KARL MOORE – This is Karl Moore of the Desautels Faculty of Management at McGill University, talking management for The Globe and Mail. Today, I am delighted to speak to the great [management professor] Michael Useem from the Wharton Business School [at the University of Pennsylvania].
Mike, you have done a lot of research looking at Chile and the way it came back wonderfully from the 2010 earthquake. Tell us more about that.
MICHAEL USEEM – Of the earthquakes in the last century, it ranked No. 6. In magnitude, it was 500 times greater than that that had hit Haiti about six weeks before. On the magnitude scale, it was an 8.8 – and everybody in that country felt the earthquake.
I was there this week and talked with a dozen people, kind of like people in the U.S. talk about where they were on 9/11. All of the 10 people, all 10, each of them had a story of what happened, they remembered it as if it was yesterday. The impact of this earthquake cannot be overstated, but if you look at the rating agencies' appraisal of Chile's credit, it was unaffected by the earthquake, the stock market took almost no hit, and economic growth was pretty much back on schedule within a few months.
KARL MOORE – What did they do to turn Chile around? Are there any lessons that jumped out at you?
MICHAEL USEEM – Two big lessons. No. 1, the people who are responsible for the country – in this case the president, he had a cabinet of 22 members – he said unequivocally: "We are coming back."
So his commitment, his drive, he went to the far end of the spectrum of taking charge and really saying, "We have to do this," and being adamant with follow-up that they had to do it.
Secondly, Chile, despite the military coup in 1973, has a long history – since democracy was restored – of fairness, equitable treatment of people regardless of where they are, their region, or who they are, of rule of law, and enforcement of the law.
So building codes are very tough in Chile and they are enforced. Corruption, compared to many other countries, is at a minimum. With all of that strong leadership at the top, unequivocally important, [is] a strong institutional tradition or a set of institutional principles saying, "We have to do this fairly, we have to do it quickly and we have to do it honestly."
Chile is back on its feet from a setback that, for most countries, could have led to permanent damage, and certainly they would not have come back as fast as Chile.