UK: THE DINOSAUR FLEXES ITS MUSCLES. - Professor John Stopford of London Business School, teacher, writer and authority on international business, thinks reports of the death of the nation state are greatly exaggerated.

Last Updated: 31 Aug 2010

Professor John Stopford of London Business School, teacher, writer and authority on international business, thinks reports of the death of the nation state are greatly exaggerated.

The End of the Nation State

By Kenichi Ohmae

HarperCollins; 211pp; £16.99

In this era of the global economy it has become fashionable to talk of the nation state, as Ken Ohmae does, as 'a dinosaur waiting to die'. The sheer volume of money and information flowing across national borders - so the argument goes - has inexorably weakened the powers of national authorities to control their domestic economies. Even a former British chancellor of the exchequer has claimed, after leaving office, that 'the ability of national governments to decide their exchange rate ... and output (levels) has been savagely crippled by market forces'. The argument suggests that the row over a common currency for Europe is little more than a rearguard action by politicians fearful of admitting that they have already lost the game.

Ohmae, as many readers of Management Today know, has written extensively on this subject. He would not now agree, however, that the nation state has been superseded solely by the blind forces of 'the market'. In this book he urges us to consider the 'region state' as the principal source of dynamism and wealth creation. Look not to Washington but to Silicon Valley. Look to South Wales not London, to Hong Kong/South China not Beijing, or to the growth triangle around the city state of Singapore. There you will find evidence of how the new clustering of resources is reshaping the world economy.

The argument, presented here in breathless fashion, and in a text studded with vignettes and what some Americans call 'factoids', is worth examining for it is often overlooked in the policy debate. Its nub is that the global economy is being shaped by the 'four Is': investment, industry, information technology and the individual consumer (who is, like the other three, increasingly global in outlook and knowledge). 'Region states are different in that they sidestep the bunting and hoopla of sovereignty in return for the ability to harness the global Is to their own needs,' writes Ohmae. Each of the successful region states possesses 'the essential ingredients for participation in the global economy'. So far so good, even if others, like Michael Porter, have said much the same rather more elegantly.

But then the argument falters. I could find no clue as to how these ingredients were created in the first place, only that it was somehow easier if everything was clustered nearby. All the reader gets is evidence of regional disparities in wealth. While some regions retain their dynamism, others (like the technopolis that used to flourish on Route 128 around Boston) wither away as they resort to appeals for funding from central government. Certainly one needs reminding of these evident truths. Although the old centrist models of economic development based on average income effects have long gone, there is still a tendency for the policy debate to focus on issues of 'national competitiveness', as though, somehow, it were the nation states and not their enterprises and regional clusters that were in competition.

The key question for policy makers is how to initiate, nurture and develop these regional states as bulwarks against the rip tides of turbulent competition. Here the book is a grave disappointment. Ohmae is surely right to suggest, on the penultimate page, that national authorities should engage in a spot of re-engineering, and redefine 'their role from central provider to that of the region state catalyst'. But, without some prescriptive clues, that conclusion is too slight to repay a journey of 150 pages, however racily written.

A more serious criticism relates to the unquestioned assumption that nation states really have lost power and should now be included on the list of endangered species. Ohmae blithely ignores much evidence to the contrary. In fact there is a lot of evidence that the nation state is not only alive and well, but also flexing its muscles. How else can one explain the enormous range in the proportion of national income that governments spend? At the high end of the scale, in Singapore - one of Ohmae's exemplars - nearly 70% of national income is spent by the government. In countries like South Korea strong national government is associated with strong region states, as around Pusan. Maddeningly, Ohmae is well aware of this, for he argues that 'region states are not - and need not be - the enemies of central government. Handled gently, by federation, these ports of entry to the global economy may well prove to be their best friends.' The worth of this argument is undermined by the author's failure to confront the paradox that countervailing trends are acting simultaneously at global, regional, national and sub-regional levels. While the global capital market is rewriting the macro-economic rulebook, there are also sub-regional forces creating new wealth. Taken together, these forces seem to be having an effect quite different from that implied by Ohmae. Instead of assuming that everything favours the regional state, we would do well to consider the possibility that increasing diversity will pose a much more complex set of policy puzzles. Ohmae's argument might give heart to those involved in the politics of local identity, as in Quebec or on the extreme right of the Tory party. But he does not ask whether an independent Quebecois region state, or a United Kingdom divorced from Europe, could find an independent economic dynamic. To have done so would have confronted the real dilemmas of policy choice, but would also have had less populist appeal.

The top ten business hardbacks

1. Beyond Certainty: The Changing World of Organisation By Charles B Handy Hutchinson; 176pp; £12.99 2. Company Man: The Rise and Fall of Corporate Life By Anthony Sampson HarperCollins; 416pp; £20 3. Trust: The New Foundations of Global Prosperity By Francis Fukuyama Hamish Hamilton; 480pp; £25 4. Troubleshooter Returns By John Harvey-Jones BBC Books; 240pp; £17.99 5. Competing for the Future By Gary Hamel & C K Prahalad Harvard Business School Press; 288pp; £21.95 6. The State We're In By Will Hutton Cape; 352pp; £16.99 7. Re-engineering Management By James Champy HarperCollins; 256pp; £17.99 8. The Warren Buffet Way By Robert G Hagstrom Wiley; 288pp; £17.95 9. Re-engineering the Corporation By Michael Hammer & James Champy Nicholas Brealey; 223pp; £16.99 10. Re-engineering Revolution: The Handbook By Michael Hammer & Steven A Stanton HarperCollins; 352pp; £18.

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