When my friends at BusinessWeek asked me to contribute an article to an issue they were planning on the role of optimism in business I was happy to oblige for two reasons.
First I believed that I had an important case to make that growth in the number of professionals in the developing world (and the concomitant spread of the rule of law fair and transparent financial markets and high quality healthcare at an affordable price) is not only good for Thomson Reuters but also for the societies in which these professionals work.
Second BusinessWeek itself has been the subject of a number of swipes in other publications ever since rumors of its purported sale began to leak and I was happy to support Steve Adler and his very professional team at BW. The fact that the economic model for business news has shifted rapidly under the feet of BW Forbes and Fortune should not now be seen to detract from the quality of the work of their journalists.
Here is the article from the August 24 2009 issue:
A Boost from Professionals
The rise of a class of highly trained workers in the developing world bodes well for growth
Why are these new professionals important? Because the growth of law accounting and other professions requiring formal training appears to be correlated with lower corruption levels and growth in gross domestic product in these countries. That’s excellent news for our networked world economy.
A generation ago for instance patents didn’t exist in China. The country did not even adopt patent laws until 1985. At the time there were a mere 5000 attorneys to serve a population of more than 1 billion.
PATENT POWER
Today China is an intellectual property powerhouse. According to the Derwent World Patents Index which we at Thomson Reuters publish China now issues about 30000 patents annually helping to keep the country’s 150000 lawyers busy. Measured by applications China’s patent office has become the third-busiest in the world ranking behind only Japan and the U.S. It is expected to pull ahead of both by 2012.
No short-term economic disruptions can derail the powerful developments behind China’s patent boom: the transition from an economy based on manufacturing to one based on technology and the establishment of a legal system that encourages innovation by protecting property rights.
Indeed China’s ascendancy in the global patent market highlights a broader trend of professionalization in the developing world. The growth in the number of lawyers in China is mirrored by the increase in accountants in India physicians in Brazil and financial traders in Dubai. This expanding army of professionals is on the front lines of globalization.
It includes a wide variety of specialists whose vocations require prolonged training and formal qualification. Definitive numbers are difficult to obtain but Thomson Reuters analysis indicates that the total number of global professionals in developing countries now stands at 4 million a figure projected to grow at 6.5% a year to 5.2 million by 2013.
The ranks of these professionals are mounting not just because these nations are beginning to get serious about transparency the rule of law and market pricing. There is also a broader force driving the growth of this class: the continuing harmonization of worldwide legal and financial reporting rules.
Consider International Financial Reporting Standards (IFRS). By 2013 more than 90% of the world’s gross domestic product will be earned in nations that have adopted the IFRS creating a strong global demand for accountants who have been trained in these regulations.
What’s more since the U.S. Congress passed the Sarbanes-Oxley Act in 2002 more than a dozen other countries—including Australia France India Japan Mexico and South Africa—have passed similar laws and regulations. This has prompted the proliferation of still more professionals.
When you have a global community of professionals—accountants lawyers or financial practitioners—speaking a common language it is easier for developing countries to do business with the developed world. One of the main reasons Islamic finance has blossomed into an estimated $1 trillion business is that a skilled community of professionals has developed a group that is adept at merging Islamic religious principles with Western criteria for financial product development and standardization. Islamic finance didn’t even exist as a specialty in the early 1960s. Now it’s estimated to be growing 10% to 15% annually.
DECLINE IN CORRUPTION
And it’s not just about doing deals. While there are exceptions there is strong evidence that professionalization leads to an increase in production and a decline in levels of corruption.
The Czech Republic has seen the number of professionals in its workforce grow by 15% over the last five years a period in which the country also has shown a 9.5% gain in per capita GDP and a 40.5% improvement in the widely used Corruption Perceptions Index published by Transparency International a Berlin-based nonpartisan group that supports anticorruption reforms around the world.
The Czech Republic isn’t the only developing nation profiting from professionalization. Higher GDP and lower corruption levels are seen across the fast-growing business economies of Eastern Europe. Over the same period for instance Poland has had a 37% rise in the number of professionals a 17% rise in per capita GDP and a 15% improvement in its ranking in the Corruption Perceptions Index.
At a time when the world is enduring the worst recession since the 1930s good news can be easily overlooked. The professionalization of the global workforce is excellent news and we should not underestimate its impact. As it channels the recovery into today’s fastest emerging markets professionalization will help frame the coming economic rebound.
Tom. Great bit good read. i would like to know your thinking on TR offering new services or directions like Hosting that can be high margin if done right. Regards David
I liked this positive review of Reuters. “Some Suggestions for Chris Ahearn & Reuters” http://blog.newscred.com/?p=200
Because the growth of law accounting and other professions requiring formal training appears to be correlated with lower corruption levels and growth in gross domestic product in these countries. That’s excellent news for our networked world economy. Whilst I am an optimist too; I am unsure about this central argument. There may be a correlation but what can we infer from it? Ask yourself what comes first: Professionals or growth? Surely its growth; legal and accounting professionals (and their training) follow growth they do not create it. Other professions and skills certainly create growth by seeking out opportunities but may not necessarily do so whilst “embracing … transparency rule of law”. And yet your evidence seems to show that there are more professionals and there is a greater acceptance of the rule of law. I am happy to concede that you have better access to such data than I do but I am unsure that we are looking at cause and effect. For example: I my own country we have always had very well established professional bodies that have operated to international standards. This has not however protected the country from the continuance of the most outrageous cases of bribery graft and corruption transcending big business and rooted in politics from the bottom to the top. These abuses were/are committed daily with the conivance of the professionals who are happy to ‘self regulate’ and offer light touch regulation over others – ignoring the public interest. Today we have a greater sense* of the rule of law because of our increased access to information (*I am unsure if it’s more than a sense). Whatever way you look at it the pervasive nature of multimedia the ubiquity of the internet the ability to find out what you want to know are having a massive democratising effect. Whilst businesses and governments have lived for many years by the maxim of “what they don’t know won’t harm them” they are now waking up to the fact that “we will find out”. So more transparency and more news if good right? I’d say yes and as head of Thomson Reuters you must be very optimistic. But there is a dark side to more transparency and more news – and I beleive it offers even greater reason for your optimism. We are already awash with information. The internet is filled with truth and also filled with lies. How can I find the truth? Of course any physisist will tell you there is no fixed point of the truth there are always a spectrum of possibilities. So it is with news stories and the reader always needs to bear in mind the bias of the author. This is easy to do with your national newspapers but impossible for millions of websites. What’s needed is a way to navigate information that recognises bias and flags it which weighs evidence and facts – or at least sets the evidence side by side. If a story is rated highly who by – what’s their average bias? Sounds like a job for Google and Thomson Reuters?
Speaking of optimism I just finished “The Rational Optimist” by Matt Ridley and loved it. It helped me understand and appreciate the power and importance of “exchange” which is at the heart of the Thomson Reuters business — particularly the Markets group. http://www.rationaloptimist.com/
Great bit good read.