Coevolving Innovations

Peter Harding, in the Globe and Mail¹, is cited as a high-level bureaucrat — he managed six departments under five different prime ministers — who is respected by both Canadian political parties. In 2000, he received the Prime Minister’s Outstanding Achievement Award for leadership in the public service. He has now left the public service, and is free to express his opinion on globalization. He proposes three laws:

1. Economic space is greater than political space.
2. The country that best understands globalization wins.
3. We are our geography.

These are interesting ideas. I’m not sure that I’m in 100% agreement with the interpretations of these laws in the newspaper column, but they do represent a departure from the preconceptions of the 20th century. Let’s think about these a little deeper.

First law of governance: Economic space is greater than political space. Anyone that subscribes to Friedman’s observations that the world is flat should already appreciate this. Governments can set laws and policies within their borders, but capital flows in a world of trade are multilateral. There are historical examples of countries that have closed their borders, but internal forces (e.g. a Boxer Rebellion in China) or external forces (e.g. the Convention of Kanagawa by Commodore Perry in Japan) have eventually led to openness. Either the political system changes, or citizens will immigrate (or escape) elsewhere.

Second law of governance: The country that best understands globalization wins. Businesses operate globally. As resources in one region become less competitive relative to other places, operations may be shifted from one region to another. Every business is incorporated at the pleasure of a state. That state can continue to invest in renewable resources — physical or human — either in parochial interests, or in larger contexts. Governments that can’t see beyond their national borders will be overtaken by those that can. The world in the 21st century seems to move faster than 100 years ago.

Third law of governance: We are our geography. Capital may be mobile, but for its potential to become realized, it has to land somewhere. In some respects, this law means less than it used it. Business people commonly get on planes to work at remote locations, or are connected electronically to colleagues over the Internet. However, there’s no substitute for face-to-face interactions. Everyone needs a home base. Everyone lives in a physical world.

I like Harding’s three laws of governance. I’m quibbling over a few details on how the laws might be interpreted, and I really think he’s more right than wrong. The real challenge is people who are in denial of the trends of globalization and want to turn the clock back.