Soft power: Winning hearts, minds . . . and export sales?

10 Sep 2015

Tags

  • Mark Thirlwell
  • Australian Economy
  • International Investment
  • International Trade

Soft power, a term coined by Joseph Nye (pdf), refers to the ability of a country to persuade or attract other players to do what it wants.  Soft power is a product of a country’s culture, politics and foreign policy and can be seen as a measure of the ‘attractiveness’ of these factors to other countries.  As such, the concept is also related to the idea of a national ‘brand’.  The presence of an attractive national branding is often thought to be helpful in terms of attracting tourists, international students and investment, and in supporting export sales.

In this context, some interesting recent work by economist Andrew Rose has looked at the relationship between a country's soft power and its export performance.  Rose uses a bilateral indicator of soft power in the form of results from a BBC/GlobeScan survey (pdf) to test whether importers take soft power into account when choosing exporters.  He finds that a ten per cent net increase in soft power based on his measure is associated with an eight per cent increase in exports, holding other things constant, suggesting that "winning hearts and minds also wins sales".

While Australia is one of the countries that participates in the BBC/GlobeScan exercise in terms of providing views on the reputation of other nations, there is no score available for Australia itself.  However, there are several multilateral indicators of soft power available which do include Australia in their rankings1.

Soft power is, almost by definition, hard to measure in concrete terms, and the various indices and indicators listed here all take a range of approaches to its quantification.  Still, it’s notable that Australia holds a top ten position across each one of the rankings listed above.

Rose’s results suggest that Australia’s relatively high ranking in terms of soft power could be a significant source of export competitiveness, in line with the theory of national branding.  If so, it also seems reasonable to think that the same kind of positive pay-off from a strong soft power ranking apply to other economic variables such as inward investment.  

1Note that, unlike the data used by Rose in his work, several of the indices listed below already explicitly include exports or export-related indicators in their construction.
2The same organisation also produces a Tourism edition of their rankings.  Australia is ranked in seventh place in this version.