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The global competition among elites

Innovation in a country’s industry is more important than ever for economic success.

The relative weight of any country in international relations can be measured at three levels: its dissuasive strength in terms of defense forces; the prosperity of its citizens and its companies; and its influence as projected through intangible values.

As far as all of these are concerned, innovation is the key. And innovation is something that is produced by elites.

There are ways of thinking and acting that set up oppositions such as “North/South”, “domestic/external market”, and “public/private companies or universities”. They are turning society into hostages of immobility.

This has been well explained from the time of the pioneering Schumpeter up until Acemoglu& Robinson and their essential book “Why Nations Fail”.

Its outcome is irrelevance in terms of traditional power, low degree of technological density in its economy, and limited soft power. The only way out is for elites basically to adopt one or another type of innovation strategy: either creative destruction or creative adaptation.

The former means that the economy is in a permanent state of “evolutionary chaos”. Innovators are the only ones to survive in a context of constant mutation. The replacement of typewriters by computers is a typical example of creative destruction.

Argentina used to be a wealthy country at the beginning of the 20th century thanks to agriculture and livestock. Its elite was well educated but little prone to innovation. As a result, it entered the 21st century relatively poor. Meanwhile, the United States has been progressing since the 19th century thanks to a radically innovative elite. It became the wealthiest and most powerful nation in the world.

The second option (creative adaptation) means to do the same as the leader does, but adding a degree of innovation in terms of labor costs, logistics, and efficiency. This is the model that was adopted by Asian elites. The performance of South Korean companies in television, smart phone, or automobile manufacturing is a typical example of creative adaptation, as well as the great Chinese take off achieved since 1978.

The trouble is that in a lot of countries, companies and elites get used to an environment that favors import substitution or agro-export models. In this context, “adaptation” leads to obsolescence and conservatism.

Creative destruction-style innovation is not related to genius-like inspiration, even though it may seem to be at first sight. It requires visionary elites that are passionately committed to their country. Functional elites are those that can mix patriotism and strategic planning – something rarely on Brazilian leaders’ radar.

Having a large contingent coming out of high schools or technical institutes is not enough. Education for all is a civic requirement. In the meantime, innovation cannot be measured in terms of hours of schooling, but by what is actually being done with the teaching that has been received in concrete and innovative terms. For innovation is produced by elites and is the product of elites.

Innovative elites lead their countries to a combination of “four founding elements” of creative destruction. Capital, knowledge, entrepreneurship and business environments that are conducive to innovation.

The key element of innovation is high quality human capital – a rare resource called talent. To a certain extent, the great global race of the 21st century is nothing other than a competition among elites.

Marcos Troyjo is director of the BRICLab at Columbia University, where he teaches international affairs. He can be reached at [email protected]

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