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strategy and business
 / Fall 2003 / Issue 32(originally published by Booz & Company)


John Kay: The Thought Leader Interview

The development of television is typical of those things that happen a lot with a certain sort of applied innovation. All the bits needed to do it were there — so television was effectively invented half a dozen times, more or less simultaneously, by different people around the world. Probably the most plausible claim to be the inventor of the commercially viable television is a small entrepreneur in the U.S. supported by business angels. The other example is green revolution crops. That, interestingly, was the Rockefeller Foundation again.

S+B: We’ve talked about the American business model — real or imagined. Is there a European business model?

KAY: There’s no one distinctive model. There’s a multiplicity of models. The market economy is centrally and fundamentally a West European institution. It came into being in Western Europe a couple of hundred years ago. And almost all of the countries today that are effective players in the market economy are either West European or they’re what Madison called the West European offshoots. That includes the United States because its political, social, and cultural institutions are basically West European in origin.

So what we have across most of the productive world is a set of variants on that particular theme. It’s then an open question to what extent the Asian partial success is just another variant on that theme, or to what extent that represents a somewhat independent strand of historical development.

S+B: There’s another paradox, which you rightly point out: Despite there being no single American business model, that model is the most admired in the world.

KAY: One of the oddities about the last decade has been the belief — on the basis of no evidence — that the U.S. is not just the world’s most successful economy, but that it’s so markedly more successful than any others. The truth is that the richest countries in the world are small Western European states: Switzerland, Norway, Denmark, and so on.

S+B: Do you see any decline in the competitive position of the U.S. economy relative to Europe?

KAY: If you look at growth rates during the last 20 years, there is no marked difference between American economic performance and European economic performance. The bizarre thing is that not just Americans but a lot of Europeans seem to have brainwashed themselves into believing that Europe is doing much worse than the United States. One of my favorite comments at the moment is to say American GDP is 20 percent above French; but French working hours are 20 percent shorter. The only difference is the French have more holidays and longer lunches.

There never really has been a huge gap between European and American productivity. People seem to have convinced themselves in the late 1990s that Europe has a major problem in comparative economic performance.

S+B: But many people believed that the U.S.’s rapid adoption of new technologies was giving it a major structural advantage over the rest of the world.

KAY: There is nothing to suggest that something has permanently increased the U.S. growth trend, or the growth rate of any other major economy. Nor is there any convincing evidence to support the notion that information technology has fundamentally changed the characteristics of a successful business.

S+B: Is globalization a force for economic good in the world? Does it benefit poorer countries, or is it a form of economic colonialism?

KAY: Globalization is another of those words that has so many meanings and connotations. There is an easy and positive way to define it. Market economies have really developed because of an ever-finer division of labor by which the tasks performed by both individuals and organizations become more and more specialized. Growth in international trade has been a part of that; in that sense, globalization is a great dynamic for economic development. If globalization means the international influence of large corporations, then a lot of that is good, as well. Large corporations are vehicles for transferring not just technology but institutional knowledge to poorer countries, which desperately need it.

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