extremism. The mass media in India often raise the following question: If the popularity that The Beatles and The Rolling Stones enjoyed among young people in socialist countries helped to overthrow communist regimes, can Bollywood play a similar role in the fight against religious – and primarily Islamic – fundamentalism? Shikha Dalmia – a political analyst at think tank the Reason Foundation – believes that Western pop culture cannot offer an adequate response to fundamentalism due to a significant cultural divide. He has argued on reason.com that while young people in Pakistan or Saudi Arabia are certainly familiar with MTV music videos, Hollywood movies and Western music in general, Western culture does not enjoy a great deal of influence. 105

SOF T POWER

For radicals, these entertaining and light pictures are dangerous, with their ‘sinful’ singing and dancing. In April 2007, Islamists from the notorious Red Mosque in Islamabad organized a ceremony of videodisc burning. They piled videodiscs and cassettes together to make a gigantic bonﬁre that was set ablaze by the imam of the mosque, who claimed in my presence the ﬁlms were “sinful and lewd”

in my presence that the films were “sinful and lewd.” Perhaps there were some porn films in the pile but, from what I could gather, the vast majority of discs contained Bollywood films with beautiful Indian actresses prominently featured on their covers. In 2008, Pakistan somewhat loosened its ban on Bollywood films and audiences flocked to theaters to watch long-awaited Indian movies. However, the opponents of Indian cinema still file lawsuits in attempts to bring back the ban. Indian films are equally popular in Afghanistan. The people of this country have long been some of Bollywood’s greatest admirers, and this affection managed to survive even during Taliban rule, when movies and television were banned. After the fall of the Taliban movement and the return of television to Afghanistan, Indian soap operas became hugely popular. They say that when a new episode is airing, terrorist activity tends to go down. It is hard to say whether that is really the case, but radicals in Afghanistan are also staunchly against Indian cinematography. Still, I imagine they find it difficult to fight Bollywood in the age of satellite dishes. The soft power of cinematic entertainment keeps smashing holes in the armor of traditional societies. It would be too far-fetched to claim that the Indian film industry will singlehandedly defeat extremism. It is obvious, however, that in regions characterized by a growing confrontation between radical and moderate Islam, Bollywood has already become a trusted partner for the moderates.

Bollywood is clearly a different story. Today the Middle East has become one of the main markets for the Indian film industry. Dubai, for instance, often plays host to Indian film festivals and premieres. Even though Pakistan introduced a ban on Indian cinema screenings following the Indo-Pakistani war of 1965, video stores have remained full of Bollywood movies. Pakistani audiences watch all of the latest Indian blockbusters and know all the Bollywood celebrities. And many Muslims star in Indian films, portraying the image of a modern man, a successful movie character who lives in peace with the tenets of his religion but whose mind has not been ‘polluted’ by the radicals. These films often feature a lot of music, including Sufi songs. For radicals, these entertaining and light pictures are dangerous, with their ‘sinful’ singing and dancing. The Taliban in Afghanistan and Pakistan have been adamant about banning all films and television in the territories under their control. In April 2007, I witnessed a ceremony of videodisc burning organized by Islamists from the notorious Red Mosque in Islamabad. Several months later the mosque, which by that time had become the headquarters for radicals who had declared a holy war against the government, would be stormed and taken over by the Pakistani army. But it was with the war on video products that the Red Mosque leaders started their quest. They piled videodiscs and cassettes together to make a gigantic bonfire that was set ablaze by the imam of the mosque, who claimed 106

India’s Cinematic Trident

Indian Spices for Export Commercial feature films are financed by production companies, but it is also often the case that the rights to a film featuring celebrities are sold long before it is actually made. Everyone knows that songs play a very important role in Bollywood – and not merely as a decorative element: film soundtracks often account for between five percent and 20% of overall sales.

India to be awarded an Honorary Oscar

branches in the US, the UK, and the

In fact the success of a ﬁlm is often

for Lifetime Achievement), Mira Nair,

UAE, among others. Films are shown

determined by the popularity of the

and other renowned ﬁlmmakers. Many

in movie theaters, distributed on DVD,

musical hits featured in it. For that

movies that the organization helped

and aired on cable television.

reason a ﬁlm’s soundtrack is often

produce have represented India at

available before the movie is released.

prestigious international ﬁlm festivals.

performance of Indian ﬁlms is hardly

The Indian authorities work hard

The NFDC has also supported the

comparable with that of Hollywood,

to support the country’s ﬁlm industry.

production of a number of foreign

but the revenues continue to grow

As early as 1975 the Ministry of

ﬁlms about India, including Richard

steadily, including in overseas markets.

Information and Broadcasting set

Attenborough’s award-winning Ghandi.

For instance, the most popular Indian

up the National Film Development

Indian producers are also

Naturally, the box oﬃce

ﬁlm in 2013, Dhoom 3 (known in

Corporation (NFDC) in Bombay,

proactively involved in Western ﬁlm

English as Blast 3 and in Russia as

where the most popular studios are

productions that also sometimes

Bikers 3) netted $84 million on the

located. The NFDC’s main objectives

feature Indian actors, screenwriters,

domestic market – a great result by

are to support and foster modern

or stakeholders. Merchant Ivory

Indian standards – and $28.6 million

Indian cinema and provide assistance

Productions, set up by Indian

abroad. Another popular picture,

in harnessing state-of-the-art

entrepreneur and producer Ismail

Three Idiots, netted $63 million

technologies.

Merchant and American director

domestically and $26 million overseas.

The NFDC also supports non-proﬁt

James Ivory, is one of the most salient

Perhaps the most popular category

‘parallel’ Indian cinema, addressing

examples. The company released

of Indian ﬁlms, both in India and

the social issues and real problems

a number of classics.

abroad, are so-called ‘masala’ ﬁlms

faced by Indians. All in all it has helped

Indian commercial ﬁlms are also

(a masala is a mix of hot spices), which

release more than 300 ﬁlms in various

ﬁnding their way into overseas

combine several genres in one movie,

languages spoken on the subcontinent,

markets without the aid of government

ranging from drama to action – but

including motion pictures directed by

agencies. Plenty of domestic

always with the traditional happy

Satyajit Ray (the only director from

distribution companies, including

ending.

Eros International and Red Chillies Entertainment, also promote Indian ﬁlms abroad. The largest – Eros International – maintains a distribution network in 50 countries and operates №1(5), 2014

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Soft Revolution Claire Hsu talks about what the museum boom in China is likely to bring and what it can tell us about Chinese society.

many of which were destroyed or closed during the Cultural Revolution. Art museums are in the minority in a scene which encompasses the most specific and mundane of collections, including the Beijing Museum of Tap Water. However, the most prominent buildings are dedicated to the arts. The decision to expand the National Art Museum of China to six times its current size in a new building in the Olympic Park at an estimated cost of $145 million, led by the French architect Jean Nouvel and the Beijing Institute of Architectural Design, is a case in point. Investment in China’s museums doesn’t come from the government alone. The private sector increasingly funds high-profile collections, from the wellestablished Rockbund Art Museum in Shanghai and the Ullens Center for Contemporary Art in Beijing, to the new, lavish Sifang Art Museum in Nanjing and the Yuz Foundation showcasing contemporary art

China’s museum boom has generated a lot of attention recently, as growing government and private investment has pushed the total number of museums to about 3,800 – and rising. To get a sense of the speed and magnitude of this trend, the figure has almost tripled from the 1,373 museums open in 2000, and the majority of those were built in the years since Deng Xiaoping’s economic reforms in the late 1970s. In 1949, for example, when the communists took control, there were only 45 museums in China,

Claire Hsu is co-founder of the Asia Art Archive and a World Economic Forum Young Global Leader. She participated in the World Economic Forum’s Annual Meeting 2014.

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Soft Revolution

we must ask whether these state-run spaces can truly in Shanghai. There are many reasons for this boom, become platforms on which ideas and art practice including a growing interest in investing in art among can be tested and pushed. At the same time, how China’s new class of super-wealthy, priority access to will these spaces invite and develop critical thinking state-owned land, and a growing philanthropic will to and inquiry? It is only in these environments that art share one’s collection with the public. can truly flourish and evolve our current thinking of It is evident that the government has identified the world. And it is art that pushes the boundaries art and culture as a pillar to buttress China’s national that will ultimately become historically significant. identity and position as a world superpower. This While critically engaged art is being made by is demonstrated not only in the extensive stateChinese artists in China, what does it mean if they sanctioned building of museums, but also in its cannot show their work in the hundreds of art involvement in expanding the market for art in museums being built in the country? China. China’s largest auction house, Poly Auction, At the non-profit organisation Asia Art Archive, is also the third-largest auction house in the world, which I co-founded in 2000 in Hong Kong, for and part of the $40 billion state-owned Poly Group, example, we felt it essential which covers a wide range to start with the ‘software’ of investments. The majority of the art museums being built, while While China is donning the latest architectural coats, are severely first (an extensive public archive on the recent witnessing what might be lacking in content, programming or qualiﬁed described as a true cultural professionals, which often come as an afterthought. history of art from Asia, which is constantly revolution – in stark Many of the state-run museums have declined to contrast to the 1966-1976 show or collect experimental art, or anything that activated through public period of the same name, may be deemed controversial. And most museums programmes) then shift which saw the destruction double up as rental spaces which in effect means the physical walls of the of books, museums that anyone who can afford to rent the space can institution around the content, and gradually. and cultural objects on have a ‘museum’ show And while China is a national scale – there one of the highlights of our collection, our intent are a number of critics who view China’s current is to establish a comparative approach between trajectory as being too focused on the buildings, the different art histories of the region and draw with little regard for content, too market orientated, alternative frames of reference from those welland stifled by political constraints. The majority travelled between Europe and the US. of the art museums being built, while donning the As China embarks on the largest investment in latest architectural coats, are severely lacking in the arts in the region, will it take the lead in opening content, programming or qualified professionals, up an exchange of ideas through the arts between which often come as an afterthought. Many of the neighbouring countries such as India and Indonesia, state-run museums have declined to show or collect so it is not merely an inward-looking, national experimental art, or anything that may be deemed process? And in what way will the Chinese art world controversial. And most museums double up as rental impact on those in other parts of the globe? spaces which in effect means that anyone who can It is very likely that most of the museums being afford to rent the space can have a ‘museum’ show. built will have a short shelf life, but those that On the other side of the argument, with survive, that continue to receive backing and museums in the West struggling to survive and stay become relevant to society, will play an important relevant in the 21st century, might these kinds of role in presenting narratives and histories through spaces, which blur private and public descriptions art to the public. The future of China’s art scene will and allow for commercial funding, offer a more continue to be inextricably bound up with changes sustainable model for the future? And might we to its society and its role in the world. We must speculate that the future of the public exhibition is hope that art fundamentally becomes more than one that will operate in less permanent and more a trophy; a valued space for ideas and knowledge fluid structures? that will enrich one of the most rapidly changing While there are varying schools of thought on the societies in the world. current museum boom in China, most importantly №1(5), 2014

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25 Languages of Our Time David Pegg There are more than 6,000 languages spoken in the world today, and 30% of them are used by no more than a thousand people. To identify the 25 most signiďŹ cant languages of our time, one must factor in not only the number of native speakers of each language, but also how many people speak it as a second language. One should also take into account its inďŹ&#x201A;uence on global commerce and trade, as well as whether it enjoys the status of a lingua franca.

Source: List25.com 110

25 Languages of Our Time

25/

21/

Although it is spoken by almost 80 million people in North Korea, South Korea, and China, it has not achieved a significant level of influence beyond the borders of the Korean Peninsula. It is also one of the hardest languages for foreigners to learn, along with Arabic and Japanese. For Europeans and Americans it requires at least 63 weeks of instruction to achieve a workable level of fluency, as opposed to only 25 weeks for Spanish or French.

Javanese is the primary language of an eastern Asian island. Java, found in Indonesia, is the world’s most populous island, which gives Javanese a total number of native speakers numbering close to 90 million.

KOREAN

JAVANESE

20/

POLISH

With the second most widely spoken Slavic language after Russian, Polish speakers stand at about 46 million strong. Although there are numerous communities of Polish speakers living abroad, the language is not nearly as influential as some of its other European counterparts.

24/

CANTONESE

Despite having only 1/20th the number of speakers as its counterpart (60 million), Cantonese has a much more global reach than Mandarin. It is spoken not only in southern China and Hong Kong, but also in Chinese communities around the world.

19/

VIETNAMESE

Spoken by roughly 90 million people, Vietnamese doesn’t rank any higher due to the fact that it is used almost exclusively in Vietnam. The language has, however, begun to propagate beyond the country’s borders as immigrants take it with them to Europe and America.

23/

THAI

While it is technically spoken by around 25 million people, the official language of Thailand has a number of mutually intelligible dialects that brings the total number of speakers to around 60 million.

18/

TURKISH

22/

As the language of the most dominant power in the Middle East and one of the largest economies in the world, Turkish is spoken by 83 million people, primarily in Turkey, but also in various regions around Central Asia.

PUNJABI

With approximately 90 million speakers Punjabi is the tenth most spoken language in the world, and although it is the primary language of the Indian state of Punjab, most of its 90 million speakers reside in Pakistan. As far as having global influence, Punjabi hardly compares to some of the other languages on this list, but with so many speakers it was bound to end up on here somewhere.

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17/

BENGALI

With over 200 million speakers, Bengali is the sixth most spoken language in the world. The only reason it is so far behind the other five (which rank much higher on this list) is because it is primarily spoken in only one very small geographical region – the extremely densely populated country of Bangladesh.

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16/

11/

With a total of around 50 million speakers, the mutually intelligible languages of Dutch and Afrikaans find significant usage everywhere from Europe to South America, to Indonesia. Afrikaans is a daughter language spoken in South Africa, formed from Dutch dialects.

In Malaysia it is known as Malaysian, while in Indonesia it is known as Indonesian. Although the nomenclature can get a bit confusing, Malay as a whole is spoken in numerous countries throughout the region, accounting for hundreds of millions of speakers.

DUTCH/AFRIKAANS

MALAY

15/

10/

ITALIAN

HINDUSTANI (HINDI/URDU)

In the European Union it has 65 million speakers, but if you count the numerous regions abroad where it is spoken as a second language then the number gets closer to 90 million. Notably it is the official language of the Vatican and carries considerable weight in the worlds of music (particularly opera), international sports, design and fashion.

These sister languages are very closely related and really only differ in their writing system. Urdu, the official language of Pakistan, is written using Arabic script, while Hindi, the official language of India, is written in Devanagari script. Although neither has significant influence outside of the Indian subcontinent, they have a combined total of over 200 million native speakers. Hundreds of millions more speak them as a second language. It should be noted, however, that a multitude of languages are spoken throughout India, and although Hindi is the official language, certain regions like the Dravidian-speaking south actually prefer English, which is often seen as an ‘associate official language.’

14/

TAMIL

Spoken primarily in several southern Indian states, Tamil also holds official-language status in Sri Lanka and Singapore. It is one the oldest languages still in use today and has around 80 million total speakers.

13/

JAPANESE

SWAHILI

Spoken by about 120 million people, most of its speakers reside within the borders of Japan. It is a notoriously hard language to learn, which has probably in part contributed to the fact that it hasn’t been picked up in many other countries. Japan is, however, one of the world’s reigning economic powers and as a result its language does hold significant influence in the realms of business and trade.

Used extensively along the east coast of Africa as the language of trade, Swahili has upwards of 100 million speakers (though only a small portion are native) and is the official language of several countries. Its influence is steadily growing and many major international news outlets now feature Swahili-language broadcasts.

12/

FARSI (PERSIAN)

With over 100 million speakers, Farsi holds official status in Iran, Afghanistan, and Tajikistan, and has a long history of being regarded as a prestigious cultural language throughout Central Asia. 112

25 Languages of Our Time

With about 120 million speakers, German has undergone some wild fluctuations over the course of the last century. Typically, it has been the language of science and industry with technically oriented students around the globe having to learn it in order to pursue their careers. Although after the two World Wars it inevitably lost clout, as one of the world’s strongest economies Germany still exerts considerable influence.

Apart from English and French, Arabic is arguably the most international language – largely due to its position as the language of Islam. It can be hard to quantify the exact number of speakers, however, because Modern Standard Arabic, although spoken as a second language by hundreds of millions of people around the globe, can be very different from the dialects spoken in the roughly 20 countries where Arabic is the primary language.

GERMAN

ARABIC

PORTUGUESE

SPANISH

Spoken by about 200 million people worldwide, Portuguese is actually the most popular language in the Southern Hemisphere. Along with English, French, and Spanish, it is considered a ‘world language’ due to its global reach. With Brazil emerging as a world power, look out for Portuguese coming along for the ride.

Although nowhere near English in terms of global influence, Spanish is rapidly gaining on French. It has almost 400 million native speakers, is the lingua franca of close to 20 countries, and is spoken all over the world as a second language. Also, as Latin America comes into its own on the world stage, Spanish will inevitably gain influence.

RUSSIAN

FRENCH

With around 200 million native speakers, Russian is understood throughout Eastern Europe and Central Asia. Although people in some former Soviet republics would prefer to avoid it, Russian is still widely understood across quite different countries, from Tajikistan to Estonia.

Although it has lost considerable ground to English over the course of the last century, French is still the second most influential language in the world. With official-language status in 25 countries, it is the most popular lingua franca after English and is used by many international groups and organizations.

MANDARIN

ENGLISH

There are two reasons that Mandarin is at number five on this list. First, it has close to a billion native speakers, which is almost three times as many as any other language. But secondly, the truth is that it really isn’t spoken anywhere beyond Southeast Asia other than in Taiwan and in Chinese communities in other parts of the world. So although it is not very influential in a global sense at present, due to China’s robust economy it may very well begin to flex its muscles in the near future.

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English only has about 500 million native speakers, but there are almost two billion people in the world that communicate in English on a regular basis. And can you guess where most of those English speakers live? (Hint – it is the country whose primary language is at number five.)

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Natural and Mental Phenomena

A conversation with a linguist about language, history and politics One of the most well-known Russian linguists abroad, Vladimir Plungian is a corresponding member of the Russian Academy of Sciences and head of the Department of Theoretical and Applied Linguistics at Lomonosov Moscow State University. He also leads the Department of Corpus Linguistics and Poetics at the Vinogradov Institute of Russian Language. Here he talks to BRICS Business Magazine about the relationship between languages and thought, what makes a good global language, the consequences of globalization, and Africa.

At some point Whorf discovered the languages spoken by Native Americans, and it struck him how different they were from European languages. Having recovered from the shock of this discovery, Whorf went on to formulate his hypothesis: that the way a language is structured, its lexicon and grammar, have a direct impact on how we can or cannot think and perceive the world. According to Whorf, our native language imposes very strict limitations on us. For instance, the fact that some languages spoken by Native Americans do not have a grammatical category of tense leads to the conclusion that these peoples’ physical perception of time was also different from that of the Europeans. Whorf even made a famous statement along the lines that ‘if Newton were born an Indian there would have never been any classical mechanics.’ Naturally, today professional linguists do not take the Sapir–Whorf hypothesis seriously. Nobody believes in these dramatic statements that are completely unsubstantiated by hard facts. Yet they all acknowledge that there is a connection between language and thinking. Language is a form, based on which we think. The main problem is whether the specific aspects of this form affect in any way how we perceive the world, and act. There are still naïve relapses of Whorfianism that occur in popular literature from time to time. Recently, I read an article written by an economist who claimed something along the lines that the languages in which the future tense has a dedicated grammatical form produce societies with successful economies.

You have said on many occasions that each language presupposes an independent system of thinking. What does that really mean? What is the connection between language and consciousness? Does the underlying grammar affect how we think and how we make decisions? As far as I remember I have never expressed this idea. However, I did refer to this opinion that has become very widespread in modern linguistics (but not generally accepted). Overall, it is a very complicated question and I would caution you not to make any absolute pronouncements – no matter how impressive they sound. After all, scholars are very boring people and they always like to emphasise that things are not that straightforward, and that jumping to conclusions is very dangerous, etc. Incidentally, this is what sets them apart from non-specialists, who always tend to see things in black and white terms and think that everything is simple... Language and thought are undoubtedly linked but this is a very vague statement; the subtle bit is how they are linked. There are a number of extreme hypotheses in the history of linguistics, the most famous being the Sapir–Whorf hypothesis. According to this school of thought, our thinking is strictly determined by the language we speak. Sapir was a great American linguist who in reality had very little to do with this idea. He was just friendly with Benjamin Lee Whorf, a chemical engineer, insurance specialist and gifted amateur who came up with somewhat strange and at times paradoxical ideas. 114

Natural and Mental Phenomena

I think it is complete nonsense. If we take the English language, for example, it has a future tense but in a rather problematic form – there is no single future tense marker. For instance, ‘will’ is a modal verb that has many other meanings, such as intention or willingness. English is a fine example of a language with a non-dedicated future tense marker (expressing future among many other things), just like other languages in the Germanic group. If the Scandinavian countries with their Germanic languages are not some of the strongest economies in the world, I do not know which countries are. And when it comes to the future tense in these languages, things are not that great either. In Slavonic languages, on the other hand, the dedicated markers of the future tense are perfectly well attested. It is obvious to a professional linguist that the notion of future tense is very complex; generally speaking, it is a label without a comprehensible content. It may seem to laymen that this is a very simple label because they have never thought about it. To agree on what we want to refer to as the future tense, we would have to read and write many articles and books. However, a reasonable №1(5), 2014

African language systems are some of the most complex; they are veritable pearls in mankind’s linguistic repertoire and perhaps serve as one of Africa’s most signiﬁcant contributions to world culture. Africa is a territory where the indigenous population is dominant and nearly nothing threatens this enormous number of languages in the immediate future

way to agree on the meaning of the future tense is absolutely incompatible with the statements made by this author. Mind you, this naïve Whorfianism is not an entirely harmless thing after all. It comes across as some sort of ethnic propaganda with a thinly veiled suggestion that there are ostensibly languages that are good and useful for efficient thinking, and there are others that are poor and underdeveloped. Parenthetically, this thought is not entirely new – it dates back at least to the 19th century. Modern linguistics absolutely rejects this value-based attitude to languages: from an instrumental point of view all languages are equal. The languages spoken by tribes in Brazil or New Guinea that still remain at the hunting and gathering stage of development are as complex as 115

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WHAT IS A L ANGUAGE CORPUS?

A language corpus is a collection of texts that are first of all presented in electronic form and secondly processed, or ‘annotated’ as we term it. In other words, those who compile the language corpus add various types of information to it, mostly of a purely linguistic nature that deals with grammar, word forms and other aspects – anything a researcher might need. If the annotated corpus is rich, it means that it offers broad search possibilities and researchers can find anything they need in this corpus, from phrases with short adjectives to verbs in past tense, and other fascinating things. In other words, the corpus enables researchers to select any combination of examples with the properties they require, which is something you cannot do by simply running an internet search, because nobody is going to filter out the dative in Google. Serious work usually goes into putting together a corpus, but when the work is done and the corpus is large, we have a chance to work with a language on a scale that is unimaginable in the absence of such a corpus. It is not unlike inventing a telescope or a microscope in the natural sciences. Corpus linguistics is an exceedingly valuable area that is undergoing explosive development. One could even say that it serves as an example of how modern information technologies can be used in the humanities, even though linguistics does not belong purely to the field of the ‘soft sciences.’ It has always been something in between; after all, language is not merely a phenomenon of mind, but also of nature. In many ways it belongs to the world of the unconscious. Language speakers are not aware of language rules and have no control over the laws governing language development. This makes ‘precise’ and ‘objective’ methods all the more valuable for language studies. Corpora exist for all big and developed languages. In preparing our project for the Russian language we were supported by Yandex (the biggest Russian internet resource with one of the most powerful and innovative search engines) and the Russian Academy of Sciences, which has now been disbanded. It is one of the most efficient academic projects of recent times in the field of human studies. Today the Russian National Corpus is available online (at ruscorpora.ru) and is used widely all over the world. Naturally, it is primarily favoured by Russian language teachers and researchers, but it is also used for many other purposes. If you develop the know-how and have the right technical platform, you can lay a solid foundation for any language corpus within one or two years, and then this corpus can be constantly updated and improved. However, it is not easy to understand how to build a corpus well. Once the Russian National Corpus was completed, the same team built a number of other corpora. They had already gained the experience, and that is why for the most part they managed to create corpora that are quite good, especially those for the Armenian, Ossetian, and other languages. For researchers of these languages such corpora are a priceless gift. All these corpora are freely accessible. This was our principal position. A language corpus is the highest form of scientific altruism, if you will. You create a corpus to a lesser extent for yourself and to a much greater extent for all those who are interested in this language and who need it.

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which cannot be translated as easily into another. Chinese, English or Russian, and in some ways Naturally, any thought can be expressed in any even surpass the latter. language – this statement would equally ring true. Surpass how? Some sort of an equivalent can always be found. There is this effect that the bigger the language, You can say anything about everything, but the the more people speak it and the greater the problem lies in the fact that in a realistic situation it probability that its structure will simplify. One is not always something that is willingly discussed. can try to measure the complexity of a language – This is where we move from the workings of the there are works of this kind. There is also the language to that of the society and culture. After notion of the ‘Kolmogorov complexity’: Roughly all, in reality the language is not some magic wand speaking, the longer it takes to describe an object, that opens up any world, nor is it a straight railway the more complex the object gets. Let us say that if track that you cannot turn off from (as Whorf a language has eight types of declension, it would believed). A language is by and large a system of be more complex than a language with only one customisable templates, if you will. The content declension type. These are the parameters that, as that is most sought after in a given society will be a rule, make languages spoken by smaller ethnic expressed naturally with great ease in its language communities more complex than those spoken by both by means of its grammar and lexicon. larger communities. There is an explanation: When There is a well-known phenomenon of culturethere is a constant inflow of alien ethnic elements specific words. This is an example of such a mental that learn a language from scratch (the so-called template. For instance, specialists in Russian write ‘imperfect learners,’ as they are frequently dubbed), a lot about words like udal’ (prowess, courage, darthe language has to sacrifice something. That is why, ing) or uyut (cosiness, homeliness, comfort, conroughly speaking, English and Chinese are much venience), which are difficult (but really not impossimpler (in this particular sense!) than languages sible) to render in other languages. There is a group spoken by small tribes that lead a very secluded life. of researchers (Anna You worked in Mali Zaliznyak, Irina Levonand studied one of the No new languages have appeared since the era tina and Alexei Shmelocal languages. Did you of great geographic discoveries: the world has lev) who have published manage to internalize become ﬁnite and exceedingly small. No single a new system of think- community can be divided so as to completely lose several books on this subject. They try to show ing? all contact between the parts. In the past, a great It was difficult. Un- number of languages died and a great number of that Russian culture has fortunately, I am not languages were born, but now they have only been a certain convenient way of talking about percepa professional in the field dying: smaller languages are absorbed by larger tions that are intrinsic to of African linguistics. ones. This comes as a result of globalisation; this culture – what they I am a typologist, which it is one of its most salient manifestations term ‘key concepts.’ makes me an eternal dilFor example, let us take the verb dobiratsa (get ettante: I have to know a little bit about every lansomewhere, get to, arrive), which we use very often guage area. But still I did study African languages both in the written language and in our everyday quite intensively for about 15 years without any communication. It turns out that it is quite difficult impressive successes, and I did try to speak some of to translate it into French or English and not even these languages. because it is impossible to find an equivalent, but To be able to do it well, one needs to pick one’s rather due to the fact that we do not see such a great words and structure phrases in an entirely different interest in who ‘gets’ where and how in English or way and, to an extent, really think differently. That French discourse: the constant agonising process is why one could partially understand Whorf: of negotiating a hostile environment is not a key differences between human languages can be huge concept in these societies. and may boggle the unprepared mind. For instance, The language services a set of perceptions that are they often refer to an ‘untranslatable play on words.’ sought after by the society. Does the language itself Indeed, there are many things that can be expressed affect the way the society’s perceptions are shaped? naturally and with ease in one language but №1(5), 2014

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remember Africa only when we read about another bloody conflict in the press. For an ordinary person it is as if it does not exist, which is of course bad. There is a significant difference between those who remember that Africa still exists and those who do not think about it. One can understand Africa; understanding is a difficult job though. This is why we need liberal arts education, which is a question they constantly talk about nowadays. We need this to be able to understand others. To be able to understand Africa, one would have to immerse oneself in it for a long time and be able to reject stereotypes. Of course, knowing African languages or at least knowing something about these languages would come in very handy. African language systems are some of the most complex; they are veritable pearls in mankind’s linguistic repertoire and perhaps serve as one of Africa’s most significant contributions to world culture. We should bear in mind that, first and foremost, there are exceedingly many languages in Africa, as opposed to South America and in particular North America or Australia, where indigenous people have been considerably marginalised and their languages are fading away. Africa, on the other hand, is a territory where the indigenous population is dominant and nearly nothing threatens this enormous number of languages in the immediate future. They can and must be studied. European languages that are used in most countries as official state languages do not have any significant influence on in-depth processes. African societies remain largely traditional and are still hardly affected by Western civilisation. From one standpoint that is very bad, and from another it is good – a certain alternative remains. There is a very serious subject to be studied and I would encourage you to treat Africa seriously and avoid conventional prejudices. Many people treat Africa seriously specifically because of economic considerations. But you probably mean something else. I am speaking more about what is related to culture in a broader sense. Africa can make a very valuable contribution to the study of mankind. That is why I always get irritated when I hear laymen’s perceptions of Africa as a concentration of absolute savagery. Such statements, which are often heard, speak more about those who utter them and reveal their stupid arrogance and primitive narrow-mindedness.

My core scientiﬁc specialisation is linguistic typology, which involves comparing the structures of different languages. Typology answers the questions of how human language is built, what is possible within it, and what is impossible. Linguistics in the true sense of the word is not a science that studies one single language but rather all languages of the world. In my view, typology is one of the most advanced streams in modern linguistics. Incidentally, there are typological schools operating in Russia that are quite good; this area has been traditionally strong in our country. Sometimes, to scare our colleagues who study Russian, we say that from the point of view of modern science, in order to be able to describe the Russian language well, one would need to learn how all other human languages are built. But on a serious note, that is true in many respects. Any human language is a variation on a speciﬁc theme, and to be able to judge the extent of this variation one needs to understand what our theme is all about. No man can have a perfect command of all languages in the world – there are currently about 7,000 of them – but a typologist must understand how all of these languages are built and how they ‘work.’

When there is an easy trail and a difficult one, naturally it is less trouble to choose the one that is easy, but if you really need to make a turn then you will. You may even blaze a new trail. One could say that every language is a network of roads, with dense traffic heading in a certain direction and just a few cars heading in another. But in no way does it mean that one language is ‘better’ for it or another is ‘worse.’ Generally speaking, I would not try to look for advantages or disadvantages in languages, even though there are plenty of differences. Otherwise we would arrive at a very primitive logic along the lines that if, for instance, your native language is Chinese, you are likely to grow rice better than other nations. I hope you realise that this is not a very shrewd statement, to put it mildly. Going back to Africa, can a European understand it? The continent is turning into a gigantic, rapidly growing market that the rest of the world needs to learn to understand, both in its entirety and each fragment specifically. Africa is a very interesting continent that has been forgotten to an extent by the modern world. We 118

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In particular, the languages spoken in the Extreme North of Russia deserve the closest attention. There are languages in our country that are absolutely great and, unfortunately, they are not going through the best of times. It is obvious why: as a rule there needs to be one official state language and it will bring great benefits, including for people in the regions. However, this does not mean that other languages cede their place to it and ultimately diminish more and more until they disappear altogether. Indeed, as a rule, the move to a ‘stronger’ language is something that is done voluntarily, but it is a huge loss for science. In our case, for example, one could definitely say that languages spoken in the Extreme North can well compete with African languages in terms of the complexity of their grammatical systems and rich lexicon. It is self-evident that these languages are ideally suited to describe the environment in which their native speakers live. Indeed, to attempt to ‘mothball’ such a language often means to go against the grain of history. But at least one should understand that if they do disappear it would be bad on a humankind scale. I would not want people to think that shifting from smaller languages to bigger ones always brings unconditional and unquestionable benefits, at least not the decision makers. Do new languages emerge? No, there are no new emerging languages and most likely there will be none in the foreseeable future. The fact of the matter is that as time goes by and generations change, any language changes as well. But a new language emerges when, for example, two parts of what was previously one people lose all contact. It takes 300 to 400 years for the differences that occurred independently in each of these peoples to become noticeable, another 300 to 400 years to become pronounced, and approximately fifteen hundred years later two entirely different languages will emerge. It is clear why no new languages have appeared since the era of great geographic discoveries and technological revolutions: the world has become finite and exceedingly small. No single community can be divided in such a manner as to completely lose all contact between the divided parts. In the past, a great number of languages died and a great number of languages were born, but now it has already been several centuries since they have only been dying: smaller languages are absorbed by

Africa is a continent of exceedingly diverse cultures and many ancient civilisations – it is very complex and is not homogenous in the least. Before the Europeans arrived on the continent there were very subtle and interesting structures in place, which the Europeans destroyed and did not even notice it. And of course modern Africa is unfortunately an area suffering from recurring humanitarian disasters. But this is a problem of all mankind and not just of African nations. There is this unscientific yet frequently quoted premise that certain ethnicities have a system of thinking that is simple and limited, and which prevents them from overcoming their disadvantaged state and reaching prosperity. There is no rational proof that this is the case. Speaking about language, as I have already mentioned, it is more like a network of roads that is easy to change if you want to move in a different direction. It should be noted that by and large any society is ready for change and is capable of it. Psychologically and physically, all people are built the same way and have initially the same potential. Going back to Africa, I would like to reiterate that from a linguistic point of view Africa makes an exceedingly interesting study. For instance, in many African languages there is this wonderful grammatical category called ‘temporal distance,’ which indicates not just the time reference of an event – whether it took place in the past or will take place in the future – but when exactly this event took place and how long ago (or how soon it will take place): just now, yesterday, today, tomorrow, several days ago, a long time ago (for example, during this year) or very long ago, and so forth. In most languages we can convey this idea by using ordinary words, adverbial modifiers of time, but in African languages a separate grammatical category exists just for this purpose. In other words, when talking about events of different remoteness, you have to use different forms of verbs! Something of this sort exists almost nowhere else in the world. It is distinctly specific to languages spoken in equatorial Africa. As a linguist I encourage people to study Africa; so far this continent remains largely unexplored. Admittedly, linguists find attractive all areas where you can find new languages that have not yet been described or have been described insufficiently. There are still enough such places on the planet. №1(5), 2014

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larger ones. This comes as a result of globalisation; it is one of its most salient manifestations. How much more difficult is it for people living in multilingual countries to understand one another? The greater part of mankind lived and continues to live in a multilingual environment and is well adapted to it. Speaking of Africa, it is built exactly that way – the fact that you are surrounded by several languages since early childhood is perfectly normal; from their perspective there are no obstacles in the way and everyone can learn all of these languages. In this sense Russia is a relatively unorthodox country, where indeed one language remains dominant across its vast territory. It should be noted that the Russian language is very homogenous, from Vladivostok to Kaliningrad; there are no noticeable dialects except of course those of a traditional nature spoken in small villages, but their visibility is small and the society knows nearly nothing about them. As opposed to many countries (Italy, Belgium, and others) Russia does not have urban dialects and there are

Differences between human languages can be huge and may boggle the unprepared mind. They often refer to an ‘untranslatable play on words.’ Indeed, there are many things that can be expressed naturally and with ease in one language but which cannot be translated as easily into another

no significant differences in the language spoken by people who live in cities. In Russia even a specialist would often find it impossible to place a person’s origin, and would be able to name the right region at best. Take Belgium, for instance. It takes two to three sentences to be able to place the speaker in his or her native city: It is one thing when someone comes from Ghent and a completely different thing when they come from Antwerp, even though the distance between them is miniscule by Russian standards. In general, as a region, Europe is a great mosaic – almost all European countries are characterised by fragmentation into different languages or dialects. This is what usually tends to happen: the larger the territory, the greater the linguistic fragmentation. Russia is the only exception. 120

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How long does it take for a language to become Apparently, the main reason lies in the fact that global? Even back in the 1970s the English Russia’s population was highly mobile. Dialects language did not enjoy the same status as it are formed when people live in the same place for does now. several centuries. Belgian peasants and artisans You see, 50 years proved to be enough. These changnever moved and never travelled to any particular es arrived quite rapidly. Let us think back to the situlocations. One generation after another they were ation before the war. Today, when we read memoirs born and they died in their small village or town and documents from that era, many are surprised: where everything was probably to their liking. the vast majority of Europeans did not speak English. It was different in Russia. Suffice it to recall the It was what they call a ‘rare language.’ In Russia educolonisation of Siberia – for several centuries it was cated people always used to be bilingual, but English populated by people from all regions of the country. was rarely represented as the second language. It is well Or take recent Soviet history, when the entire counknown that English was spoken in Nabokov’s family try was in turmoil with people being thrown from but this was considered an one corner to another exception, an act of eccenand anybody could be upIf people perceive their language as something tricity of sorts. Just imagrooted at any given monot very prestigious, it is exceedingly diﬃcult to ine that your family spoke ment. “His orders were change that perception; for the development of Swedish. to move West and hers the language it is much worse even than a small America was far away were otherwise,” as Isanumber of native speakers. Some people are kovsky’s song goes. Rus- certain that they would achieve something if they and Britain was but a small island for Europe, sia was constantly shaken were to learn English. These seemingly purely and stirred. If you shake psychological mechanisms of prestige and success even though it was a coloa cocktail long enough it have a much more destructive effect upon the fate nial power. But as you can see, even the 19th century comes out homogenous. of languages than bullets, warheads, the size of You said in one of population and other factors. All changes originate empire ‘on which the sun never set’ did not manyour lectures that the in people’s minds age to turn English into a dominant position of the global language. At that time, international science English language today is predicated on the Allies’ favoured mostly German. French enjoyed a huge victory in the Second World War. What does the niche as the language of advanced culture, literafuture hold for English? ture, and fashion – the language of refined actions To be able to answer this question, one should and thoughts. And all of these things co-existed be asking what the future holds for humanity as until a certain point in time. a whole, and the United States in particular. Will The balance was drastically upset after the this country stay the global leader, or cede its place Second World War. Germany took away its status to China, India, Indonesia or Brazil? of intellectual leader with its own hands; France, It is not about the English language itself. exsanguinated by the two terrible wars of the 20th What matters is the role of the countries that century, plunged into all sorts of domestic problems speak English. And English is far from an ideal that prevented it from enjoying the same influence global language, if we really think about it. as it used to. The centre of gravity shifted to America. Grammatically, English is relatively simple, and Add to that Canada, Australia, and India. The new it is easy to learn to speak it poorly, but English world meets the legacy of the British Empire. phonetics are very complicated and ‘unwieldy’ Post-war America emerged as a nation of for those who try to listen to and comprehend advanced scientific thought, which played a very it. In this respect Italian phonetics, for example, significant role. Intellectual leadership is important are much clearer; Italian would probably make a for a language to spread. Almost all intellectual great global language. However, it is not a matter innovations are now formulated in English – not of the technical details of a given language – it in Hindi, not even in Japanese, but in English. This is all about politics. It is not linguists who elect phenomenon has a cumulative effect: even if I live the leader, and it is not linguists who judge his in another linguistic space but I want the world future. №1(5), 2014

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between the 7th and 12th centuries. It is as if all Slavic to learn about me, I must translate myself into English. If someone wants it to be different, they countries used the Old Church Slavonic language need to create a centre of intellectual leadership for writing and communications with one another. elsewhere. No propaganda tricks, demonstration Tunisians, Algerians, and Syrians cannot even unof force, bravado or threats will help in this regard. derstand the native languages spoken by each other. The Goths and Huns captured and destroyed the When they want to socialise, they switch to the literdecrepit Roman Empire, ary Arabic language or albut the grandchildren of Intellectual leadership is important for a language fushá, which all educated these conquerors still Arabs speak. A partly simito spread. Almost all intellectual innovations are switched to the Latin now formulated in English – not in Hindi, not even lar situation exists in Chilanguage. na. There are several dozen in Japanese. This phenomenon has a cumulative so-called Chinese dialects If our objective is to effect: even if I live in another linguistic space (including Cantonese, spread a specific lanbut I want the world to learn about me, I must Min and others) which guage in the world, all translate myself into English. If someone wants are in a full sense different we need to do is to creit to be different, they need to create a centre of ate something unique intellectual leadership elsewhere. No propaganda languages. This diversity is in this language, some- tricks, demonstration of force, bravado or threats especially pronounced in the south and southwest of thing that does not exist will help in this regard China between Shanghai in the domain occupied by other languages. Young people all over the world and the Vietnamese border. Naturally, there is the have derived a great deal of pleasure studying Japastandard literary Chinese language called Mandarin nese exclusively because of Anime, and complicated (or Putonghua) that is based on the Beijing norm, hieroglyphs do not scare them – on the contrary, but not everyone speaks it well. they find their beauty attractive. America’s intellectual and economic What do you think about the statistics leadership, its victory in the Second World showing that by 2050 the topmost languages in War, its geographic span – all of these factors terms of numbers of speakers will be Chinese, combined have contributed to the connotation Hindi, Arabic, Spanish and English? of prosperity that the English language has. It depends on what we mean by ‘topmost.’ Can the number of speakers increase to such an There is the factor of population size, which does extent that their sheer mass and pressure ensures not directly spell global leadership. You may have prosperity for the mother country, for example a poor family with many children and a rich family the Spanish language and Spain? with just one child. They are difficult to compare. In my view, the fact that a language is spoken by There are regions with rapidly growing populations many people in and of itself does not automatically and by extension the number of language speakers spell prosperity. In essence, a language is not increases as well. I am speaking of Indonesia, India, something tangible – it is rather a spiritual, China and the Arab world. But if you look at it mental and cultural phenomenon. The size of the within the intangible space of culture, science and population, on the other hand, is very physical and politics, this growth is not that visible. The fact belongs in the material world. There is no direct that there are many of you does not mean that your correlation. Naturally, if a language is spoken by voice will be heard. Unfortunately, this is how the several million people, it will feel relatively well, modern world works. whereas a language spoken by several thousand is One should also bear in mind that, strictly virtually doomed. If the world does not change in speaking, there is no such thing as the Chinese or a radical way, smaller languages will continue to Arabic language at all. They are rather what is called disappear. linguistic clusters. Of course the Arab world uses Another intangible notion – that of prestige – the literary Arabic language but it is not a native offers a very powerful mechanism. If people language for anyone. This is the language in which perceive their language as something not very the classical Arabic literature was written – the prestigious, it is exceedingly difficult to change language of the Quran and the masterpieces created that perception; for the development of the 122

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And in Central Asia there were, generally speaking, modern states with sufficiently developed infrastructure. First of all, they were relatively monoethnic. Secondly, they had their own press, literature, writers, dictionaries and even academies of sciences. A transition to their national language in all areas of life merely required a small initial impulse, the so-called ‘political will,’ and the machine clicked and switched into gear on its own. As for political will, there was certainly no shortage of it. It would be strange and naïve to expect that given such a point of departure the elites would prefer another country’s language. There are no reasons to assume that, except perhaps out of arrogance. Surprisingly, Kazakhstan is the only country to retain the Russian language to a certain extent, and that is thanks to the fact that, in certain cases, Kazakhs still continue to communicate with each other in Russian. But this is a unique situation that should be highlighted and encouraged. The processes that lead to the opposite result should hardly surprise anyone any longer – we are talking about the rise of national identity and ordinary nation building. If you have your own nation there is no other way for you to go about it. Indeed, it begs the question of longer-term prospects. Was it really the right step to resolutely do away with the Russian language, which still is a global language no matter how you spin it, and certainly one of the principal languages in the Eurasian space? However, people tend to think more about transient benefits and ignore arguments of this kind. Having said that, the pendulum may at some point swing the other way, which is often the case. However, those who are concerned with the spread of the Russian language in the world should understand that the expansion of a language is not a function of power politics. It is predicated on how attractive are the specific cultural and intellectual patterns that exist within the space of this given language. A language is not sustained by the soles of military boots and sledgehammers – it is sustained by books, ideas, inventions, and discoveries. People will not speak the language of Attila the Hun or Genghis Khan but rather that of Virgil and St. Augustine, Newton and Leibnitz, Pascal and Einstein. Well, come to think of it, the Russian language does not have such a bad standing in this competition…

language it is much worse even than a small number of native speakers. Someone feels embarrassed to speak his or her native language and does not want to use it and believes that speaking this language has something to do with being poor or backwards. We started from the premise that from the scientific perspective all languages are equal and that there is no determinism; to blame one’s problems on one’s language is tantamount to naïve Whorfianism. But unfortunately, in the minds of ordinary people there is often this association. Some people are certain that they would achieve something if they were to learn English, for instance, and then they make their children forget their native language and switch to English. These seemingly purely psychological mechanisms of prestige and success have a much more destructive effect upon the fate of languages than bullets, warheads, the size of population and other factors. All changes originate in people’s minds. In Central Asian countries people shifted from Russian to native languages rather drastically. Does that mean the prestige of Russian, or the prospects associated with it, diminished just as suddenly? Or is it purely a desire on their part to find their own identity, leading them to preserve their language no matter how non-prestigious it is? This is a complicated process. What the Russian language was undergoing in the post-Soviet space was a multi-vector process. In a certain sense everything that happened is natural and is to be expected in the foreseeable future for independent nations with dominant indigenous populations. Let us revisit Africa. Why is it that after African countries gained their independence, English or French still remained the official languages nearly everywhere? Many expected that Central Asia would repeat Africa’s experience and the Russian language would retain the same role as French does in Africa. But then the two situations could not be more different. In Africa it was a forced measure primarily because there is enormous polyethnicity in every country: dozens if not hundreds of ethnicities in a relatively small territory. Secondly, local languages were not functionally developed and standardised in any way; the vast majority of them did not even have a writing system. №1(5), 2014

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The Rules of the Language Changes in our language represent a legitimate phenomenon that is directly governed by global processes. As primary and secondary economic roles are divided between countries, some languages automatically become more widespread, while others teeter on the brink of extinction. But neologisms and borrowed words may help keep a language on the linguistic map, explains Maxim Kronhaus, head of the Social Linguistics Centre at the Russian Academy of National Economy and Public Administration, in an interview with BRICS Business Magazine.

Why is it that some languages grow and expand throughout the world, while other languages are spoken by several thousand people only? Is this process legitimate? Is it uncontrollable? The number of native speakers of a given language is primarily defined by such factors as their political, economic and cultural activity as well as by such vague notions as commitment to one’s roots, identifying oneself with one’s nation and other similar aspects. According to various experts, including those from UNESCO, between 50% and 90% of all languages spoken on the planet are likely to disappear by the end of the 21st century. Why might that happen? This is the natural result of the globalization process, although I am not sure about the percentage points. Transitions from one culture or language to another that is more influential and hence more attractive have always been practiced. Today these processes have become more intense and fast-paced. What is the danger of the dwindling number of languages, and why is it that linguists are always against this trend? One should not speak of danger per se. A loss of a language is primarily a cultural loss or a loss

What sort of criteria should a language meet to be considered one of the ‘bigger’ ones? The notion of a ‘big’ vs. ‘small’ language is very conditional, and strictly speaking has no definition. What is important for any language is not just the number of native speakers but its status in all respects. Has it been adopted as the state language by specific countries? Are there many schools with a curriculum taught in this language? Are there any electronic or printed media that are published in it? Have there been literary works written in this language? How widespread is this language on the internet? By and large, to be able to understand the place of a specific language in the world one would need to take various factors into account. Many languages hardly qualify as big but still they could not be called small either. Scholars try to avoid thinking in these terms.

Maxim Kronhaus is head of the Social Linguistics Centre at the Russian Academy of National Economy and Public Administration.

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Generations may come and go but the process of a certain perceptional universe, or to put it in of ‘continuous displacement’ may last a very long simpler terms – a loss of a specific worldview and time and become chronic. It may come across as perception of the world. A loss of cultural values a paradox but it happens. Young people move on is not always dangerous, but is always sad. For to a more prestigious language but as they grow linguists this also means a loss of the subject of older they go back to their native tongue, realizing their studies. If we want to talk about ‘Language’ the value of their culture and their roots. Out of all with a capital L, the more diverse languages we things, language represents the most intelligible have at our disposal, the better we fare. A linguist and perceptible embodiment of one’s roots. who describes Language based on the English On many occasions you have mentioned that language only will do a far poorer job than over the last 30 years the Russian language has someone who has materials in other languages at mutated considerably. You have even published their disposal – and there are plenty of linguists of a book entitled Russian Language on the Verge the former kind. of a Nervous Breakdown, in which you called If, however, we were to move this discourse into upon the reader not to give in to panic on that a general pragmatic dimension we would end up account. What kinds of changes have taken place again uttering the word ‘diversity.’ Diversity makes in the language? To the system more sustainawhat extent were these ble; diversity begets competition. In other words, Borrowing as a process helps a language to survive neologisms necessary? Vocabulary is the best it creates an enabling en- in the face of strong pressure from an alien culture. case in point. One notices vironment for developIt is not unlike inoculation against a disease that changes in vocabulary ment. Less cultural and helps our immune system develop a response the most, and there are linguistic diversity makes many of them. There are us, and the culture as a a great deal of new words. We tend to notice less the whole, more primitive and vulnerable. gradual disappearance of some words or selected Does the share of borrowed vocabulary in meanings. For instance, I am astounded by the a language affect the rate at which it becomes fact that people under 25 no longer remember that extinct? the term dvushka (‘deuce’) used to refer to a twoNo – this is a serious misconception. It is kopeck coin. Nowadays, for them it primarily quite the opposite. Borrowing as a process helps means a two-room flat. The term pyatak (‘fiver’), a language to survive in the face of strong pressure however, still retains its original meaning. from an alien culture. It is not unlike inoculation Changes in speech etiquette – even in a broader against a disease that helps our immune system sense changes in speech behavior – play an equally develop a response. important role, even though one tends to notice It is obvious that it is smaller languages that them less. There are also many other changes, are primarily facing the threat of extinction. for example those in intonation or one’s attitude What will happen to them? Will they simply towards spelling mistakes and other things. end up replaced by bigger languages, or will It is difficult to say whether these changes are the native speakers of these languages resort to necessary, because it is not entirely clear what being bilingual to preserve them? the term ‘necessary’ means in this context. For It happens both ways and is partly predicated example, now there is this hip and trendy word on the language policy. However, in the latter ‘wow.’ Could we do without it? We probably case we can be talking about diglossia, in other could. However, if we take the transformation words a division of social and cultural functions process in its entirety and not just selected words, between different languages. One’s native lanthen it is definitely necessary. The world around guage, for example, can be used exclusively for us and life itself are changing and so are relations day-to-day communication, and this is not such between us. Given this backdrop, our language a bad option. needs to change to stay alive. The Russian language How many generations does it take for a big has managed to pull it off. language to completely displace a smaller one? №1(5), 2014

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CITIES

Alejandro Aravena

A Visionary Architect Who Wants to Change the World Bruce Watson The award-winning Chilean designer has made it his quest to create buildings that remove cities’ natural divisions.

of social organisation and civic engagement. He’s designing buildings, but he’s also designing cities they will occupy and the livelihoods of the people who will live in them. This becomes clear as, from time to time, Aravena flips through the book, noting something, sketching an idea, then laying it aside. As previous interviewers have pointed out, Aravena bears no small resemblance to the comic book character Wolverine. His salt-and-pepper hair evokes the trademark Wolverine flip, and

When we first meet, Alejandro Aravena is sitting in a New York café, sketching in a journal and nibbling on a cheese omelette. Architects tend to straddle the line between art and engineering, and the blend plays out in the pages of Aravena’s journal, where cryptic notes and equations sit with scribbles and sketches. Here there’s a drawing suggesting the line of a roof or the arch of a doorway; there a page of notes and comments. But Aravena’s plans extend far from the standard considerations of building and line, into theories 126

Bruce Watson / The Guardian / The Interview People

Alejandro Aravena A Visionary Architect Who Wants to Change the World

the intensity in his grey eyes brings to mind the character’s feral energy. Excitement and intensity pour off him as he discusses the place of design in society, and its ability to change lives. In fact, Aravena’s friendliness creates a moment of cognitive dissonance. This, after all, is one of the world’s leading architects, a man who has won some of the most prestigious architecture prizes in the world, including the Marcus and the Erich Schelling, and is on the jury for the Pritzker prize. He has taught at Harvard, and his high-profile buildings have been erected all around the world, to great acclaim. Given the opportunity, many architects would steer conversation toward their most prestigious work. And, certainly, Aravena has more than enough celebrated architecture to discuss: his current and recent projects include an innovation centre in Santiago, corporate buildings for Novartis and Vitra, and a proposed stock exchange in Tehran. But, rather than talking about his prestigious commissions, Aravena wants to talk about social housing. №1(5), 2014

Cities, Aravena argues, may be the best tool that planners can use to extend economic opportunity to the less privileged, without resorting to heavyhanded tools like income transfers, and without “guilt or paternalism.” The key, as with any other form of design, lies in synthesising disparate elements, embracing contradiction, and realising that, in the end, cities must balance human rights with human responsibilities

Much has been written about Aravena’s social housing projects, which combine innovative architectural design with a social framework that encourages personal investment on the part of the inhabitants. In fact, his company, Elemental, tries to evenly divide its work between social housing, large-scale civic construction, and private contracts. While these three elements may seem contradictory, Aravena revels in the contradictions, which, he argues, fuel his practice. The power of contradiction emerges as Aravena tells a story about a social housing project he recently built in the north of Chile. The project, 127

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in the second year of law school. The CEO, surprised, pointed out that his grandson was in the same law school programme. They soon realised that the two young men were in a study group together. The key to this story, Aravena emphasises, is that the location of the ghetto, and later of the social housing project that his company built, created opportunities for the woman and her fellow workers. “A typical housing project wouldn’t be in the best part of the city,” he notes. “It would be

located near the centre of a city, replaced a slum largely occupied by people who worked for the city’s richest citizens. After completion, Aravena toured the project with the CEO of Chile’s national gas company, one of the wealthiest men in the country. They came across a woman who was moving into one of the units. When they asked her how she felt about the new housing, she was effusive, and proceeded to tell them about her four children, two of whom were in college, one of whom was in Chile’s top high school, and one of whom was 128

Alejandro Aravena A Visionary Architect Who Wants to Change the World

is paying to think about it better. Good design costs money, but social housing is either done pro bono, or by people who couldn’t find jobs in other places.” This lack of resources and engagement leads to poor results, which can often be felt for generations. “This is equivalent to brain surgery. If you make a mistake, it’s irreversible. If you screw it up, you screw it up for thousands of people, over multiple generations.” One reason that top-level architects shy away from social housing is the lack of resources. In his social housing projects, Aravena routinely works with a hard cap of $10,000 per unit, a sum that has to pay for both the building and the land it sits on. But, while many architects would shy away from such constraints, Aravena argues that the “discipline of scarcity” leads to a clarity of vision and quality of design that would be impossible under other circumstances. Designing social housing, he claims, has taught him to “leave out what is not strictly vital. Be precise. Avoid arbitrariness.” This precision, Aravena notes, is borne out in the name of his company. “An elemental project is your best. Period. It is something that goes to the most essential core of something. This is something that is desirable, no matter how many resources, or how much freedom you have.” This elemental process works both ways. While Aravena’s notion of precise, clean social housing design informs his higher-profile projects, the professionalism of those undertakings also influences his social housing designs. “Novartis requires the best possible design. Building their headquarters has trained my designer muscles to their limit.” This, in turn, plays out in his social housing: “When we do social housing, we enter it as designers, not as policymakers, not as an NGO. If I’m going to make a difference, I’m going to do it as a designer. That’s why I need my muscles trained.” Ultimately, Aravena argues, cities may be the best tool that planners can use to extend economic opportunity to the less privileged, without resorting to heavy-handed tools like income transfers, and without “guilt or paternalism.” The key, as with any other form of design, lies in synthesising disparate elements, embracing contradiction, and realising that, in the end, cities must balance human rights with human responsibilities.

two hours away. If she lived there, she could forget about sending her kids to college. Forget about being in contact with the rich grandson. Forget about having access to the best high school in the country. So her daughter, who was about to leave high school to go to medical school, would never have had access to university.” This story gets to the heart of Aravena’s concept of cities, and architecture as a tool for social change. “Inequalities are not just an economic issue,” he explains. “They’re a cultural issue. The role that cities can play in creating or not creating those opportunities, it’s irreversible.” If designed properly, he says, “cities can be a great tool for the efficient amelioration of quality of life problems”. “They are a great shortcut for creating equality.” The key, Aravena argues, is that cities, and architects, must not shy away from the stresses created by competing forces like poverty and wealth or public and private construction. Rather than argue about whether to design cities for the needs of their poorest citizens or the egos of their wealthiest, Aravena posits, the answer might be to do both. At Elemental, he says, “we do not fear that, in this initial entry to the problem, we have forces that may seem contradictory. If you trust the synthesis of design, you don’t fear contradictory forces.” Of course, good design isn’t cheap, “it requires time and it requires effort,” he says. This synthesis of disparate elements is borne out in Elemental itself. The company is co-owned by three groups: the private architects who work for the company, a Catholic university, and Chile’s largest oil company. Aravena notes that the combination of these stakeholders, each with a very different agenda, helps his company to maintain its relevance, and its connection to the broader society. “One of the biggest mistakes in architecture is that we’re expecting society to be interested in the specific problems of architecture.” Instead, he argues, architects “need to adjust to what society is discussing. We just provide the forms that can translate their problems into solutions.” In the case of social housing, he argues, one problem is that many of the architects translating resources into solutions are either unskilled or unengaged. “One of the crucial factors we found that makes social housing so poor is that nobody №1(5), 2014

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Measuring the Unmeasurable Within the context of staggering Asian urbanization, it is hard to resist the lure of big data. However, a quantitative approach to measuring the whole process and quality of urban life in India and China does not tell the whole story, as Pushpa Arabindoo said at the Moscow Urban Forum.

The second thing pertains to the scale of this urbanization in China and India. A quite reasonable question to be asked here is what are the characteristics of their urbanization? Specifically, do we speak of mega-cities, secondtier cities, or small towns? In India, for example, there is statistical evidence, at least from the 2011 census, to show that its urbanization is as much about small towns as it is about mega-cities or metropolitan centers. In China the situation is slightly different. There we see a balance between what is happening in small towns and in metropolitan cities. So there is overlap and competition between these two different patterns. The problem is that we still don’t have a good system to deal with the phenomenon of urbanization in a nuanced and sophisticated manner. The third thing is really in terms of regionalization. Both India and China are beginning to recognize the fact that they really need to raise the issue of regional urbanization. In other words, urbanization there is in fact regionalization. Thus in China, for instance, urban planning policies are starting to very consciously speak about forming mega-urban regions. One is the Chang Jiang River Delta megaurban region that includes Shanghai and cities of its agglomeration. Another is the Beijing-Tianjin belt. Then you have the Pearl River Delta. These are the three mega-regions which drive the focus of urbanization as economic drivers. The scale of this urbanization is in fact enormous. For example, Beijing used to be only around 16,000 km2, but now we are talking about

Equating quality with quantity is often not easy. So I am always a bit uncomfortable with the way we constantly seek to measure through indicators what we mean by quality of life – quality of urban life specifically. By the way, as far as China and India are concerned we have to understand that within the context of Asian urbanization, it is again a fear of the numbers. So for example you can say that this world of roughly 7 billion people is half urban, and of that nearly two billion are coming from Asia, almost a billion are from India and China alone. And that is the exaggerating fear of numbers that drives the way we understand urbanization processes in both countries, while a much more laid-out approach needs to be taken to find out what their challenges and specifics are. The first thing about challenges one must keep in mind is that both Asian superpowers are still comparatively in very early stages of their urbanization. Just 46% of China’s population is considered to be urban, whereas in India it is only roughly 30%. That means we have to talk about the urban development challenges for China and India within the context of their being still pretty much rural. Thus the urban population there will long be defined by rural-to-urban migration – pull and push factors – which is very unique to the Indian and Chinese context. Pushpa Arabindoo is co-director of the UCL Urban Laboratory at University College London.

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incomparable, as well as with the similar. So there a Beijing-Tianjin agglomeration of 100,000 km2. is as much to be learnt from what seems to be The Pearl River Delta is about 120,000 km2. unfamiliar as what seems to be familiar. And some of the regional urban systems that On the one hand, that is a useful approach the Chinese government is pursuing are around in terms of bringing very disparate sets of cities 200,000 km2. onto a common platform. On the other, it In India again there is the well-known example doesn’t create a level playing field. It means one of the National Capital Region (NCR) of Delhi, has to be careful in terms of standardization which is more than 40,000 km2. However, or generalization, so that you are not simply the tensions between the well-serviced New borrowing from a trendsetter’s model and trying Delhi metropolitan area and its poorly serviced to force it onto a city which is not a clear match. peripheral cities and towns are staggering. Within the context of urbanization, you need Similarly, there have been tensions between to start looking into how to modify it, how to Shanghai and other historic cities like Nanjing tweak it, how to make it work in your particular coming into the equation in the Chang Jiang urban agglomeration. River Delta region, because each of them wants So it is a fine balance between the general and to hold their own way. the specific, the universal and the particular, that One big question in terms of scale is whether should be sought. And a balance has to be struck it is manageable – or are we overextending our before you start adopting capacities in the way we think of a region? Yes, As far as China and India are concerned we have models, even very successful ones. it is ambitious, quite to understand that within the context of Asian However, there is a clear enticing and appealing, urbanization, it is again a fear of the numbers. tendency to ‘follow the but is it realistic? The So for example you can say that this world of trail’ – to follow examples answers are still to be roughly seven billion people is half urban, and of urbanization – especially found. of that nearly two billion are coming from Asia, so in Asia. Quite clearly, almost a billion are from India and China alone. Both Asian superpowers are still comparatively in China is becoming a very ONE SIZE key market and source of very early stages of their urbanization. Just 46% DOESN’T FIT ALL Some of these regional of China’s population is considered to be urban, that. People are looking at the Chinese as exceptional. whereas in India it is only roughly 30% projects have been In turn, China is beginning quite successful in to export it to other Asian terms of infrastructure cities, saying, ‘This is successful, so look at the Sheninvestment and urban development. One success zhen model of special economic zones.’ story is the NCR. This is mainly because it creates But India, for example, cannot follow it healthy competition, raising profiles, bringing blindly, as its democratic system and antiquated visibility for other cities and small towns that were land-acquisition acts do not allow that kind of in the shadow of Delhi – for example Gurgaon or implementation. Thus India needs to have a realistic Noida. Both have benefited from the regionalized picture of what it can do. approach the Indian capital has adopted to its In fact there is no one universal template or oneurbanization. So today people talk about Gurgaon size-fits-all approach for pushing urbanization. as a parallel competitive city to Delhi. Yes, it is useful to look at examples and paradigms, The same goes for the Pearl River Delta, which is but you have to look at how they might fit within now widely seen as a successful model of urbanization, your own context. And there should be a good and to be copied. But surprisingly, that approach combination of the general and the specific, the might be a curse rather than a blessing. universal and the particular. The opportunities In fact, in urban studies at the moment there is that urbanization offers to improve quality of life a trend for comparative urbanism, which says we in Asian cities should not be shied away from. And shouldn’t be looking to learn from just the similar, make it measurable, no matter what technique is the obviously comparable. Rather, we should employed for the measuring. be looking into comparing with the apparently №1(5), 2014

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Vitamins for Krasnoyarsk Lev Kuznetsov Universiades, also known as World University Games, hold a special place among the super events of the sports world that Russia has been chosen to host. While there is much less grandeur about them compared to the Olympic Games or the FIFA World Cup, they make at least as much practical sense for the host city’s infrastructure, local communities and international business.

a new environment. These are exactly the kinds of things that show investors that they find themselves in a ‘climate’ they are accustomed to – not extreme conditions. Secondly, along with Kazan becoming increasingly recognisable, the city’s residents have changed as well. Their sense of pride about what has been achieved, and the ambitious projects that are to follow in the footsteps of the Universiade, offer people a very powerful driver to avoid complacency and continue to transform the environment around them. In other words there has been improved quality, but more importantly there has been an emotional outcome. One does not need to be concerned over the development of this area any longer. I am positive that it is a perfectly realistic ambition for us to reach a similar emotional outcome in Krasnoyarsk. Young people here are asking themselves the most serious of questions; they need to believe in their own abilities. For their career paths we need to move from the steppingstone model to that of the finish line – the personal success that people are striving to achieve. We at least need to become a pit stop where someone can take a pause, and not just for a minute as in Formula 1, but for a while. The Universiade, with its numerous projects and new people, is precisely the tool to solve this problem. It is good and it is right that in preparing for this sporting event we do not just represent Krasnoyarsk – we represent the whole of Russia. This gives us an entirely different motivation and energy, different incentives and views. It is great when you are facing the kinds of challenges that drive you to become more productive, or make

EMOTIONAL OUTCOME

For a long time, foreigners believed that Russia had only two cities: Moscow and St. Petersburg. But recently the Kazan Universiade put a new city on the map, and the Olympic Games then helped foreigners to discover Sochi. Now we have four cities on this imaginary map. Very soon they should be joined by a fifth – Krasnoyarsk – which last year won the bid to host the 2019 Winter Universiade. But this will require some more work to be done. The first question investors usually ask us is, “What sort of connections are there to get to your city?” If you have to connect in Moscow, you stand to lose 50% of your time there. That is why the region’s positioning, and finding a solution to make it more accessible, is a complex but important task. However, the president has declared the development of Siberia and the Far East one of our national priorities for the 21st century and I believe that soon enough we will have an answer ready for investors. The most decisive among them – those who will beat everyone else to the punch – definitely stand to win. What happened to Kazan, a city that pursued systemic efforts to attract investors regardless of the big event? First of all, the city has undergone a facelift. Now it boasts a better quality of life and Lev Kuznetsov is Governor of Krasnoyarsk Krai.

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maintain. Relying on the best practices pioneered in Sochi, and state-of-the-art innovations, we will create two ice arenas and one ski stadium. The objective is to design a universal complex that will become a symbol of sport for the whole of Siberia, and which can operate 24/7, every day of the year. Administrative and business aspects aside, what is important is that sport becomes more diverse and popular among the public. All of the current sports facilities have been designed following the principles of Universiade legacy, with the Biathlon Academy and the Winter Sports Academy about to complete the ‘last mile’ to reach full operational readiness. The alpine skiing complex is based on facilities built in 1982 for the Spartakiade, for the peoples of the USSR. Without any added strain on the budget, we will be able to renovate them and commission venues of an advanced standard. The second objective we need to tackle in preparing the Universiade is to resolve our transport limitations. We need to build a modern international airport, and expand the legacy transportation system by adding a new ring road to help optimise traffic flow in the city. And we can also develop an alternative means of transport – the suburban electric train. We will also modernise the Siberian Federal University. In particular, we will build a modern campus, including not only comfortable student accommodation but also an athletics hub. We also plan to bring our healthcare system and its basic facilities up to the appropriate level. This includes the regional clinical hospital and the emergency care hospital, and a new state-of-the-art polyclinic near the sports venues. These efforts will transform the city’s environment and boost the development of new local communities, enabling them to reach their full potential. The university will become more attractive for professors and talented students, and the city as a whole will provide greater comfort for its residents, particularly as pedestrians. The Universiade offers a great opportunity, but we need to seize it – and use it carefully and expertly. It will help us to accomplish faster and more efficiently what we would have had to do anyway: build, renovate and upgrade. In sports terminology, rather than a doping strategy, it is a timely vitamin injection.

you master a foreign language, for example. If the city is ready to up its status to ‘international’ and showcase high-quality human capital along with a modernised education system and communication capabilities, investors will be the first to sense it – long before the television broadcasts begin. International co-operation is well under way. The Winter Universiade of 2017 will be held in Almaty, and we plan to work closely with Kazakhstan on both their Games and ours. Krasnoyarsk also plans to get young people from across the Eurasian Union on board, not only to meet but also to work together on joint projects. Exciting collaborations are already under way with the city of Brasília, which will host the Summer Universiade in 2019. Our two cities are working to involve young people and students from the BRICS countries in the launch of many high-profile initiatives. We hope that in working for the common cause, those young people will not just have a chance to learn about a different culture and build abstract ‘bridges,’ but will be able to forge robust horizontal networks that will remain active ten or 20 years later, laying a foundation for efficient business co-operation, public projects and politics. This is a long-term project. It is important that we manage to build trust between people. In time this trust will be transformed into investment. In the final analysis, with all other things being equal, you are more likely to invest your money in a place or a person you trust. It is for that reason that we put more stock in these humanitarian communications than in our PR efforts. A CITY FOR PEDESTRIANS

Preliminary estimates are that Krasnoyarsk will be allocated 40 billion rubles for the preparation of the Universiade. Our pragmatic objective is to address the problems faced by the krai’s capital and to invest the funds that will be freed up into other parts of the region. We are not going to build one gigantic stadium – we want to change the city and its transport infrastructure. It should be noted that we have approached the implementation of the various projects with the greatest of care, deciding to harmonise them with existing facilities. In terms of its requirements, the Universiade is not the most complex of sporting events. There is no need to create unnatural or narrowly specialised facilities that would later cost us a fortune to №1(5), 2014

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BRICS Business Magazine thanks correspondent of China Radio International in Moscow Yang Jin for the translation into Mandarin. 134

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GEOGRAPHY AND ETERNITY. THIS SPECIAL SECTION OF THE MAGAZINE IS DEDICATED TO CULTURAL AND EMOTIONAL LANDSCAPES IN VARIOUS CORNERS OF THE GLOBE, AND TO FEATURES OF SPECIFIC COUNTRIES THAT SHOULD BE TAKEN INTO ACCOUNT BY ANYONE WISHING TO BE AN ENLIGHTENED INVESTOR OR SIMPLY A SUCCESSFUL TOURIST.

Sense of Location

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“National reputation cannot be constructed; it can only be earned,” says territorial branding guru Simon Anholt in his book Places: Identity, Image and Reputation. “In other words the multi-million dollar investments channeled by governments towards building their countries’ branding through advertising and PR campaigns are unlikely to yield any tangible results in the long term,” he writes. So, what happens then? What should developing nations do to promote their image in the eyes of the international community? BRICS Business Magazine here publishes excerpts from Anholt’s Places, with answers to these and many other questions.

Simon Anholt Places: Identity, Image and Reputation, 2010.

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PAKISTAN AND MEXICO

There will come a day when the country needs to think about restoring its damaged reputation pandemic in early 2009: at such moments, its main concerns were rather more practical and immediate. But when major natural disasters happen, people often do worry that it will damage their country’s international interests by spoiling its image, and they are usually wrong. Most of my research suggests that the things which happen to a country (such as natural disasters, terrorist attacks or epidemics) seldom affect people’s perceptions of that country in any profound or lasting way: what changes the image of a country far more is how the country responds to such crises, and what the government, the people or the companies in that country do – especially when it has an impact on people in other countries. The population of Pakistan quite rightly feel that they are as little to blame for their country’s current woes as the people of Mexico: but they are nonetheless likely to suffer the consequences of them for very much longer. Mexico will recover from floods and flu, people will rebuild their lives

Talking about Pakistan’s international image may sound irrelevant, even absurd, at a more than usually troubled time in the country’s history, but the simple fact is that every country on earth depends on its good name in order to achieve its aims in the globally connected world we live in today. At some point in the future, when things have stabilized a little, Pakistan will find that its ability to interact effectively and profitably with other countries will depend to a considerable extent on its good or bad image; its ability to lure back its most talented emigrés and stem the tide of those leaving to study and work abroad; its ability to attract business and leisure visitors as well as foreign investment; the quality of its engagements with other governments and multilateral agencies: all of these transactions will be considerably easier if Pakistan’s reputation improves, and they will prove a constant, uphill struggle if its reputation remains as weak and negative as it has become today. With daily violence, a bitter struggle against insurgent elements along the Afghan border, and constant political and social upheaval, the international image of Pakistan is in tatters, and is probably the last thing on the mind of Pakistan’s government as they fight for political survival and ascendancy over the Taleban. But there will come a day when the country needs to think again about restoring its damaged reputation: and the longer the country remains in freefall, the harder a task this will be. The Mexican government probably wasn’t primarily concerned with its international reputation either, when the southern state of Tabasco lay partly under water in 2008 or when swine flu threatened to develop into a global

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itself and abroad, of the changes that are taking place, and thus shortening the normal lag between reality and perception. This is a classic case of confusing correlation and causality: claiming that the advertising causes the new image is like noticing that I open my umbrella whenever it starts to rain, and then hailing me as a magician because I can make it rain just by opening my umbrella. Creating a better image for a country is often far cheaper and always infinitely harder than people imagine. It’s about creating a viable yet inspirational long-term vision for the development of the country and pursuing that aim through good leadership, economic and social reform, imaginative and effective cultural and political relations, transparency and integrity, infrastructure, education, and so forth: in other words, substance. The substance is then expressed, over many years, through a series of symbolic actions which bring it memorably, effectively and lastingly to the world’s attention. Nations have brand images: that much is clear. And those brand images are extremely important to their progress in the modern world. Brand theory can be helpful in understanding those images, measuring and monitoring them, and

and their communities, and life will return to something like normal for the majority of those affected; before very long, world opinion will focus on another disaster, and will forget the Tabasco floods and swine flu, just as it has begun to forget Pakistan’s devastating earthquakes of 2005. But because Pakistan’s present troubles are manmade, their effect on the world’s perceptions of the country will persist, and Pakistan will struggle for decades to present itself to the world as a responsible, trustworthy ally and partner in trade, tourism and politics. Acts of God can harm a country in many ways: but it is acts of men that cause the most lasting damage. KENYA

An article from the Nairobi Business Daily in 2008 told how the ‘Brand Kenya’ initiative, despite a great deal of goodwill, failed to get off the ground. Various reasons were given for the project’s lack of momentum, including the absence of sufficient political will: it is certainly true that unless such projects have the sustained and personal backing of the head of government and, preferably, the head of state, they are unlikely to go very far or last very long. Without such authority and commitment, there is little incentive for the various stakeholders to collaborate, and they will soon revert to ‘business as usual.’ What was striking about the article, however, was the unquestioned assumption that a lack of funds was the real reason for the failure of the project. Various people were quoted, mentioning staggering sums of money, and pointing out that these sums were inadequate because they were less than the average corporation spends on advertising, and therefore well below the minimum required to ‘brand’ a country. This seems to be missing the point. Countries can’t simply buy their way into a positive ‘brand image’ – especially if, like most African countries, their current image is very negative or very weak. Every country that has ever succeeded in noticeably improving its reputation – South Africa, Ireland, Japan, Germany, Spain – has done so as a result of economic or political progress. The advertising and PR campaigns which occasionally accompany these ‘branding miracles’ are never the cause of them, although on occasions they have been some help in making people aware, both inside the country №1(5), 2014

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even investigating how they have come about. But brand marketing cannot do very much to change them. Change comes from good governance, wise investment, innovation and popular support. What created the image in the first place? Not communications. What can change the image in the future? Not communications. What Kenyans need to understand is that winning a better image is not only a matter of persuading government to get involved in the issue: it is the primary responsibility of the government, and that image is the direct consequence of the leadership and good governance given by the government – or the lack of it. Creating a more positive national image is not a project that government needs to take an interest in. Earning a more positive national image is what good governance is all about.

few people outside Eastern and Central Europe have any conception of countries like Poland, Romania, Bulgaria, Hungary or the Baltic States as free countries with their own proud histories, cultures, personalities, products, landscapes, traditions, languages and people. There are few bigger crimes than what was done in the name of Communism during the last century: entirely obliterating a country’s good name and its history and identity, along with the centuries of its progress and cultural growth, and like some global game of snakes and ladders, sending it back to square one to fight for recognition in a busy, highly competitive, and largely indifferent world. And speaking of board games, the US company Parker Games launched the Monopoly World Edition website last year, where people could vote for the cities that were to be featured in the new Global Edition of the game. The contest was announced in a Latvian newspaper, and Riga soon rose from 46th to 2nd position. Parker Games presumably then was faced with the dilemma of either assigning some of the most valuable real estate on the board to this virtually anonymous ex-Communist city, or else risking international opprobrium and overriding the popular vote: naturally, thousands of the good citizens of Riga had got voting, and succeeded in pushing their city way up the rankings. I say ‘naturally,’ because almost nothing is more natural – or more powerful – than people’s love of their own city, region or country. Parker, I’m glad to report, did the honourable thing: Riga now sits proudly alongside Montréal on one of the two coveted dark blue squares on the board – and who knows? Perhaps a generation of children around the world are growing up with an

Riga no Montréal on dark bl

L AT VIA

Latvia faces a problem which is common throughout its neighbourhood: the urgent need to try and rebuild a national identity and reputation which the Soviet Union almost entirely erased. This is one of the less recognized impacts of Soviet rule: by cutting off all movement of trade, culture, people and communications between its satellite states and the rest of the world, the Soviet system effectively destroyed the public identities of these countries. Now, they have to painstakingly rebuild those identities, brick by brick. The lucky countries are the ones that were left with beautiful cities – like Riga, Prague, Ljubljana, Krakow and Budapest – as they have been able to attract plenty of tourists to their cities and thus reopen a dialogue with the West, and beyond: for the Ryanair generation, the appeal of such places has little to do with their past, and everything to do with their nightlife, their affordability and their cool. The countries and cities without obvious tourist appeal and without budget airline links have a far harder task ahead of them. Spain, too, had an easier job ‘re-introducing’ itself to Europe after the death of Francisco Franco, because his rule was short enough for Europeans still to share a common memory of Spain as a dynamic, modern European democracy. People only needed to be reminded of this, and to be reassured that Spain was once again open to the world and open for business, and Spain could pick up the pieces of its shattered reputation again. But 140

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group pride, and the expression of our own identity through the place that made us. As I first reported in the 3rd Quarter Report of the 2005 Nation Brands Index, the way in which people rank the ‘brand images’ of their own countries follows a fascinating pattern. Every country in the overall Top Ten of the NBI ranks itself first, while every country in the bottom 30 rates one or more other countries higher than itself – with the exception of two of the fastest-growing economies in the world, India and Ireland. It’s impossible to say whether this is cause or effect: do people rate their own country highly because they know how admired and admirable it is, or does the fact they rate it so highly help it to become admired and admirable? The reality is that it’s probably both at the same time, and there is some kind of feedback loop going on here. Ask 100 chief executives the secret of their company’s strong brand, and half of them will probably tell you that it’s the belief of their own staff in that brand and its values. Loyalty builds success, and success builds loyalty, and no place on earth – city, town, country, village or region – can hope to make others respect and admire it unless it first respects and admires itself. But of course there’s a catch. As with anything else that involves getting large numbers of people to make the effort to do something they don’t normally do – even if it’s only a matter of visiting a website and clicking on a button – there is a limit to how many times this force can be successfully unleashed. Yes, people undoubtedly do feel a strong pride in their own country or city, but their energy to express it is, like anything else, limited. You can’t keep stoking the fire of patriotism forever: unless provided with new fuel, it will eventually die down and burn out. Governments should reflect on this. Poking the embers of a population’s love of their country will, nine times out of ten, produce a blaze, and this is a trick that any child can perform. But keeping the fire going for generations, without burning the house down, is a steeper challenge altogether.

unshakeable conviction in the back of their minds that Riga is one of the world’s poshest cities. A similar phenomenon was observed last year when the Swiss film-maker and adventurer Bernard Weber had the idea of creating a ranking for the ‘New Seven Wonders of the World.’ The event resulted in over one hundred million votes being cast around the world, as ordinary people voted frantically to get ‘their’ national landmark recognized as one of the new seven wonders. As I write in mid-2009, Weber’s firm is launching a new initiative: the New Seven Wonders of the Natural World, and they are talking coolly of receiving one billion online votes. It’s striking because such events are somewhat unfamiliar. But if you think about it, equally dramatic displays of widespread and energetic patriotism are regularly triggered for every football World Cup, every Olympic Games, and to a lesser extent for contests such as ‘Miss World.’ Whenever people have an opportunity to boost the profile of their home town or home country, they do it, and in huge numbers. In the Eurovision Song Contest, where people can’t vote for their own country, we see instead the utterly compelling spectacle of hundreds of thousands of people practising realtime public diplomacy, and voting for the countries they most wish to appease, flatter or flirt with. Clearly, powerful forces are being unleashed here, and in a way it’s reassuring to find that in our age of globalization such a simple and elemental instinct as patriotism is alive and well – and especially encouraging that it usually manages to find its outlet in harmless fun. Such contests are undoubtedly ‘good branding’ for the places that do well in them: in one way or another, they will help to raise the profile of the place, increase tourism numbers, encourage other kinds of commercial interest such as foreign investment and trade, and boost the number of people who decide to study, work and relocate there. But all those millions of ordinary citizens certainly aren’t voting for their home town because the tourist board has asked them to (most people are blissfully unaware that their city or country even has a tourist authority, and many even complain about the number of foreign visitors cluttering up their streets) or even because they necessarily see a direct connection between their vote and their future prosperity. It appears to be something purely instinctive, an almost automatic outpouring of

ow sits proudly alongside n one of the two coveted lue squares on the board

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ALBANIA

Albania, just like America, finds itself battling against a negative image, its officials also asking ‘why do they hate us?,’ and also complaining that the good stories just don’t seem to be able to get out. 141

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the media and become the common currency of a country’s international image. If I’ve learned one thing in the years I’ve been working in this field, it’s the sad, simple fact that public opinion will never voluntarily ‘trade down’ from a juicy story to a boring one. Meanwhile, back across the Atlantic, successive public diplomacy officials, with their energetic and well-meaning attempts to communicate how tolerant and benign the USA really is to publics that, largely, detest the place – and for, largely, very good reasons – were suffering from the same misapprehension as the government of Albania: both thought that the good stories would kill the bad ones. They were both wrong. Strong stories can only be killed by stronger ones.

Albania is in many ways the typical case of a transition state whose reputation lags painfully behind the reality: since the end of Communism, the country has made notable social and economic progress, but this appears to have had almost no impact on popular perceptions of the country. The ‘professional’ audiences – such as investors, diplomats, tour operators, bankers and business people – are, of course, better informed about the place, and some of them are quite excited about Albania’s prospects, but the general public is 20 years behind the curve. From the way most Europeans talk about Albania, you would think that King Zog was still on the throne. Albania’s problem is the fact that most people are far too busy worrying about their own countries and their own lives to give much thought to a country they know little about and will probably never visit, and they are unlikely to go to any trouble to update the shallow, convenient, prejudiced narrative they hold in their heads about such places. Modest progress, growing stability and sensible reforms don’t make headlines and don’t interest people who have no personal connection with the place. Evil tyrants, self-styled monarchs, repulsive regimes, shocking repression: these are the stories that make

Albania’s problem is the fact most people are far too busy to give much thought to a country they know little about BILBAO AND DUBAI

People often ask me whether commissioning a big, glamorous new building will ‘brand’ their city. The answer is that it depends why you’re doing it, and how original the building really, objectively is. If the building is highly expressive of something clear and interesting that your city is telling the world about itself – like the Guggenheim Museum in Bilbao, the Sydney Opera House or the Kunsthaus in Graz – then it might be a very effective piece of ‘branding’ (although it will achieve nothing on its own – it has to be one well-chosen part of a very long-term series of substantial actions that make the story real). If, on the other hand, it’s done for its own sake and there’s no real long-term strategy behind it, it will add nothing to the city’s overall image at all. Most of the ‘trophy buildings’ built in places like Dubai aren’t expressive of anything in particular: they are just very large glass and steel filing-cabinets which, if they communicate anything at all, are simply monuments to money, power, modernity, technology, and the desire to show off. You need a veritable forest of such buildings before they really mean anything – and even then the only meaning is how much money there is in your city. ‘Make me a landmark building’ is no kind of brief for an architect: but ‘tell the world our story’ might be. Buildings must say something about their city and the country, or they are just bricks and mortar. Or steel and glass.

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branding, carried out with the specific intention of increasing visitors to the country. It was never intended, nor could it really aspire, to impact directly on the world’s overall perceptions of the country, although of course there are plenty of opportunities for indirect impacts on the country’s ‘brand image’ – not least the simple fact that if more people visit the country and enjoy themselves, they are more likely to spread the word and create a positive ‘vibe’ about the place. A more rigorous habit of distinguishing between sectoral promotion – such as tourism, exports and investment promotion – and ‘nation branding,’ is an urgent need amongst the community of scholars, commentators and practitioners within this field, in Asia as elsewhere. The idea of place branding in Asia is commonly associated with tourism today, since many Asian countries are now discovering that a healthy economy depends on a broad spread of risk: the countries that have traditionally relied on exports for their foreign revenues, such as Japan and South Korea, are now urgently attempting to build their visitor numbers, while the countries whose economies – and images – have tended to focus on their appeal as a destination, such as Thailand and the Maldives, are equally keen to broaden their image to embrace foreign direct investment, exports and other sectors. Image goes hand in hand with economic development: a country that is strongly associated with certain sectors will always trade at a premium in those sectors, whereas a country that is not will always trade at a discount. India is often cited for the vigour and ambition of its image enhancing activities. Long prominent in

ASIA

The level of interest in the images and reputations of places continues to grow, and apparently nowhere faster than in Asia. More money is being spent on various kinds of ‘reputation management’ – some of it wisely, but much of it not – by Asian cities, countries and regions than anywhere else on earth. In the rush to stake a claim in the new global economic order, countries from Bhutan to Oman and from Kazakhstan to Korea are talking about their ‘brands’ and attempting to wield some kind of influence over them. Many of these countries are simply trying to ensure that their international reputations keep pace with the rapid growth of their economic and political power. Others believe that their strongly negative reputations are undeserved, and obstruct their progress. Still others believe that if only they could have some kind of image, and escape their current anonymity, they would be able to participate more effectively in the global marketplace. In Asia as in every other part of the world, one sees governments falling into the same traps when it comes to national image and reputation: the ‘naïve fallacy’ that national image can somehow be built, reversed or otherwise manipulated through marketing communications; and the confusion between ‘destination branding,’ which is a kind of sophisticated tourism promotion, and ‘nation branding,’ which is usually understood as the management of the country’s overall reputation. One of the most prominent cases in Asia is Malaysia’s long-running tourism campaign, featuring the slogan ‘Malaysia, Truly Asia,’ which is often (wrongly) cited as a classic case of successful nation branding. In fact, this is destination №1(5), 2014

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tourism promotion, the country has more recently started to branch out into more general national image enhancement, and has had some notable successes in lobbying high-level decision makers – for example at the Davos forum in 2007, when India almost ‘stole the show’ with its ubiquitous self-promotion. Most of the big ‘branding stories’ of Asia are, however, associated with exports. The tale of how Japan built its economy and its image after 1945 is frequently cited as an export-led branding miracle, and several other countries – South Korea, Singapore, Malaysia, Taiwan and of course China itself – have quite deliberately set themselves the task of repeating the Japanese miracle. As all of these countries have discovered, this journey is a long one. To develop the capacity to produce world-class consumer goods, to distribute them worldwide, to market them and to build the customer service capability behind them that today’s consumers demand, is a decadeslong task; and even once the industries are built and the products selling well around the world, an enhanced national reputation is depressingly slow to follow. Countries like Korea and Taiwan are disappointed to discover that, despite the huge successes of several of their manufacturers in other countries, and the major contribution such exporters have made to their economies, they are still not yet widely associated as a powerful country of origin for such goods. If ‘nation branding’ is still in its infancy in Asia, the sister field of public diplomacy is equally so. The literature of public diplomacy is poor in Asian examples, and not all Asian ministries of foreign affairs even recognize the existence of such a discipline: Japan is a notable exception, and China – alongside its highly visible expansion into consumer markets overseas and its ever increasing investment in tourism promotion – has made major advances in cultural diplomacy through the expansion of its Confucius Institutes around the world. Yet the region is hardly short of countries that would amply reward some analysis of their situations through the lens of public diplomacy – the impact of the Borat movie on Kazakhstan’s image, the pariah status of Burma and North Korea, the way the relationship between Taiwan and the People’s Republic of China is played out in the public sphere, and so forth.

most of the big ‘branding stories’ of Asia are, however, associated with exports CHINA

China’s international image continues to slide quite rapidly downhill: exactly the opposite of what China’s leadership was hoping for in the buildup to the all-important Beijing Olympics. Almost all of the ground its image had gained during the highly disciplined and stage-managed Olympics, plus some international sympathy as a result of a bad earthquake, was virtually wiped out as a result of a bad poisoning episode from baby milk, and the botched attempt to cover it up. It remains to be seen whether China’s still relatively strong economic growth, as other major economies falter, will help to achieve what such ‘nation branding’ initiatives have so far failed to do, and persuade the world that China is a country to be trusted, and admired. Repeated episodes relating to dodgy products made in China further damage the image of the country, and, as long as they continue, will significantly slow down the process of taking the ‘Made in China’ brand from merely ubiquitous to actually trusted, and ultimately desired. I once predicted that within ten years’ time, we would start to see American and European products being launched on the marketplace with fake Chinesesounding names in an attempt to make them appear more desirable than their real country of origin would allow: but this goal – which, let us not forget, Japan managed to achieve in just a few decades – looks further off than ever. The Chinese leadership is frantic to create a better ‘soft power’ image for China in its potential marketplaces around the world, and the huge investment in Confucius Centres, the Beijing Olympics, the Shanghai Expo, its increasing aid

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loves and supports a challenger, but let it succeed in its challenge and acquire the power it seeks, and the love will quickly turn to fear, and the fear to hatred. China is getting there in one short step. China has the economic and increasingly the political strength to do pretty much whatever it wants: but the one thing it cannot do with all that power is to make itself much liked. And as its leadership has clearly understood, being liked is the fundamental prerequisite for building modern, market-based Empires on the US model. The results from the Nation Brands Index do not make comfortable reading for China. If we compare the NBI results for the 35 countries in the survey over the period between its first appearance in the Index in early 2005 and 2007, China experienced the worst trend of any country measured in the survey. Its overall score declined during this period by four percent. This may not seem much, but it is nearly double the ground lost by any other country in the NBI – and around six percent below the fastest improving countries like the Czech Republic and Brazil. What is worse for China is that the decline is much greater than average in areas where it most needs traction in the international economic arena. The worst figures are in the Immigration and Investment dimension and in particular for people’s willingness to live and work in China – the ‘talent magnet’ question. For Immigration and Investment as a whole, China’s score declined by 11.4% between the final quarter of 2005 and the second quarter of 2007. For willingness to live and work in China, the figure was nearly 14%. This compares with drops of around 9% for Russia and Indonesia, the countries with the next most negative trends in this

donations in Africa, the more moderate and collaborative foreign policy in some areas, the acquisition of trusted Western brands by Chinese companies, are all part of this strategy. In a speech to the 17th Party Congress, President Hu Jintao (Editor’s Note: at the time when the book was being written he still held this position) spoke again of his aim to create trusted Chinese export brands – echoing the same promise made several years ago by the then VicePremier Wu Bangguo, as I reported in my 2003 book Brand New Justice – but this ambitious and complex manoeuvre is proving exceedingly hard to stagemanage on China’s own terms. Part of the problem is that China is a bull in the global china shop, and is becoming simply too powerful to be able to carry out the delicate manipulations necessary to build a positive and trusted image in other countries. Take the news in late 2008 that the Chinese oil firm PetroChina trumped US rival ExxonMobil to become the world’s biggest firm, with a market capitalization of a trillion dollars: no matter how you tell a story like this, the reaction of many ordinary people is more likely to be fear than liking or respect. Brand China is going from invisible to overbearing in one leap. At least the United States enjoyed a couple of centuries of admiration and affection before starting to experience the downside of its success in the global marketplace. As I pointed out in Brand America, America’s image problems have at least as much to do with its achievement of many of its economic aims as its frequently unpopular foreign policy: the world №1(5), 2014

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area. Only Israel is now less popular than China as a place to live and work. China’s bad news is not confined to the Immigration and Investment dimension; for the country of origin effect on product purchase, the results were not good. If people find out that a product is made in China, the majority of people in the survey said they would be less inclined to buy it. What’s more, the people who said they had bought products from China were even more negative than the respondents as a whole. The trend for China’s products was also the worst of any of the 35 countries. In the 2008 study, China is now 47th (the third-lowest country) for products, compared with 24th in late 2005. Its score declined by nearly six percent over the ’05–’07 period, compared for example with an increase of nearly six percent for Brazil, another of the quartet of largest emerging markets. If China is hoping to emulate or even outstrip Japan’s remarkable 40-year rise as a leading global producer of trusted and desirable consumer products, it appears to have taken a wrong turn in the road. The first stage of this process – familiarity with the ‘Made in China’ label through wide distribution of its products – has been achieved with remarkable speed and efficiency, but the second stage – where familiarity turns to trust – looks considerably more elusive. China’s current highly publicized quality issues have certainly delayed this stage. The final stage – where trust turns to desire and premium positioning – can only take place when the corporations as well as the products are truly world class, and can design and brand to world-class standards, and this stage looks to be decades away for the majority of Chinese products. There are exceptions – Haier and Lenovo being perhaps the most high-profile examples – and of course there is always the option of ‘fasttracking’ the process through the acquisition of already trusted foreign brands, an approach which both China and India see as part of their strategy. China’s tourism appeal is lagging too. People are showing no increase in their desire to visit China, despite the undoubted fascination of its historical heritage. In fact the trend in China’s results for ‘likely to visit, money no object’ is the worst of any country – a drop of 5.6% since late 2005. China is now down in 21st position in the tourism brand rank, according to the 2008 study.

None of this augurs well for China and its attempts to promote itself as an attractive and trusted member of the international community. China’s recent growth may have been stellar, but sooner or later it will have to base its economy on the sound footing of a comprehensive, robust and improving national reputation. This must include a governmental system that people trust. How far people’s perceptions of China’s governance spill over into these other areas, we cannot say for sure. China showed one of the worst results for governance in the 2008 survey, outranking only Nigeria and Iran, and this included its results for competence in domestic governance. It is highly likely that if people have little confidence in a country’s ability to manage itself, they will not be willing to invest their time and money in it, and a successful Olympic Games will certainly not have been sufficient to achieve the image turnaround they are hoping for. Building a reputation, as China will discover, often feels like taking two steps forward and one step back: no sooner have you achieved something that makes people feel good about you, than it’s forgotten. Governments must plan for the long term, and obsessively ask: ‘what can we do next?’ A successful Olympics is the start of the process, not the end; and of course it takes more than sporting events to build a national image: policy, products, people, culture, tourism and business have to work together to earn the country a better reputation. Only real changes, sustained over the very long term, can turn around a national image – especially one as bad as China’s. Yet it’s not an impossible task: Japan and Germany both suffered from worse images than China’s half a century ago, and are now amongst the most admired nations on earth. If any country has the patience and the resources to imitate those examples, it is surely China.

the world loves and supports a challenger, but let it acquire the power it seeks, and the love will quickly turn to fear 146

Sense of Location

Very few countries, in fact, have images that remain entirely consistent between East and West. South Korea is a classic case of a country that enjoys a rather positive reputation in its own ‘neighbourhood’ – the ‘Korean wave’ of commercial entertainment has made Korea something of a celebrity in East and even South Asia, but the wave doesn’t reach Europe or the Americas, where – at least according to the Nation Brands Index – there appears to be substantial confusion between South Korea and its northern neighbour (to the obvious disadvantage of the South). Most of the ‘Asian Tiger’ economies of East Asia are generally admired in Europe, yet there is a strong prejudice against them amongst South American populations, and especially in Brazil. The Brazilians show a remarkable distaste for most Far Eastern countries which is entirely out of kilter with ‘global’ views. One can only surmise what this antipathy stems from, but it does suggest that the world is still very far from united in a common sense of national reputation and image. Democracy and place image do not always go easily or simply together, and it is noticeable that two of the places most widely recognized for the grip they have managed to exert over their international reputations – Dubai and Singapore – are both places that are run on somewhat corporate lines. This is surely no accident: the main reason why building a brand in the corporate sector is so much more straightforward than doing the same for a place is precisely because corporations have a supreme commander in the shape of their CEO, whose vision tends to form the defining narrative of the place, and deviation from this narrative often results in dismissal. Whatever one might say about North Korea, one has to admit that its brand is clear, simple and consistent – again, the consequence of the entire society being run along the lines of one man’s viewpoint. It remains to be seen whether India, the world’s largest democracy, or China, the world’s fastestdeveloping economy and the last major bastion of Communism, will eventually prove more successful at managing their reputations in the eyes of the world. So far, it looks very much as if democracy is winning the day, but the determination, resources and skill of the Chinese should never be underestimated.

China, like India and indeed many countries in Asia, has for many centuries held a strong fascination over the imaginations of people in the West, and this glamour is an important component of their ‘brand equity’ in the age of globalization. But exoticism is a double-edged sword, and whilst such an image may support the tourism industry to a degree, and perhaps certain export sectors – Chinese tea, Indian perfume, Japanese fashion – it can prove rather unhelpful for a country that is trying to build its reputation in financial services, engineering or technology. India’s image is currently straddling these two sides of its image in a way which at times seems almost uncomfortable: a fundamental component of its tourism and cultural image, for example, is its poverty, and yet its more modern commercial image is an image of wealth. By the same token, the ‘destination brand’ of India is an image of chaos, almost of anarchy – hardly a useful attribute when one is trying to build a service economy based on efficient customer service or reliable motor vehicles. This is, without question, an interesting stage in the maturity of the West’s perception of the East. The facile and comforting clichés of ‘the mysterious Orient’ are the legacy of a less connected, less tolerant and more ignorant age, where engagement with other civilizations was limited to imperial adventures rather than true collaboration in a global marketplace. The demystification of the Orient is a necessary phase in human development, which implies major shifts in the reputational capital of the world. №1(5), 2014

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Are You Happy? Smile! Where do the planet’s happiest people live? To ﬁnd out, perhaps one could start by counting smiles from around the world. Jetpac City Guides has done exactly that, to create its own world happiness ranking – and it says the number of smiling citizens has nothing to do with the amount of money in their pockets.

While mankind continues to argue over the endless question of whether or not happiness is predicated on money – and, if it is, on what specific amount – Jetpac City Guides, a provider of online tourism and travel apps, has attempted to find out for itself where on this planet people feel the happiest. In tackling this task the company did not resort to traditional polls but rather chose to analyze more than 150 million Instagram photos from around the world. First, using specialized software, they located smiling people in the photos. Next they determined how broadly they were smiling to ultimately assign the country of origin a point score. A minor smirk, for example, was worth less than a radiant, full-breadth smile. These efforts culminated in a world happiness ranking that was published by Jetpac to coincide with the United Nations International Day of Happiness on 20 March. Surprisingly, out of 122 countries on the list, the top billings were firmly taken by countries that one could not really call the richest. For example, the happiness score for Brazil, the highest on the index, was twice as high as that of the world’s largest and most affluent economy: the United States managed only 34th place. At the bottom of the list, Japan turned out to be the world’s unhappiest country. One might say that the absence of Bhutan in Jetpac’s ranking makes it somewhat less representative. After all, this is the country that since the early 1970s has prioritized the growth of GNH – Gross National Happiness – rather than GDP. So it may well be that this Himalayan kingdom is one of the happiest countries on the planet, even though it is also one of the poorest.

Happiness List Place 1 2 3 4 5

Country Brazil Nicaragua Honduras Colombia Bolivia

Ranking 60.5 59.4 53.9 49.8 48.1

South Africa

31.5

USA

29.8

Russia

28.0

India

21.7

114

China

12.5

118 119 120 121 122

Maldives Vatican City Kuwait South Korea Japan

9.8 9.8 9.7 9.2 4.1

Source: Jetpac City Guides.

But times are changing. Bhutan’s new prime minister, 48-year-old Tshering Tobgay, has already made it clear that even though he does not believe “economic growth to be the only and ultimate development goal” for his country, GNH should not distract the government and society from addressing more topical issues. These include a weak national currency, chronic unemployment, stagnating poverty, and growing corruption. It appears that the subjects of even the happiest kingdom may eventually have to roll up their sleeves and get down to work. 176