[Paleopsych] NYT: 'The World Is Flat': Global Playing Field: More Level, but It Still Has Bumps

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'The World Is Flat': Global Playing Field: More Level, but It Still Has Bumps

[Sunday Book Review and first chapter appended. I already posted an NYT 
Magazine article by Friedman.]

April 30, 2005
Global Playing Field: More Level, but It Still Has Bumps

THE WORLD IS FLAT: A Brief History of the 21st Century
By Thomas L. Friedman.
488 pp. Farrar, Straus & Giroux. $27.50.

    The world is flat, or at least becoming flatter very quickly, Thomas
    L. Friedman says in his exciting and very readable account of
    globalization. In this flat new world, there is a level (or at least
    more level) playing field in which countries like India and China,
    long marginalized in the global economy, are able to compete. And
    while Mr. Friedman, a Pulitzer Prize-winning columnist for The New
    York Times, celebrates the new vistas opening up for these countries,
    he describes forcefully the challenges globalization presents for the
    older industrialized nations - especially the United States.

    America is still the global leader in science and technology, but its
    dominance is eroding. As Mr. Friedman points out in "The World Is
    Flat," Asian countries now produce eight times as many bachelor's
    degrees in engineering as the United States; the proportion of
    foreign-born Ph.D.'s in the American science and engineering labor
    force has risen to 38 percent; and federal financing for research in
    physical and mathematical sciences and engineering as a share of gross
    domestic product declined by 37 percent from 1970 to 2004.

    About a third of "The World Is Flat" is devoted to describing the
    forces of leveling - from the fall of the Berlin Wall, which
    eliminated the ideological divide separating much of the world, to the
    rise of the Internet and technological changes that have led to new
    models of production and collaboration, including outsourcing and
    offshore manufacturing.

    The rest of the book is devoted to exploring the implications of this
    flattening, both for the advanced industrial countries and the
    developing world. In truth, Mr. Friedman's major points would come
    across more strongly if his 488 pages were edited more tightly. But he
    provides a compelling case that something big is going on. I was in
    Bangalore, India, in January 2004 - just a month before Mr. Friedman -
    visiting Infosys, one of India's new leading high-technology
    companies. I, too, was bowled over by what I saw: "campuses" more
    modern than anything I had seen on the West Coast, and business
    leaders as dynamic and thoughtful as anywhere in the world.

    It may be true that fears of outsourcing have been exaggerated: there
    are only a limited number of radiologists, software programmers and
    back-office people whose jobs can be performed at a distance. But I
    side with Mr. Friedman: the integration of some three billion people
    into the global economy is a big deal. Even if only a limited number
    of American jobs are lost, the new competition will have striking
    effects, particularly on the wages of unskilled workers. While free
    trade may ultimately make every country better off, not every
    individual will be better off. There are winners and there are losers;
    and while, in principle, the winners could compensate the losers, that
    typically does not happen. Among other things, a flatter world means a
    less flat America - more inequality.

    The playing field may be getting more level, but not everyone is
    equipped to play on it. On that same trip to India, I spent more than
    half my time in the countryside surrounding Bangalore, where traveling
    10 miles was like traveling back 2,000 years. Peasants were farming as
    their ancestors must have. What has enabled Bangalore to become a
    high-tech success story is that companies like Infosys have removed
    themselves from what is going on nearby. They communicate directly by
    satellite with the United States, and in a place where local
    newspapers list the number of brownouts the previous day, these
    companies can have their own sources of power. And while new
    technologies may close the gap between parts of India and China and
    the advanced industrial countries, they will also increase the gap
    between those countries and Africa.

    Mr. Friedman is right that there are forces flattening the world, but
    there are other forces making it less flat. At issue is the balance
    between them. So is the world really much flatter than before?

    For instance, the new technologies that Mr. Friedman praises as
    levelers have also given rise to new opportunities for monopolization.
    Mr. Friedman praises Netscape's leveling role: its browser has really
    helped to put a world of knowledge and information at each person's
    doorstep (or computer). But Microsoft was able to use its own market
    power through control of computer operating systems to effectively
    replace Netscape with its own browser, Internet Explorer. While
    Microsoft speaks eloquently of the need to reward innovation, the real
    rewards are often not reaped by the innovators.

    In addition, the underlying research for major developments like the
    Internet and Web browsers is expensive. Large, rich countries can pay
    for it; poor, small ones cannot. Mr. Friedman notes, but does not
    emphasize as much as he might, the important role played by government
    in financing such research before allowing private entrepreneurs to
    bring the actual products to market - and make the profits. American
    companies have a distinct advantage in benefiting from
    government-financed research, even though there are crumbs (some quite
    large) that those around the world can pick up.

    Meanwhile, the new "rules of the game" that were part of the last
    round of global trade negotiations - notably intellectual property
    regulations requiring all countries to adopt American-style patent and
    copyright laws - are almost surely making the playing field less
    level. They will make it easier for those who are ahead of the game to
    maintain their lead.

    One mark of a great book is that it makes you see things in a new way,
    and Mr. Friedman certainly succeeds in that goal. The world may not
    yet be flat, but there is no doubt that there are important forces -
    some leveling, some the opposite - that are changing its shape in
    critical ways. And in his provocative account, Mr. Friedman suggests
    what this brave new world will mean to all of us, in both the
    developed and the developing worlds.

    Joseph E. Stiglitz, university professor at Columbia University, won
    the Nobel Prize in Economics in 2001. ----------------
Sunday Book Review > 'The World Is Flat': The Wealth of Yet More Nations
May 1, 2005


THE WORLD IS FLAT: A Brief History of the Twenty-First Century.
By Thomas L. Friedman.
488 pp. Farrar, Straus & Giroux. $27.50.

    OVER the past few years, the United States has been obsessed with the
    Middle East. The administration, the news media and the American
    people have all been focused almost exclusively on the region, and it
    has seemed that dealing with its problems would define the early
    decades of the 21st century. ''The war on terror is a struggle that
    will last for generations,'' Donald Rumsfeld is reported to have said
    to his associates after 9/11.

    But could it be that we're focused on the wrong problem? The challenge
    of Islamic terrorism is real enough, but could it prove to be less
    durable than it once appeared? There are some signs to suggest this.
    The combined power of most governments of the world is proving to be a
    match for any terror group. In addition, several of the governments in
    the Middle East are inching toward modernizing and opening up their
    societies. This will be a long process but it is already draining some
    of the rage that undergirded Islamic extremism.

    This doesn't mean that the Middle East will disappear off the map. Far
    from it. Terrorism remains a threat, and we will all continue to be
    fascinated by upheavals in Lebanon, events in Iran and reforms in
    Egypt. But ultimately these trends are unlikely to shape the world's
    future. The countries of the Middle East have been losers in the age
    of globalization, out of step in an age of free markets, free trade
    and democratic politics. The world's future -- the big picture -- is
    more likely to be shaped by the winners of this era. And if the United
    States thought it was difficult to deal with the losers, the winners
    present an even thornier set of challenges. This is the implication of
    the New York Times columnist Thomas L. Friedman's excellent new book,
    ''The World Is Flat: A Brief History of the Twenty-First Century.''

    The metaphor of a flat world, used by Friedman to describe the next
    phase of globalization, is ingenious. It came to him after hearing an
    Indian software executive explain how the world's economic playing
    field was being leveled. For a variety of reasons, what economists
    call ''barriers to entry'' are being destroyed; today an individual or
    company anywhere can collaborate or compete globally. Bill Gates
    explains the meaning of this transformation best. Thirty years ago, he
    tells Friedman, if you had to choose between being born a genius in
    Mumbai or Shanghai and an average person in Poughkeepsie, you would
    have chosen Poughkeepsie because your chances of living a prosperous
    and fulfilled life were much greater there. ''Now,'' Gates says, ''I
    would rather be a genius born in China than an average guy born in

    The book is done in Friedman's trademark style. You travel with him,
    meet his wife and kids, learn about his friends and sit in on his
    interviews. Some find this irritating. I think it works in making
    complicated ideas accessible. Another Indian entrepreneur, Jerry Rao,
    explained to Friedman why his accounting firm in Bangalore was able to
    prepare tax returns for Americans. (In 2005, an estimated 400,000
    American I.R.S. returns were prepared in India.) ''Any activity where
    we can digitize and decompose the value chain, and move the work
    around, will get moved around. Some people will say, 'Yes, but you
    can't serve me a steak.' True, but I can take the reservation for your
    table sitting anywhere in the world,'' Rao says. He ended the
    interview by describing his next plan, which is to link up with an
    Israeli company that can transmit CAT scans via the Internet so that
    Americans can get a second opinion from an Indian or Israeli doctor,
    quickly and cheaply.

    What created the flat world? Friedman stresses technological forces.
    Paradoxically, the dot-com bubble played a crucial role.
    Telecommunications companies like Global Crossing had hundreds of
    millions of dollars of cash -- given to them by gullible investors --
    and they used it to pursue incredibly ambitious plans to ''wire the
    world,'' laying fiber-optic cable across the ocean floors, connecting
    Bangalore, Bangkok and Beijing to the advanced industrial countries.
    This excess supply of connectivity meant that the costs of phone
    calls, Internet connections and data transmission declined
    dramatically -- so dramatically that many of the companies that laid
    these cables went bankrupt. But the deed was done, the world was
    wired. Today it costs about as much to connect to Guangdong as it does
    New Jersey.

    The next blow in this one-two punch was the dot-com bust. The stock
    market crash made companies everywhere cut spending. That meant they
    needed to look for ways to do what they were doing for less money. The
    solution: outsourcing. General Electric had led the way a decade
    earlier and by the late 1990's many large American companies were
    recognizing that Indian engineers could handle most technical jobs
    they needed done, at a tenth the cost. The preparations for Y2K, the
    millennium bug, gave a huge impetus to this shift since most Western
    companies needed armies of cheap software workers to recode their
    computers. Welcome to Bangalore.

    A good bit of the book is taken up with a discussion of these
    technological forces and the way in which business has reacted and
    adapted to them. Friedman explains the importance of the development
    of ''work flow platforms,'' software that made it possible for all
    kinds of computer applications to connect and work together, which is
    what allowed seamless cooperation by people working anywhere. ''It is
    the creation of this platform, with these unique attributes, that is
    the truly important sustainable breakthrough that has made what you
    call the flattening of the world possible,'' Microsoft's chief
    technology officer, Craig J. Mundie, told Friedman.

    Friedman has a flair for business reporting and finds amusing stories
    about Wal-Mart, UPS, Dell and JetBlue, among others, that relate to
    his basic theme. Did you know that when you order a burger at the
    drive-through McDonald's on Interstate 55 near Cape Girardeau, Mo.,
    the person taking your order is at a call center 900 miles away in
    Colorado Springs? (He or she then zaps it back to that McDonald's and
    the order is ready a few minutes later as you drive around to the
    pickup window.) Or that when you call JetBlue for a reservation,
    you're talking to a housewife in Utah, who does the job part time? Or
    that when you ship your Toshiba laptop for repairs via UPS, it's
    actually UPS's guys in the ''funny brown shorts'' who do the fixing?

    China and India loom large in Friedman's story because they are the
    two big countries benefiting most from the flat world. To take just
    one example, Wal-Mart alone last year imported $18 billion worth of
    goods from its 5,000 Chinese suppliers. (Friedman doesn't do the math,
    but this would mean that of Wal-Mart's 6,000 suppliers, 80 percent are
    in one country -- China.) The Indian case is less staggering and still
    mostly in services, though the trend is dramatically upward. But
    Friedman understands that China and India represent not just threats
    to the developed world, but also great opportunities. After all, the
    changes he is describing have the net effect of adding hundreds of
    millions of people -- consumers -- to the world economy. That is an
    unparalleled opportunity for every company and individual in the

    Friedman quotes a Morgan Stanley study estimating that since the
    mid-1990's cheap imports from China have saved American consumers over
    $600 billion and probably saved American companies even more than that
    since they use Chinese-sourced parts in their production. And this is
    not all about cheap labor. Between 1995 and 2002, China's private
    sector has increased productivity at 17 percent annually -- a truly
    breathtaking pace.

    Friedman describes his honest reaction to this new world while he's at
    one of India's great outsourcing companies, Infosys. He was standing,
    he says, ''at the gate observing this river of educated young people
    flowing in and out. . . . They all looked as if they had scored 1600
    on their SAT's. . . . My mind just kept telling me, 'Ricardo is right,
    Ricardo is right.' . . . These Indian techies were doing what was
    their comparative advantage and then turning around and using their
    income to buy all the products from America that are our comparative
    advantage. . . . Both our countries would benefit. . . . But my eye
    kept . . . telling me something else: 'Oh, my God, there are just so
    many of them, and they all look so serious, so eager for work. And
    they just keep coming, wave after wave. How in the world can it
    possibly be good for my daughters and millions of other young
    Americans that these Indians can do the same jobs as they can for a
    fraction of the wages?' ''

    He ends up, wisely, understanding that there's no way to stop the
    wave. You cannot switch off these forces except at great cost to your
    own economic well-being. Over the last century, those countries that
    tried to preserve their systems, jobs, culture or traditions by
    keeping the rest of the world out all stagnated. Those that opened
    themselves up to the world prospered. But that doesn't mean you can't
    do anything to prepare for this new competition and new world.
    Friedman spends a good chunk of the book outlining ways that America
    and Americans can place themselves in a position to do better.

    People in advanced countries have to find ways to move up the value
    chain, to have special skills that create superior products for which
    they can charge extra. The UPS story is a classic example of this.
    Delivering goods doesn't have high margins, but repairing computers
    (and in effect managing a supply chain) does. In one of Friedman's
    classic anecdote-as-explanation shticks, he recounts that one of his
    best friends is an illustrator. The friend saw his business beginning
    to dry up as computers made routine illustrations easy to do, and he
    moved on to something new. He became an illustration consultant,
    helping clients conceive of what they want rather than simply
    executing a drawing. Friedman explains this in Friedman metaphors: the
    friend's work began as a chocolate sauce, was turned into a vanilla
    commodity, through upgraded skills became a special chocolate sauce
    again, and then had a cherry put on top. All clear?

    Of course it won't be as easy as that, as Friedman knows. He points to
    the dramatic erosion of America's science and technology base, which
    has been masked in recent decades by another aspect of globalization.
    America now imports foreigners to do the scientific work that its
    citizens no longer want to do or even know how to do. Nearly one in
    five scientists and engineers in the United States is an immigrant,
    and 51 percent of doctorates in engineering go to foreigners.
    America's soaring health care costs are increasingly a burden in a
    global race, particularly since American industry is especially
    disadvantaged on this issue. An American carmaker pays about $6,000
    per worker for health care. If it moves its factory up to Canada,
    where the government runs and pays for medical coverage, the company
    pays only $800. Most of Friedman's solutions to these kinds of
    problems are intelligent, neoliberal ways of using government in a
    market-friendly way to further the country's ability to compete in a
    flat world.

    There are difficulties with the book. Once Friedman gets through
    explicating his main point, he throws in too many extras -- perhaps
    trying to make that chocolate sundae -- making the book seem slightly
    padded. The process of flattening that he is describing is in its
    infancy. India is still a poor third-world country, but if you read
    this book you would assume it is on the verge of becoming a global
    superstar. (Though as an Indian-American, I read Friedman and whisper
    the old Jewish saying, ''From your lips to God's ears.'') And while
    this book is not as powerful as Friedman's earlier ones -- it is, as
    the publisher notes, an ''update'' of [1]''The Lexus and the Olive
    Tree'' -- its fundamental insight is true and deeply important.

    In explaining this insight and this new world, Friedman can sometimes
    sound like a technological determinist. And while he does acknowledge
    political factors, they get little space in the book, which gives it a
    lopsided feel. I would argue that one of the primary forces driving
    the flat world is actually the shifting attitudes and policies of
    governments around the world. From Brazil to South Africa to India,
    governments are becoming more market-friendly, accepting that the best
    way to cure poverty is to aim for high-growth policies. This change,
    more than any other, has unleashed the energy of the private sector.
    After all, India had hundreds of thousands of trained engineers in the
    1970's, but they didn't produce growth. In the United States and
    Europe, deregulation policies spurred the competition that led to
    radical innovation. There is a chicken-and-egg problem, to be sure.
    Did government policies create the technological boom or vice versa?
    At least one can say that each furthered the other.

    The largest political factor is, of course, the structure of global
    politics. The flat economic world has been created by an extremely
    unflat political world. The United States dominates the globe like no
    country since ancient Rome. It has been at the forefront, pushing for
    open markets, open trade and open politics. But the consequence of
    these policies will be to create a more nearly equal world,
    economically and politically. If China grows economically, at some
    point it will also gain political ambitions. If Brazil continues to
    surge, it will want to have a larger voice on the international stage.
    If India gains economic muscle, history suggests that it will also
    want the security of a stronger military. Friedman tells us that the
    economic relations between states will be a powerful deterrent to war,
    which is true if nations act sensibly. But as we have seen over the
    last three years, pride, honor and rage play a large part in global

    The ultimate challenge for America -- and for Americans -- is whether
    we are prepared for this flat world, economic and political. While
    hierarchies are being eroded and playing fields leveled as other
    countries and people rise in importance and ambition, are we
    conducting ourselves in a way that will succeed in this new
    atmosphere? Or will it turn out that, having globalized the world, the
    United States had forgotten to globalize itself?

    Fareed Zakaria, the editor of Newsweek International and author of
    ''The Future of Freedom,'' is the host of a new current affairs
    program on public television, Foreign Exchange.


    1. http://www.nytimes.com/books/99/04/25/reviews/990425.25joffet.html
First Chapter: 'The World Is Flat'


    No one ever gave me directions like this on a golf course before:
    "Aim at either Microsoft or IBM." I was standing on the first tee at
    the KGA Golf Club in downtown Bangalore, in southern India, when my
    playing partner pointed at two shiny glass-and-steel buildings off in
    the distance, just behind the first green. The Goldman Sachs building
    wasn't done yet; otherwise he could have pointed that out as well and
    made it a threesome. HP and Texas Instruments had their offices on the
    back nine, along the tenth hole. That wasn't all. The tee markers were
    from Epson, the printer company, and one of our caddies was wearing a
    hat from 3M. Outside, some of the traffic signs were also sponsored by
    Texas Instruments, and the Pizza Hut billboard on the way over showed
    a steaming pizza, under the headline "Gigabites of Taste!"

    No, this definitely wasn't Kansas. It didn't even seem like India. Was
    this the New World, the Old World, or the Next World?

    I had come to Bangalore, India's Silicon Valley, on my own
    Columbus-like journey of exploration. Columbus sailed with the Niña,
    the Pinta, and the Santa María in an effort to discover a shorter,
    more direct route to India by heading west, across the Atlantic, on
    what he presumed to be an open sea route to the East Indies-rather
    than going south and east around Africa, as Portuguese explorers of
    his day were trying to do. India and the magical Spice Islands of the
    East were famed at the time for their gold, pearls, gems, and silk-a
    source of untold riches. Finding this shortcut by sea to India, at a
    time when the Muslim powers of the day had blocked the overland routes
    from Europe, was a way for both Columbus and the Spanish monarchy to
    become wealthy and powerful. When Columbus set sail, he apparently
    assumed the Earth was round, which was why he was convinced that he
    could get to India by going west. He miscalculated the distance,
    though. He thought the Earth was a smaller sphere than it is. He also
    did not anticipate running into a landmass before he reached the East
    Indies. Nevertheless, he called the aboriginal peoples he encountered
    in the new world "Indians." Returning home, though, Columbus was able
    to tell his patrons, King Ferdinand and Queen Isabella, that although
    he never did find India, he could confirm that the world was indeed

    I set out for India by going due east, via Frankfurt. I had Lufthansa
    business class. I knew exactly which direction I was going thanks to
    the GPS map displayed on the screen that popped out of the armrest of
    my airline seat. I landed safely and on schedule. I too encountered
    people called Indians. I too was searching for the source of India's
    riches. Columbus was searching for hardware-precious metals, silk, and
    spices-the source of wealth in his day. I was searching for software,
    brainpower, complex algorithms, knowledge workers, call centers,
    transmission protocols, breakthroughs in optical engineering-the
    sources of wealth in our day. Columbus was happy to make the Indians
    her met his slaves, a pool of free manual labor.

    I just wanted to understand why the Indians I met were taking our
    work, why they had become such an important pool for the outsourcing
    of service and information technology work from America and other
    industrialized countries. Columbus had more than one hundred men on
    his three ships; I had a small crew from the Discovery Times channel
    that fit comfortably into two banged-up vans, with Indian drivers who
    drove barefoot. When I set sail, so to speak, I too assumed that the
    world was round, but what I encountered in the real India profoundly
    shook my faith in that notion. Columbus accidentally ran into America
    but thought he had discovered part of India. I actually found India
    and thought many of the people I met there were Americans. Some had
    actually taken American names, and others were doing great imitations
    of American accents at call centers and American business techniques
    at software labs.

    Columbus reported to his king and queen that the world was round, and
    he went down in history as the man who first made this discovery. I
    returned home and shared my discovery only with my wife, and only in a

    "Honey," I confided, "I think the world is flat." . . .

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