A business historian reminds us that since the nineteenth century, predictions about globalization have been reliably wrong. Despite technology for the fast diffusion of knowledge, information—like wealth—seems to be concentrating even further.
As Harvard Business School begins its second century, we asked Geoffrey Jones, the school’s Isidor Straus Professor of Business History, to look both forward and back, placing the current moment in global business in context. In the following edited excerpts of his remarks, Jones challenges the notion of a flattening world while still offering a hopeful take on the present—as viewed from 100 years hence.
What does recent business history suggest about the future of globalization?
First, remember that predictions about globalization are reliably wrong. In the nineteenth century everyone—including Karl Marx, who was enthusiastic about the benefits of the British colonization of India—assumed that globalization would spread wealth creation. And of course at the time, it didn’t. Modern economic growth burst out of Western Europe, headed toward North America and a few other places, and then largely stopped its march for a long period. Many assume that in our current age of globalization the outcome will be far more positive, because of the modern-day flow of knowledge and capital across borders—that this time globalization will do a better job of spreading wealth. Well, so far the evidence is inconclusive, beyond the obvious success stories in parts of India and China. Oddly enough, we now have technologies that should enable the fast diffusion of knowledge, yet knowledge and wealth not only remain geographically concentrated but seem to be concentrating further in a world that is much less “flat” than it was before 1914.
Why, as it gets easier and easier to spread information, would knowledge concentrate?
However powerful information technology becomes, the way knowledge and wealth disseminate and are applied depends significantly on the proximity of people. Clever bodies want to be living with other clever bodies. And they want a particular type of political, economic, and social institutional and cultural environment. Richard Florida has explored this idea in his work on the way creative people cluster, as have John Seely Brown and Paul Duguid in their book The Social Life of Information. Wealth and knowledge are staying where there’s a critical mass of certain types of people and institutions. Look at financial services. Obviously, it has become more rather than less important over recent decades to be in London or New York if you want to participate.
But aren’t borders more economically porous than they were in the past?
Absolutely not—certainly not if compared with the nineteenth-century global economy. Perceptions about country of origin also play an important inhibiting role in the diffusion of wealth. If your brilliant new brand or service is headquartered or created in the “wrong” place, that’s a big obstacle. I’m studying the beauty industry, and it’s clear that anyone trying to build, say, a cosmetics company other than in Paris or New York—or perhaps a handful of other niche locations—faces a major credibility issue. Perceptions about a country’s capabilities do change over time—look at the postwar view of Japanese manufacturing compared with today’s—but it takes decades. Most entrepreneurs can’t wait 50 years for attitudes to change.
What will future historians say about how the environment today shaped the trajectory of business?
I think many will say that this is when the great divergence between Western culture and China and India began to reverse. In 1700, living standards, technology, and income may have been broadly similar between Western Europe and regions of India and China. Whatever the exact starting point, the economic chasm between East and West opened up dramatically with the Industrial Revolution. The outcome was nineteenth-century Western imperialism, and the West’s lead widened with the technological achievements of the “American century.” India and China, clearly, are emerging as major forces in manufacturing and technology. The wealth gap is not going to close soon—they’re not even remotely there, despite the hype. But in 100 years’ time? We’ll see Western preeminence as an important but temporary historical blip.
Historians will also see this as the moment when we finally realized that our way of doing business was unsustainable in terms of its impact on the environment, its inequality of resource distribution, its failure to invest in human life, and the triviality of much of what it does. I’d like to think that in 100 years’ time we’ll look back and say, “This is when they got it.”