A Boost from ProfessionalsTom Glocer
As Western societies debate the shortcomings of free-market principles that contributed to this downturn, they appear to have overlooked a powerful, positive global trend. The developing world is quietly embracing the transparency, rule of law, and market pricing that have underpinned the past 100 years of rising global prosperity. And this has led to a growing global professional class.
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 5,000 attorneys to serve a population of more than 1 billion.
PATENT POWERToday, China is an intellectual property powerhouse. According to the Derwent World Patents Index, which we at Thomson Reuters (TRI) publish, China now issues about 30,000 patents annually, helping to keep the country's 150,000 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 CORRUPTIONAnd 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.
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