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America's economic growth is driven by population growth, which is expanding rapidly because of immigration. European populations are stagnating -- they are becoming gentrified. One of Japan's biggest problems is that its population is shrinking and graying. That's what's making its economic decline so difficult to repair.

Note: Business 2.0 is now part of CNNmoney and some older articles are no longer available

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There's nothing magical about the United States, in my opinion, except its ability to innovate and innovate freely, and that's what this country's all about.

The fact that the New Economy is real, however, doesn't mean that we've understood it. In explaining our success in the nineties to ourselves and the world we have largely drawn on a set of myths that desperately need debunking: that deficit reduction by itself led to the economic recovery of the 1990s; that the brilliance of our economic leaders created our newfound prosperity; that deregulation and self-regulated markets are the key to sustaining that prosperity, and should thus be exported to the rest of the world; and that American-style globalization is based on high-minded principles of equality and social justice and will inevitably lead to global prosperity, benefiting not only financial markets in America but also the poor in the developing world.

Globalization undermines neither the welfare state nor democracy, our survey argues; it is entirely consistent with sound environmental policies; above all, far from increasing poverty in the third world, it is the most effective force for reducing poverty known to mankind. But what about the view that globalization is a kind of cultural conquest? This too is plainly wrong. Under a market system, economic interaction is voluntary. This is the market's greatest virtue, greater by far than its superior productivity. So there is no reason to fear that globalization itself threatens traditional non-western cultures, such as Islam, except in so far as individual freedom threatens them. McDonald's does not march people into its outlets at the point of a gun. Nike does not require people to wear its trainers on pain of imprisonment. If people buy those things, it is because they choose to, not because globalization is forcing them to.

Say what you will about how the United States is superior to Denmark, Finland, Austria, Norway, Sweden, France, Germany, Spain, Brazil, England, Switzerland, the Netherlands, Ireland, Belgium, Australia, New Zealand and Colombia, but those countries have us beat when it comes to how much vacation time they give employees. Even the stingiest of these countries - New Zealand and Colombia - give employees 50 percent more time off in their first year of employment than the good ol' USA. Of course, many people will say, "That's why we are the most productive nation on Earth, you lazy Communist slacker," to which I would say, "That's why we lead the world in gun violence."

I think it's a national disgrace that Americans - inventors of the theme park, the station wagon and the reptile farm - take less vacation than all those other countries. We have come to equate "vacation" with "sloth" instead of seeing vacations for what they really are: a gift to our co-workers.

American culture loves the myth of the lone individual hero. It is built into our cultural DNA as a nation and yet it's not even supported by the evidence of our own history - the West was settled by groups of people not lone individuals; the great industrial advancements of the 1800s and early 1900s were not accomplished by lone geniuses but achieved by people working together who built systems of genius. History shows that it is groups that come together in a common purpose that get the real work done. Nonetheless American ideology and American culture centres on the great, epic heroic male.

Business thinker Stan Davis uses a pipeline metaphor to describe the pattern of job creation and motion. "I'm not concerned about U.S. job losses so long as we're feeding the front end of the pipeline with growth and innovation," he says. "As each new innovation creates new jobs and new sectors mature, those jobs migrate down the global food chain. The issue is, 'Does the United States represent the front end of the pipeline?' It's a question of how long we stay healthy and grow and innovate and create new sectors."

I do not believe China should be forced to hold democratic elections, even if that were possible. Its population would vote for leaders who distribute wealth to the poor. But there are still 900 million farmers in China with an average annual income of $500; distribution of wealth would simply be a synonym, as it is in India, for the distribution of poverty.

The Western debate over China's political acceptability should not be cast as a simple matter of right or wrong, but of when and how. Politically, China is comparable to the United States of 1800: an emerging nation with high ideals but widespread poverty and a great many practices that other regions find intolerable. People tend to forget that the U.S. did not establish civil rights legislation until the 1960s. A decade or two of economic growth, under the shrewd and highly motivated leaders of Chung-hua Inc., will provide China's people with the necessary education in the ways of capitalism, just as working for a large corporation does the same for young managers. It will also give the Chinese people an appetite for self-determination and participation because they will see what their efforts can achieve. That, in turn, may lead to a country whose openness and capability for democracy ultimately surprise the rest of us. Already, some village leaders are elected; this may slowly spread to regional officials, and then upward to the central government.

Put bluntly, those with the best work forces will win the competitive game of the 21st century. The quality of the work force is the key strategic competitive weapon for the individual, the firm, and the nation. In a global economy, those without skills have to face what economists know as "factor price equalization." The unskilled who live in a rich society can make no more than the unskilled who live in a poor society. If the unskilled in rich societies won't work for such wages, unskilled jobs will simply be moved to poor countries where the unskilled will work for such wages. In a global economy, the effective supply of unskilled workers expands enormously and the wages of the unskilled in rich countries fall.

While American firms often talk as if they are investing vast amounts in their work forces, they in fact invest less in the skills of their workers than either Japanese or German firms. The investment they do make tends to be highly focused on professional and managerial employees. And the limited investments that are made in average workers are narrowly focused on the specific skills necessary to do the next job, rather than on the basic background skills that make it possible to absorb new technologies.

In Germany, there is an extensive training system for the non-college-bound. These young people enter a dual school-industry apprenticeship system at age 15 or 16. At the end of three years, after passing written and practical examinations, they become journeymen with known skill levels. After another three years of work and additional courses in business management, law, and technology, a journeyman can become a master - a credential necessary to open one's own business.

In contrast, America keeps all students on the "college track," even though it knows that only a quarter of them will successfully complete that track. It ignores the fact that skilled blue-collar workers will earn more on average than college-educated workers. The mirage of equal opportunity is used to defeat real opportunity. No one is willing to plan for, or invest in, the skills of the non-college-bound. Relative to the sizes of the two populations, for every $1 per person in taxpayers' money spent on training the non-college-bound, $55 are spent subsidizing those going to college - a system that is neither fair nor efficient.

Note: Older EBF articles are not currently online. I'm not sure if this is temporary or permanent. If you click you will be taken to the Archive.org site to find an archived copy.

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Globalisation offers short-term opportunities: economies of scale, efficiencies from larger markets, and cost savings from cheaper production or services. But with the 'quick buck' comes greater vulnerability. As the business chain lengthens, the risk of failure from one weak link increases. Risks - structural and reputational - are compounded as business extends around the world.

Note: Older EBF articles are not currently online. I'm not sure if this is temporary or permanent. If you click you will be taken to the Archive.org site to find an archived copy.

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The economic case for free trade is that it produces mutual gains for countries. These gains arise from the workings of the principle of comparative advantage. Comparative advantage results from different countries having different opportunity costs of producing one traded good in terms of another; for example, the cost of a gallon of wine in terms of yards of cloth. The ratios of wine to cloth differ among countries due to inherent differences (in this case, differences in climate and soil). These different relative cost ratios are the reason why it pays to specialise and to trade.

In order for resources to be allocated within each country in keeping with comparative advantage, factors of production must be relatively immobile internationally. Otherwise, factors of production would be allocated according to absolute advantage and would move abroad to where their productivity is higher.

The operation of absolute advantage is what we see today. Labour is most productive where capital is most abundant, and capital is most productive where labour is most abundant. Thus, we observe developing world labour moving across borders physically and electronically to first-world countries where capital is abundant, and we observe first-world capital and technology moving to countries where labour is abundant and inexpensive.

Comparative advantage has now disappeared from the picture. Today, factors of production are more mobile internationally than are traded goods.

Note: Older EBF articles are not currently online. I'm not sure if this is temporary or permanent. If you click you will be taken to the Archive.org site to find an archived copy.

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We should stop talking about 'company and society'. We should talk about 'company in society'. The market is always situated in social contexts; society should not be subordinated to the market. There are no alternatives to globalisation without companies - the point is, though, that not all models of companies are acceptable or viable in a globalised world.

Note: Older EBF articles are not currently online. I'm not sure if this is temporary or permanent. If you click you will be taken to the Archive.org site to find an archived copy.

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The world economic system is like a global highway - a network of linkages and laws that allows ideas, goods and capital to circulate quickly. But there is one big problem with this highway: it does not have enough access roads. It bypasses too many poor and marginalised communities and there are not enough institutions - economic, social, legal and political - to enable people at all economic levels to participate in the emerging global economic system.

If globalisation is to work for the majority of the world's population, nations and governments everywhere will have to find ways to connect people everywhere to this global highway. It will take millions of new institutions to do this - a challenge that will demand extraordinary human initiative and mobilisation of resources. In order to achieve this, a particular type of actor will become increasingly active on the world stage: the social entrepreneur.

As long as nations care what they make, as long as they believe that potato chips and computer chips are not the same thing, and as long as differences in national policies and industrial structures exist such that one nation's efforts in these areas are facilitated at the expense of another, trade will be managed.

Governments should be concerned with creating the type of investment climate (rule of law, healthy and well-educated people, good physical infrastructure, favorable tax structure, respect for private property, and so on), that leads to private investment. Organizations such as the World Bank and the United Nations should limit their activities to assisting governments in this area, rather than attempt to become economic players themselves. When they do intervene in the economy as players, all they really succeed in doing is "crowding out" other, more efficient and more qualified investors and economic agents.

My biggest surprise was learning that having a captive market for one's products and services is not enough if the other factors of the economic context are not present. In business school, we take a number of factors for granted, including the rule of law, the efficiency of the market, and the physical and institutional infrastructure that makes capitalism function smoothly. In launching a start-up in a developing country, I learned, much to my surprise, that no matter how much pent-up demand there is for a particular product or service, if the conditions to invest are not favorable, those products and services will not be able to reach the consumer, or if they do, the cost of getting it to them are too prohibitive and risky, no matter how high their willingness to pay.

Realizing that the technology exists to conquer many of the Third World's problems, but that the infrastructure and policy framework for resolving them are often lacking, is a particularly disappointing finding, especially in the twenty-first century. The cost in terms of missed opportunities and, in the worst cases, extreme human suffering, is prohibitive. Therefore, one major lesson that I have learned is to only target those markets where governments have made a serious commitment to uphold the rule of law, to ensure fair and honest competition, and to invest in their people (e.g., health and education) to create an attractive workforce.

Go to a bookstore in London and you'll see endless rows of books on the history of British royalty or the Victorian garden or the Great Age of Elizabeth. In a Japanese bookstore, those books are about the future of transportation, the future of health, the future of urban development, and so forth. We Americans, on the other hand, tend to have no past and no future. We are what the advertisers in the '60s called, on behalf of Pepsi, the Now Generation. We tend to be focused on the immediate.

Globalization will tend to make strong business designs stronger (through global sourcing, selling, and science). It will make weak business designs weaker (through more competition, reduced differentiation, and a greater disconnect from customers). And it will create more no-profit zones for companies and even entire industries.

It seems that if the task is tough, Americans take charge. If the talk is tough, we take cover.

The global competitor will seek constantly to standardize its offering everywhere. It will digress from this standardization only after exhausting all possibilities to retain it, and will push for reinstatement of standardization whenever digression and divergence have occurred. It will never assume that the customer is a king who knows his own wishes.

...The global corporation accepts for better or for worse that technology drives consumers relentlessly toward the same common goals-alleviation of life's burdens and the expansion of discretionary time and spending power.

The reliance on open borders, transnational alliances, and global markets for capital, goods, and services has generated a "just in time" economy, which, although remarkably cost-efficient, leaves companies open to a range of discontinuities that can affect operations, reputation, customer habits, legal standing, regulatory compliance, earnings performance, and ultimately shareholder value. We call these new vulnerabilities, collectively, interdependence risk, and define it as unanticipated risk exposure across the extended enterprise that is beyond an individual organization's direct control.

We tend to underestimate the cultural dimension of managerial processes, techniques and tools...Just because something is best practice in one country does not make it necessarily transferable to another. This can be impossible when such practice is the product of the western culture, values and relationships embedded within an organization, and is significantly different from those emerging in China. Best practice and the management techniques and tools to achieve this are thought to be neutral - but they are certainly not. They are values-loaded.

I have found that language is a great window into culture. Most expatriates aren't in a country long enough to become fluent, but it's certainly worthwhile to make an effort to learn the language. It becomes a way to understand a country's customs and gain some insight into how things work.

If you think about the WTO and the way we measure trade flows around the world, it assumes a very simple model, in which a product is made in Country A and it is shipped to Country B to be consumed. That is the fundamental assumption of the model. The question is where does the substantive transformation that creates the product take place...because that is where all of the value-added is.

But if you look at the model of dispersed manufacturing, the same product actually can be made in several countries before it becomes a finished product. And, if you say the substantive transformation then occurs in the final stage of finishing and basically that becomes the country of origin -- that last country, so to speak, gets charged for the full trade statistics, whereas it may capture only a portion of the total value added, it may only capture say 30% of the value added.

And so the problem with traditional trade statistics is that you are using a system to describe a world that has already evolved and no longer fits the model. Therefore, you get all of these distortions.

People tend to only look at national culture when they go into international negotiations … but there is also educational culture, race culture, gender culture, a religious culture. All of these also impact the way people behave and they are all ‘cross cultural,’ which means that we’re underestimating the role of culture because we are only looking at the national one; but as negotiators, we need to try to understand all the others.

We can ask ourselves if it is more advantageous for companies to be national or transnational. But a better question is how we can have firms that respond to the great “glocal” problems (pollution, poorness, respect for human rights) in their daily agendas. Can companies go from being “global capitalists” to being “glocal citizens”?

I think be­lieving the world is flat leads to one-size-fits-all strategies. This may be one reason that so many firms are disappointed with the performance of their overseas operations. If you’re looking for guidance on questions like where to compete, the “world is flat” thesis has only one message: “The market is almost infinite.” There’s no sense of place, no notion of distance to help you set priorities. So businesses go for bigger and blander strategies.

Companies should not presume to treat all employees—or customers, for that matter—in a single country as having the same culture or national identity, even in developed nations. Many of today’s employees have spent long periods of time in more than one country, creating sustained connections that deeply affect spending and consumption (for example, continued remittances to family in home countries), social ties, gender roles and relations, and involvement in local politics, as well as cross-border entrepreneurship and business networks. Companies must no longer assume their employees’ fundamental loyalties, mindsets, and values and beliefs are those of the country in which they labor.

In contrast to [author] Thomas Friedman’s view – that the world is flat, and people can ‘plug in and play’ from anywhere – what the 150-million-plus members of the Creative Class actually do is migrate from major city to major city. Their ‘world’ is made up of a couple dozen cities. It’s certainly not a world where people can plug in and play from just anywhere; in fact, the great irony of the creative global economy is that the world has become more uneven – more mountainous and ‘spikey’ than ever.

In fact, what you actually get is two world economies: an economy of spikes and an economy of valleys. Instead of the myth of a flat world in which people can locate anywhere and participate, the spikey world is incredibly uneven and incredibly unstable.My view is that we need to get a better handle on the world as it actually is, and not be captivated by romantic notions of globalization.

What my work is trying to say is that, left to its own devices, the Creative Economy will create even more concentration, more density, more packing of talent and creative people into spikes, and more unevenness. So it’s going to take some really serious global effort to build new institutions to make sure people have the opportunity to live in second-tier cities, and to make sure that these cities can compete.