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Earlier this year, the Merrill Lynch Forum spoke with Dr. Francis Fukuyama about globalization. The conversation focused on how culture shapes, and is shaped by, the increasing worldwide economic integration. In his comments, Fukuyama challenges the view that globalization is leading to cultural homogeneity, arguing that societies largely maintain their individual characteristic despite economic pressures. In fact, Fukuyama asserts that these cultural values in many respects define how business is conducted within a nation.
This does not mean that society is not influenced or altered by the process of globalization -- Fukuyama does believe there is a convergence of political and economic ideologies. Rather, he suggests that there are deeper elements of culture not easily abandoned.
Q) To what extent has globalization been realized?
I think that in many respects, globalization is still superficial. Although there is a great deal of talk about it currently, the underlying truth is that the global economy is still limited. It seems to me that the real layer of globalization is restricted to the capital markets. In most other areas, institutions remain intensely local.
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Trade, for example, is still predominantly regional. Relatively little trade flows beyond local regions Asians trade mostly with Asians and Latin Americans trade mostly with Latin Americans. Even in more developed regions this practice holds true. Intra-European trade accounts for roughly 60% of all European trade.
This regional limitation is true elsewhere. Most companies are predominantly national, and certainly governments remain very national. Consumer markets are not only national, but they are segmenting even further within regions as consumer education improves and consumers are able to demand products that precisely meet their needs.
Q) Are there aspects of globalization that lead to greater homogenization?
I think that homogenization and an affirmation of distinctive cultural identities will occur simultaneously. In terms of large economic and political institutions, cultures are becoming more homogeneous. There arent as many alternatives and regime types. It isnt possible to have a kind of Peronista economic nationalism, or a certain kind of socialism. It turns out that, given the nature of the global economy, there are only so many ways that a political or economic system can be organized to make it viable and competitive. To be an advanced society, a country has to be a democracy, and it has to be connected to the global marketplace. In that respect, there is a greater homogenization of institutions and ideologies. On a cultural level, its not clear that homogenization is proceeding nearly as rapidly. To a certain extent, there is a real resistance to cultural homogenization.
Q) Do you believe that homogenization will ever occur on a deeper level?
It could be that culture will ultimately become homogenized, just like political institutions, but I believe that its going to be a much slower process. Many people think that because we have advanced communications technology, and are able to project global television culture worldwide, this will lead to homogenization on a deeper cultural level. I think that, in a way, its done just the opposite.
For example, there is probably less mutual liking, more distrust and greater emphasis on the difference between the cultures of the United States and Asia today than there was 40 years ago. In the 150s and 60s, Asia looked up to the United States as a model of modernization. Now, Asians look at American urban decay and the decline of the family and they feel that America is not a very attractive model. Communications technology has allowed both Asians and Americans to see each other more clearly, and it turns out they have very different value systems.
Q) Can global corporations have a homogenizing effect on culture?
I think that there is a global consumer culture that is spread by companies like McDonalds and Coca-Cola. However, if you look beneath the surface and ask people in different countries where their loyalties lie, how they regard their families, and how they regard authority, there will be enormous differences. When people examine a culture, they pay too much attention to aspects like the kinds of consumer goods that people buy. Thats the most superficial aspect of culture. A culture really consists of deeper moral norms that affect how people link together.
In my second book, Trust The Social Virtues and the Creation of Prosperity, one of the central theses argues that these deeper qualities, the so-called moral norms, define economic activity. For instance, Chinese culture is family-centric limiting business transactions to extended family. This fact has many consequences. It means that Chinese businesses tend not to be very large, probably because they are unwilling to bring in managers from outside the family. It means that its very difficult to establish brand names because large marketing organizations are not used. It also means it is very difficult to build lasting institutions that endure for more than two or three generations. In the China example it is culture that drives economics.
Q) What constitutes these deeper cultural Identities?
Obviously language, religion, and race are all important components of a local identity. My particular interest is in what I call networks of trust. These networks vary in different parts of the world. I think that to really understand how to operate in any region of the world, you really need to understand the networks of trust in that area. Once a trust relationship is established, a business relationship can follow.
For example, in many Latin American countries, many of the largest companies are almost always controlled by a group of families. This is also true in other countries, such as China and Turkey. Obviously, business opportunities in such countries very much depend on an understanding of the way that these social networks are wired together. The only people with a full understanding of how these networks work are the locals themselves. Thats why outsiders sometimes find it difficult to conduct business in countries where the expected degree of transparency and ability to form business relations without preexisting social relationships are lacking.
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