An American mentality

IN THE FOREIGN INVESTMENT and globalizing world, political risk is a critical factor in go and no-go decisions and in projecting management needs to deal with the vagaries of social and cultural environments. A variety of models are employed to assess the level of risk for new investors. These models typically contain some measure of the levels of democracy, ethnic tension, and violence (domestic and international), as well as involvement of the military and religion in politics.

As a recipient state for foreign investment today, the U.S. is subject to the same risk assessments as any other host nation. Risk still has to be managed, even when the investor is a Malaysian and the host country is the U.S.

The Business Environment Risk Information (BERI) model contains a variable that it calls "mentality" in its formula for national risk assessment. The idea is that there can be a national attitude, a mentality, that would be resistant or corrosive to foreign investment and prevent efficient and productive investment and business operations.

While BERI does not release data on its mentality factors, it does indicate that the rating for the U.S. (six on a scale of 11) has declined in recent years, demonstrating more investment risk emanating from the national character. Observers of the American scene can make their own assessments, but here are some of the commonly cited circumstances that have led to BERI's recent conclusions about U.S. society.

Corruption is the use of monetary and other rewards to alter the course of law enforcement, implementation of regulations, or pursuit of legal contracts. In a corrupt environment, processes and structures become distorted and predictability is irregular. Corporate corruption has become common fare in business reporting over the last few years, with Enron, Tyco. Global Crossing, and others on the big name list. The Martha Stewart case typifies practices at a lower end of the business spectrum that many think may be just as pervasive as the corporate leadership violations.

Nepotism is the granting of opportunities--economic, political, social--to persons related to the decisionmaker and circumventing normal competitive processes for employment or advancement. The concept may be extended to include close friends or colleagues as well as distant family. We use the term "cronyism" to point fingers of blame for this practice in Indonesia and Russia. This has not been a notable problem in the U.S., but names like Powell, Fleischer, Novak, Ledeen, and others have appeared where they might not have been expected. Michael Fleischer, for example, brother of presidential spokesman Ari Fleischer, ended up as the top private sector development aide to Paul Bremer in Iraq without experience other than being a New Jersey businessman. How did that happen?

Nationalism is an extreme identity of individuals with the nation-state. The state rises above civil law, constitutions, laws, regulations, and often logic and common sense. Extreme nationalism is an almost religious experience, with the state being anthropomorphized. Patriotism is an expression of nationalism and extreme patriotism would be placed toward the negative end of this scale. National symbols, such as flags, take on critical importance.

There currently is a flag-waving contest underway in the U.S. If the Democrats put up one giant American flag behind their candidate, the Republicans put up two. If those of one party wear a flag pin on their lapel, those from the other wear a larger one. Even NFL referees now wear them. Campaign signs are a panorama of red, white, and blue. There is the "National Anthem" and "America the Beautiful" and "God Bless America" (both the song and the phrase) ... and more.

Xenophobia is the fear or hatred of foreigners or those who come from outside the individual's identity group. A non-American is someone who is "un-American." Anyone who remotely resembles an Arab or a Muslim (never mind that Sikhs are not Muslim, not Arab, and, in fact, are Caucasian by race) is profiled, overseen suspiciously, denied rights, and generally treated with disrespect. Then there are the French, illegal Mexican immigrants, and the "Protect America Now" ballot proposition in Arizona. Xenophobia in America?

Willingness to compromise--expressed more appropriately as "unwillingness to compromise"--is an indicator of an unwillingness or inability to see other points of view and to make practical adjustments to pluralistic circumstances in society. A willingness to compromise is a critical value in the functioning of multi-ethnic societies and in the establishment of global policies. The Bush Administration has been morE unilateralist, insistent, and singularist in perspective than any administration in recent history. Instead of being seen a peacemakers, the U.S. is viewed as hard-line and increasingly isolationist.

Neither political risk assessment nor evaluations of mentality are what we would call an exact science and, certainly, science is not being attempted here. The U.S., however, is vulnerable to the same flaws we so readily have found in countries like China, Nigeria, and Indonesia in the search for productive investment opportunities and subsequent development.