The World Is Flat: Globalization and the New Economy

Introduction

In The World Is Flat: A Brief History of the Twenty-First Century, New York Times columnist Thomas Friedman discusses the impact that globalization has had on the world economy. However, Friedman does not frame globalization simply as an increase in the breadth and depth of the worldwide economic system. While that has certainly occurred, Friedman focuses on the other side of globalization: the shrinking of the world economy. Rather than becoming more diverse, globalization has actually led to a decrease in diversification within the global economy, because the world is now united by common elements that have linked even remote local economies to the broader global system.

Friedman begins his book by discussing how the economy became global, including the timespan for that change. He identifies the pivotal changes he considers responsible for flattening the earth and reshaping the structure of the economy. Friedman discusses America's role in the new economy, as well as the roles of emerging powers such as India and China. He examines the rules for the new economy and argues that, while some may decry the changes brought by outsourcing, it is almost inevitable. Friedman takes the position that outsourcing should be embraced and that America needs to shift its mindset away from manufacturing and production toward selling the idea of America to the rest of the world. Perhaps most provocatively, Friedman also discusses how globalization has helped encourage the rise of radical Islam.

How the World Became Flat: The Ten Flatteners

Friedman begins his book with a trip to India. He draws an obvious comparison between his visit and Columbus's planned voyage to India — during which Columbus discovered the New World and provided proof that the world was round, not flat. Given the book's title, this comparison is particularly apt: Friedman's central argument is that the new economy is collapsing the globe in the same way that Columbus's discovery once broadened it. Friedman says he first came to this realization while visiting an office in India, where the ability of local workers to communicate with locations anywhere in the world made clear to him that intellectual work and intellectual capital could be distributed from anywhere to anywhere (2007, p. 7). This means the world is moving toward a time when physical resources will no longer be the predominant measure of wealth or poverty; ideas have become nearly as mobile as goods.

In chapter two — arguably the most critical part of the book — Friedman identifies ten flatteners that shaped the emerging global economy. These ten things were not discrete events but combinations of events that Friedman links together to illustrate major shifts in how the world communicates and conducts business.

The first flattener Friedman calls a new age of creativity. He marks the end of 1989 as its beginning. The Berlin Wall fell on November 9, 1989, and Friedman's focus on this event is not simply the end of the Cold War but the fact that it gave the former Soviet states the opportunity to participate in the global economy. It also signaled a broader shift in global economic thought: prior to the Soviet Union's collapse, two superpowers existed — one with a market-driven economy and one communist. After the fall, the vast majority of the world began operating some form of market-driven economy, with consumer demand and available supply as its driving forces.

Friedman also points to the release of Windows 3.0 as an important element in linking the world, arguing that the operating system's ease of use helped popularize the personal computer. He pairs this release with the fall of the Berlin Wall, since without the rise of the personal computer a global economy would have been unlikely. The second flattener Friedman identifies is the creation of the internet. Although the web existed before the 1990s, it was not used by the general public. The release of Netscape was the pivotal change: it created the web as it is known today and, crucially, was compatible with all operating systems, connecting individual computer users in ways that had not previously been possible. Friedman also credits the public sale of Netscape stock with marking the beginning of the dot-com bubble.

The third flattener was the release of workflow software, which made it possible for workers in different locations to collaborate on projects. Together, these three elements illustrate how the internet helped connect the world and paved the way for a more global economy.

The fourth flattener is the uploading of information. Before the internet, traditional media outlets controlled information access. The internet made it possible for ordinary people to contribute to the global conversation — by writing open-source software, publishing blogs, and commenting on news — assuring publication even without a guaranteed audience. The ninth flattener also returns to the internet: never before has information access been as easy as it is today, and it grows easier every day. The internet allows people to access a wide variety of information regardless of their native language or country, creating a level of access that itself flattens economic and cultural hierarchies.

The Internet, Outsourcing, and the Changing Workplace

After examining the internet's impact on the globe, Friedman turns to how the workplace began to change. For most of the twentieth century, the United States was a center of both manufacturing and innovation, a combination that created the American middle class and established the country as an economic superpower. However, where jobs were located began to shift dramatically in the final years of the twentieth century.

First, many companies began to outsource — hiring other companies to perform work that had previously been done in-house. While outsourcing was initially limited to low-level services, it eventually became common across a wide variety of labor categories. Many of these outsourced jobs went to foreign corporations that could provide cheaper labor. As internet connectivity spread, companies could contract this work as long as an online connection to the parent company existed. India became the preferred destination for outsourcing because it had a highly educated population, strong broadband infrastructure, and a large English-speaking workforce.

Another factor that transferred jobs outside the United States was offshoring, in which a company moves its production to another country. Companies offshore because other countries offer cheaper labor, owing to lower minimum wages and less stringent safety standards. China was the primary destination for most offshoring, and once the trend began it created a domino effect: manufacturing in China became so much cheaper than in the United States that companies had to relocate production simply to remain economically competitive. While moving unskilled labor to China may not seem alarming on its own, Friedman warns that as China becomes educationally competitive, skilled positions will face the same pressures that unskilled positions have already experienced.

Conclusion

Friedman does a very good job of explaining how the economy has become global and the possible impacts of that transformation. At the time he wrote his book, it might have been possible to dismiss some of his concerns that the West was going to lose its economic dominance. However, since 2007 the world has undergone a tremendous recession, with several Western governments effectively becoming insolvent. Though the United States remains a major economic player, China's emerging economic dominance cannot be ignored. It will be interesting to see whether economic recovery is fully possible, or whether the economic distress the West is currently experiencing is not a temporary recession at all, but rather a reflection of permanently changing global economic conditions.

References

Friedman, T. (2007). The world is flat: A brief history of the twenty-first century. New York: Picador.