The World is Flat

How the West won was Globalisation 2.0. How India and China could beat the West at its own game may be Globalisation 3.0, says Thomas Friedman.
Paul Brunker | Oct 28 2005 | comment  




The World is Flat: A Brief History of the Twenty-first Century
By Thomas L. Friedman
488pp | Penguin | ISBN 0-713-99878-4  2005 | 2005 | US$16


The great exponent and populariser of monetarism Milton Friedman (no relation), in his book Free to Choose, used a pencil to demonstrate the organisational power of market forces. The free market, he said, can bring together wood, graphite and paint from all corners of the world without the need for a grand plan or a series of meetings – all to make an object that sells for a few cents.  

Many would bracket Thomas Friedman with his namesake as an advocate for capitalism red in tooth and claw. His book The Olive Tree and the Lexus (1999) tells, in the words of Professor Paul Krugman of MIT, “the story of the new global economy, and of a United States triumphant because it is the nation best suited to capitalize on that global economy”.

In The World is Flat, appropriately for a book in which technology is a key element, Thomas uses a Dell laptop where Milton used a pencil.  Mr Friedman, who is fond of using personal experience to illustrate his points, orders his Dell online and then tracks it through a rapid but complicated gestation and delivery.

The anecdote illustrates many of Friedman’s big points about the forces flattening the world. Dell is not the centralised, hierarchical multinational of the past but a virtual company built on supply arrangements spanning the globe. Its supply chain involves around 400 companies linked together instantly and constantly by internet technology. Mr Friedman gets just the computer he wants because Dell can customise each order. Speed of communication, indifference to national boundaries, collaborative relationships linked by technology and commerce, the sovereignty of the individual; these are all hallmarks of the flat world according to Friedman.

His argument is a bold attempt to challenge the conventional view of globalisation. This might be crudely characterised as a former peasant farmer in the Third World finding low-paid work in a sweatshop producing consumer goods for Western markets who, as an occasional treat, buys a burger at the newly-opened McDonald’s or a pirated DVD of the latest Hollywood movie.

Globalisation 2.0 -- a cigarette factory in India A more adolescent Friedman might describe this caricature as "so globalisation 2.0". He argues that Globalisation 1.0 (note the software-style name) started with Columbus in 1492 and lasted until around 1800. It was led by countries and their armies opening up markets and resources through invasion and exploration. Globalisation 2.0 was led by companies: American and European multinationals spreading goods and production techniques around the world. Globalisation 3.0, which started around 2000, will be powered by individuals competing and collaborating outside corporate hierarchies and across barriers of nation state and distance.

Friedman lists ten "flatteners" creating this new world order, but they can be summarised as the convergence of technological change and the widespread acceptance of capitalist economics. The book is full of examples of how the globe is getting flatter and smaller: US tax returns being outsourced to India, US radiographers outsourcing the reading of CAT scans to Australia to speed their turn-round time, the democratic creativity of open-source software and many others. While his message is that they are here to stay whether we like it or not, Friedman is unashamedly optimistic about the potential of these forces to unlock human potential – particularly in societies with the most potential to unlock. Call centre jobs may not be glamorous for Westerners, but they are a step up on a sweatshop. Visiting such a centre in Bangalore, Friedman points out that most of the young people employed there earn more than their parents earned at retirement -- and many of them are studying for a degree on the side.

Globalisation 3.0 -- a factory in China Friedman’s flatteners owe their origins principally to Western societies; but this is not the story of "how the West won". On the contrary, the book sounds a wake-up call for the advanced capitalist societies which Friedman sees as suffering from complacency and lack of ambition. This is particularly evident, he says, in education. 60 percent of bachelor’s degrees earned in China, he says, are in science and engineering; in the US only 31%. China in 2003 graduated 700,000 engineers compared with 60,000 in the US. The US has been making up for its shortfall in turning out science and engineering graduates by importing them; but as the world gets flatter, these graduates will be more able to use their degree in their homeland: The result is a “quiet crisis” in the skill base of the West, one which will be more and more exposed as technology levels the global playing-field.

Portraying globalisation as an opportunity for India and a threat for Indiana is certainly intended to disarm the “sweatshop” critics of multinational capitalism. Friedman also anticipates his critics by acknowledging that these forces are neither universal nor wholly benign. He admits, for example, that only a tiny minority of Indians work in the high-end services and technology jobs. Plenty of others still toil in the sweat shops of globalisation 2.0; even more have yet to escape pre-globalisation agrarian poverty. And supply chain management can mean one low-wage economy losing jobs to another. (Friedman uses a memorable example in the form of Virgin of Guadalupe statues being imported into Mexico from China.)

So the flattening of the world creates losers as well as winners. But Friedman’s recommendation to politicians and other leaders is simple: if you embrace the market and the new technology, you are more likely to come up on the winning side; particularly if you are a hard-working, populous, ambitious country.

This is a thought-provoking book. Its approach is unashamedly subjective and journalistic, and some readers might find Friedman’s breezy, phrase-mongering style off-putting. Certainly the book is stronger on anecdote and personal experience than on hard data, and sacrifices academic credibility for readability.  But the flow of rhetoric is powerful and Friedman does enough to convince us that he has a case.

Perhaps a more serious criticism is that the book focuses on the political economy of globalisation, and gives too little attention to the cultural and moral dimensions of this age of the individual. Friedman is convincing about how hierarchies and borders within society are weakening under the pressure of his “flatteners”, but has little to say about what will shape society as these traditional contours are eroded. If Globalisation 3.0 is the age of the individual, will it also break down ties of family, community and nation, and if so what are the implications? Even the traditional corporation has provided a community and a buffer for the individual against the volatile market. Do employees becoming self-employed outsourcing workers have nothing to lose but their chains?

Similarly, the book has little to say about what happens to national myths, to local customs and to tradition in a culture based on the instant availability of content online. Google may be bigger and quicker than a library, but a library is an informed selection based on the traditions of a society –Google is somewhere between a lucky dip and an information plebiscite, the Global Idol of insight. How, in the flat world of the future, does culture form? Does technology promote diversity and freedom of expression, because it lowers barriers to entry for communities who cannot access the commanding heights of print and conventional broadcast media; or does it pave the way for the triumph of Hollywood?

To be fair, questions like these could easily fill a book of their own; and if The World is Flat prompts us to ask them, Mr Friedman should feel that he has succeeded.

Paul Brunker is Head of Research for JPMorgan in Australia.

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