The book was written while the author was interviewing business leaders in india and elsewhere about Outsourcing and its effects on daily lifes of the populations involved in it. Althrough I did not read the book yet, ( I am dying to start reading it), I did buy it just a few minutes ago. I am bound to write some more about the book and its emplications; as well as critic it ( which is by no means an expert cirtic of the book), I would like to write down the 10 forces that flatten the world according to the author.
- 11/9/89 : The fall of the berlin wall in germany and the start of the end of the bipolar world. Also personal computers came into scene with usable technologies at costs affortable to general public.
- 8/9/95 : The start of the boom of .coms with netscape.
- Work-Flow Software: The applications could start to talk to each other. This is still a force we encounter everyday.
- Open-Sourcing: Linux and the Open source community. The power of individuals in smaller groups has never been greater.
- Outsourcing: Your credit card call center is handled by a person whose name is longer than Schwarzenegger!!
- Offshoring: Moving entire factories to other parts of the world. The effects of China.
- Supply-Chaining: Wal-mart effect. If you have taken any business course in recent years, or are in touch with business in anyway, you will know what i mean.
- Insourcing: DHL, UPS, Fedex. They now do everything you ask them to do, and more. The value added servies they started cant easily to replicated and are essential to the globalization.
- In-forming: Yahoo, Google, etc. The explosion of information, both on-demand and distributive. The effect of internet can be really left when i can watch any place in the world, live and know what is going on there. And you though the telegraph was the greatest inventation of communication!!
- The Steriods: Wireless telecommunications and ultra-mobile world of devices.
In the message boards of charlie Rose, I found the following comments which I think give a fair critic of the view presented by the author.
Part 1 - the missing cycle.-- source: http://boards.charlierose.com/board/topic.asp?ti=12035
The problem he ignores, and doesn't talk about in his book, is that we in the US have what everyone else in the world wants. We don't have the highest standard of living, but we're pretty close to it. So now as democratization spreads, and older cultures modernize (China, India, Russia), they want the stuff we enjoy. An additional 3 Billion people are now competing for all of the same jobs and they want what we want. The insidious nature of this transformation is that they all are fighting for jobs we don't want, but in the process, they end up taking away the jobs we do want. By that I mean menial tasks like assembly are now in Asia because these jobs don't pay very well. But then the need for Supervisors, Managers, Directors, Chief of operations, etc. materializes. Then because the first plant did well, additional plants get built which divert even more jobs. Then the wages that they receive in their local currency elevates their standard of living which drives up the rate of consumption in their local economy which sparks the local phenomenon of "keeping up with Jones". Eventually their consumption adds to the demand for more production, which creates more jobs, which are not located in the USA. Get it. Do you now see how seemingly innocuous, but truly insidious, this cycle really is for Americans? Mr. Friedman fails to illuminate us on this salient point and fails to acknowledge this cycle in his book.
This cycle is currently underway and as these other citizens of the world fight for their right to own a home, a car, and a TV, their standard of living will rise. Relative to ours, this means Americans will either become the lords over all, or our standard of living will either stagnate or decline. As 3 to 7 Billion over the next 50 years fight to have what we have, major dislocations will devastate the G7. Unemployment in Europe is already in double digits and young able-bodied man and women have no jobs because they have out priced their worth to the global markets. Local wages are too high and taxes are too high. And as a commentary for us in the US, our government is now unraveling the "New Deal" of yester-year and embarking on decreasing taxation as a way to attract foreign capital and investment so that the USA isn't left out of the new third world economic engine. Plus it attracts foreigners to buy our debt, which is keeping us afloat. To put it simply the new global players still need the USA's consumers!
However, what Mr. Friedman doesn't acknowledge is that in the near future the rest of world won't need us. Once we have sold them the technology to build and then show them how to do it, these other countries are on their own. Fortunately, our companies are leading in many areas, but think of these other countries as apprentices. Remember Japan and Germany. Both were decimated after WW II, but as our proteges, they were fast learners and took off all by themselves.
Part 2 - World Population
From an egocentric point of view, Americans are currently biggest consumers on the planet and everybody around the world is serving our need for consumption. Companies are driving down costs to provide better and lower cost goods for us to buy. And they are searching the globe to get this done (this is why Mr. Friedman has a rosy outlook because this is good for us now). However, eventually these other countries rate of consumption will exceed ours and they will serve either their own needs or the needs of their new larger customers (China, India, Russia, Brazil). This will occur in only one generation as the world's population grows by another 3 Billion.
While Mr. Friedman is correct in summarizing the current flattening of the World (Globalization, the new way), his rosy view ignores the impact of the growth in the world's population . The fact that the next doubling of the population will not occur in the USA means that if we don't own it now, we never will. Plus, our little place (USA) on the planet will appear to get smaller and our share of what's going on the world will diminish as China, India, Russia, Brazil, and 80 plus other countries dominate all markets. (These countries will no longer cow-tow to use Americans unless we control their purse strings, which is not likely).
As these 80 plus smaller countries begin to build their infrastructure, they benefit from not having to waste money on rebuilding an existing one since they didn't have one in the first place. So they are in a position to leap frog over older technologies and other mature civilized countries "in a single bound". These new "super countries" will be small and nimble with the ability to adjust like any entrepreneurial company and quickly pick a sector of interest and commoditize it. For example, with the proper irrigation system in place, a little country in Africa could decide to become the world producer of potatoes. Millions of acres of potatoes for the additional 4 Billion mouths to feed in the upcoming expanding global marketplace. Or they could become the world produce of paper clips. The choice is theirs and in a single generation they can obliterate poverty by building their country into a global store as part of the global mall.
Part 3 - World Resources
Another critical point missing from Mr. Friedman's book is that the earth's resources are now be gobbled up at an ever increasing rate. In the last 50 years, the population of the earth doubled from 2.8 Billion to 6.4 Billion and in the next 50 years it will reach over 9 Billion. The impact of this is huge and overhangs all of world's economies. And as a matter of fact, the poorer countries will be in a position to better survive any price inflation due to resource shortages, as they are not yet as dependent upon those resources as the G7. So as the world runs out of stuff the newer countries with their lower standard of living will be better able to do without. Just think about the fact that already 1/3 of the world's population is without potable water. How would an American cope without?
The flattening of the world is now inevitable, however, I don't believe the glass is half full and rising for the USA, I believe that the glass is half-full and leaking. The unknown variable is how our government can adapt to the New World order. Do they have vision to protect our position in the global marketplace? Do they acknowledge the current trends and are preparing for them? How do they plan to maintain our standard of living or are we going to watch it slip away? Lastly, are they simply fighting to keep what we've got and running us into the ground with debt?
You can't get any flatter than that. That's dead flat.
Although I do not agree with the details of the critic, I do agree on the broad sense of the debate that is going on.
In the Missing Cycle section, the critic complains that the rest of the world will not need United states of america. Although I wish it were the case, united states is not going to disappear for a couple of reasons. United States become the global power due to mainly reason, cheif upon them is their attaction to diversity. In history, almost all major powers of their period had diversity in their side. The importance of free exchange of ideas and resources cant be exgagreated. The reason why India and China present a major force against the powerhouse of united states is because they have such huge populations that are divserse themsevles. The vastness of their countries combined with their populations enables them to show diversity in workplace not unlike the united states. It was only when caste systems began to break that India even started to grow beyond the "hindu rate of growth" of 2 to 3%. However the situation is not perfect and could go south at any moment. Where as in United States, diversity is protected by strong institutions and establishments not yet developed in India and China and other competitors. If the immigration polcies focus on other smaller countries where people are willing to come to united states, take advantage of the eductational facilities instead of hoping to attact indians and chinese only, United States can still maintain some of its power. Unfortunely, Indians have enough Indians and Chinese have enough chinese in their countries that immigration is very much a joke. Hey, the simple idea is if i want to work with the workforce of the world, I come to United states to work. The rest can never achieve to attact the best and brightest of the world.
The second point in global population. It is a known fact that the european populations are dying out while the rest of the world is coming to age. This presents a unquie situation since population growth of one part of the world has never effected the population of any other part of the world. Looking at it in a simplistic microeconomic view, the only way the developed economiocs can survive is when they protect themselves in high levels of income by sheilding themselves in high-paying jobs. They still need to be a part of the global society of commerce and trade, without which they will not benefit from the low cost (compared to their income level) goods and services available. Unfortuentely, this has been ignored by most of the developed countries. They either take the route of complete protectionism thereby leaving out low cost oppertunities or they do not focus on issues that enable these societies to maintain their high income. Right now, the present economic scanieo rewards highly educated individuals regardless of the sector they are in. High educational costs limit the competitiveness of the skilled workforce of the developed world. Again a good immigration policy added with good educational and economic incentives should help the developed world.
The third point made is about global resources. Here I believe the very nature of capitalism, i.e., the in-built tension between the entrupreous and the established corporations/businesses will give us the solution. I personally hope that capitalism would move away from a destrutive emphasis on materialistic goods and services, and focus more on health and happiness of individuals and society. Just like how india and china embraced the wireless technologies without going through the telephone generation, given enough economic incentives more eco-friendly goods and services will be introduced by the market. Just think of the amount of money that was spent on houses during the 19th century and the amount of wastage they endured. Nowadays eco-friendly houses are a common place in some countries and will be so as more and more people demand it. Simple laws of economics of scale.
I have been reading a book called, "Our Modern Times: The New nature of Capitalism in the information age" which looks at the other side of the technological revolution. The human side and how that is impacting the generation at present. I will write about it hopefully in my next posting.
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