The Flat World?

By Jehangir Khattak, July 25, 2010

New York Times columnist Thomas Friedman’s best-selling book The World is Flat explores the metaphor that the 21^st century globalization has virtually flattened the world for commerce. Friedman identifies ten "flatteners" that he sees as leveling the global playing field:

Flattener # 1: Collapse of the Berlin Wall: The November 9, 1989 collapse of the wall dividing capitalist West Germany from the Communist East since World War II not only symbolized the end of the Cold War, but also allowed people from the Communist East to join the economic mainstream.

Flattener #2: Netscape and the web broadened the audience for the Internet from its roots as a communications medium used primarily by "early adopters and geeks" to something that made the Internet accessible to everyone.

Flattener #3: Workflow Software: The ability of machines to talk to other machines with no humans involved. Friedman believes these first three forces have become a "crude foundation of a whole new global platform for collaboration". Software protocols such as SMTP (simple mail transfer protocol); HTML (the language that enabled anyone to design and publish documents that could be transmitted to and read on any computer anywhere) strengthened this global platform and gave it stunning outreach.

Flattener #4: In-forming: Google and other search engines are the prime example. "Never before in the history of the planet have so many people – on their own – had the ability to find so much information about so many things and about so many other people," writes Friedman. The growth of search engines is tremendous; for example take Google, in which Friedman states that it is "now processing roughly one billion searches per day, up from 150 million just three years ago".

Flattener #5: Open Source or communities uploading and collaborating on online projects. Examples include open source software, blogs, and Wikipedia. Friedman considers this phenomenon "the most disruptive force of all".

Flattener #6: Offshoring: The internal relocation of a company's manufacturing or other processes to a foreign land to take advantage of less costly operations there. China's entrance in the World Trade Organization allowed for greater competition in the playing field.

Flattener #7: Outsourcing: Friedman argues that outsourcing has allowed companies to split service and manufacturing activities into components which can be subcontracted and performed in the most efficient, cost-effective way. This process became easier with the mass distribution of fiber optic cables during the introduction of the World Wide Web. Fiber optic technology revolutionized telecommunication sector and attracted massive investments. By the mid-1980s, all told, a trillion-dollar corporate capital investment had been made in information technology, including telecommunications, and it went up from there. The massive investments drastically cut down the data transfer costs, making the concept of global village a reality.

Flattener #8: Insourcing: Friedman uses UPS as a prime example for insourcing, in which the company's employees perform services – beyond shipping – for another company. For example, UPS repairs Toshiba computers on behalf of Toshiba. The work is done at the UPS hub, by UPS employees.

Flattener #9: Supply-chaining: Friedman compares the modern retail supply chain to a river, and points to Wal-Mart as the best example of a company using technology to streamline item sales, distribution, and shipping.

Flattener #10: "The Steroids": Personal digital devices like mobile phones, iPods, personal digital assistants, instant messaging, and voice over Internet Protocol (VoIP). Digital, Mobile, Personal and Virtual – all analog content and processes (from entertainment to photography to word processing) can be digitized and therefore shaped, manipulated and transmitted; virtual – these processes can be done at high speed with total ease; mobile – can be done anywhere, anytime by anyone; and personal – can be done by any one.

Friedman’s award-winning work has placed the globalized and flattened world in a new perspective. It reflects a paradigm shift of analyzing technology shaping a new global commerce order, which is working well for the techies sitting in Madras, India, or Chinese linguists working for Japanese companies in a distant province in central China.

Abundance of opportunity for development in a shrinking world aside, the new revolution may have its flip sides as well. Fiber optics may be connecting the world for opportunity and growth, but it is also exposing this development to new and unheard of economic and security threats. Outsourcing may be spurring a new middle class in India and China, but it is taking away bread and butter from workers in the developed West, forcing them to live on unemployment checks.

Humanity, especially the one submerged in abject poverty, may be the limited beneficiaries of flatteners such as outsourcing and offshoring, its ultimate beneficiaries are the big corporations that are becoming fatter, gaining unmatched political power both in the US and overseas. It has become a shortcut to multiply profits of multinationals. Outsourcing has become the sole vehicle to fatten corporate profits and flatten room for innovation in communities or even countries facing higher production costs. There is no dearth of innovation when it comes to cutting operational cost. Jet Blue is a glaring example of innovation when it comes to cutting cost and keeping jobs at home. Jet Blue has been successfully running home-based customer support system since its inception.

Globalization thus has landed the mankind in a new era where many of the rules of commerce, trade and even international politics of the last century no longer hold good. Nobel Prize winning economist Joseph Stiglitz has also been critical of Friedman's book. In "Making Globalization Work", Stiglitz writes: “Friedman is right that there have been dramatic changes in the global economy, in the global landscape; in some directions, the world is much flatter than it has ever been, with those in various parts of the world being more connected than they have ever been, but the world is not flat […] Not only is the world not flat: in many ways it has been getting less flat.”

Richard Florida expresses similar views in his 2005 Atlantic Monthly article, "The World is Spiky". However, Hans Rosling's statistical data (2006–2009) and numerous presentations have shown that significant global progress continues to be made, so growing spikes does not mean deflating valleys.

Globalization may have created level playing field in many areas of international commerce but it is flattening or has already flattened ideas and innovation in many other areas of global economy.