Saturday, July 29, 2006

Flat or Round or Lumpy

It was at the Bangalore campus of Infosys Technologies, one of India's leading new high-technology companies. Infosys CEO Nandan Nilekani turned to his visitor and remarked: "Tom, the playing field is being leveled."

The simple words hit Friedman with the force of a revelation. "What Nandan is saying, I thought, is that the playing field is being flattened.... Flattened? Flattened? My God, he's telling me the world is flat! I scribbled four words down in my notebook: The world is flat."

By now this anecdote and its perpetrator have achieved celebrity status. Tom Friedman and his book The World Is Flat: A Brief History of the Twenty-first Century are the hottest items on the non-fiction bestselling list of 2006.

But was this observation a revelation, or was it commonplace knowledge among economists that only needed to be popularized? And of what practical value is it? What does it tell us about the future of world powers such as China, India, Europe and the United States that occupy such diverse spaces on this flat-round Earth?

What the fuss is all about is the simple process called globalization. Free trade leads to the emergence of a “global market -- a worldwide system of production and consumption that disregards national and cultural boundaries.”

But this concept was well known in the 19th century, made famous by Marx and Engels in The Communist Manifesto (1848): “The need of a constantly expanding market for its products chases the bourgeoisie over the whole surface of the globe. It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilization into their midst.”

Marx and Engels welcomed the development for the increasing wealth it produced but also because they believed it enabled humanity to overcome the divisions caused by nationalism and religion.

And it is not just the consumption side of the equation that is affected by globalization. Adam Smith in The Wealth of Nations (1776) famously wrote that “the division of labor is limited by the extent of the market.” What Smith described were historical trends away from mercantilism and towards free trade that had been developing for many decades.

Though it is unarguable that the globalization trend has been progressing for at least three centuries, is it inexorable, and is it benign?

In Friedman’s view the free market brings with it most of the ingredients that make for a free and humanly fulfilling society. But Friedman shares Marx’s blind spots. They both believed that technological advances fuel economic development, and economic forces shape society. Both discounted politics and culture, nationalism and religion. Thus while globalization makes the world smaller (telegraphs, telephones, the Internet) and richer, it does not necessarily make it more peaceful or more liberal.

Which brings me to the second question: What does it tell us about the future of this lumpy world? In my Omnilore class, one of the topics we are studying is the growing power of China and India and their relationship to the United States. In my usual fashion I sent out a quickie poll to the brilliant PalosVerdesBlog readers asking their opinions. The questions were:

Which of the two countries, China or India, will be the bigger world power in 20 years? Will that country's power will be a problem for the US? Is there anything we should do about it?

The rapid response network produced 19 quickies. The answers to the first question were nearly unanimous: 18 for China, 1 unresponsive (more later). The rationale included the following:

India has a higher percentage of poor, they have a caste system, they are probably killing more babies at birth and, I believe, a much less efficient system than China. Democracy and free markets do not always add to more efficiency....maybe they do eventually but not at this stage of development.

China is becoming more capitalist and has many more people than we do!! They can get tons of cheap labor. They are putting over 230 golf courses outside Shanghai. They have learned that instead of killing girls that girls can work in the cities and send money home.

China, hands down. They are "westernizing" at a faster rate and have a better understanding of the need to "get there". I also think they have more natural resources.

China will win because we depend far too much on them for products. We depend on India as well but I don’t think their military is as mighty as China’s.

OK, China is the winner. So, what problems could China cause the US and should we do anything about it?

Biblically speaking, I believe China will be a major enemy to the world. The “kings of the East” who marshal a 200 million man army are not going to sit on the sidelines longer than they believe necessary. We must stop giving or selling them our secrets.

I think – and hope – that China will implode due to the younger generation getting more and more outside information via the internet and satellite dishes, and then rebelling against the old guard. There will be many Tianamen Squares, but ultimately the authorities will be unable to quell the rising tide of people yearning for freedom.

We should make sure there is some kind of balance of imports and exports between countries. And keep tabs on their production of nuclear weapons… close tabs. And send our kids to their country for education … bet they don’t have testing problems in China.


Spend money at home!! Keep USA strong. Have more babies – i.e. more American babies.

They will be a problem for us as they are a lot more unscrupulous, generally speaking, than India. Plus they have some of our problems, Korea for example.
The powers that be in China don't worry about other people, or even their own people. We should build bigger and better "star wars" defensive systems.

An armed Japan would be immensely useful.

China has the military might and the incentive to use it in order to secure the resources needed to sustain its economy with its 1.25 billion people. Meanwhile the U.S. will likely decline due to the mediocre public educational system and preoccupation with clashes abroad, primarily the Muslim world.

Not so, since we are already heavily invested there and more company investments are in the works.

It seems there is a near-consensus that China will be a danger to the US and that we should: buy American, have more babies, don’t cooperate militarily, build and deploy star wars and arm Japan. Not a bad list.

I’m a bit more optimistic. First, I’m not ready to concede that China will be the next world power ahead of India. The English language gives India a huge advantage even in the networked age. Have you ever seen a Chinese language computer keyboard? Democratic, non-aggressive India is far more flat-worldly than China, and I think those are advantages – although I don’t discount the advantage of central control when you want to get things done in a hurry. Our friend China Jim says that one day the Chinese mayor decides he wants a road and a coal burning power plant in a particular spot, the next day they are tearing down houses and beginning construction.

Second, I tend to agree with Friedman and Marx that the habit of free trade builds interdependences that are likely to overcome nationalistic tendencies. The US buys 21% of China’s exports and 22% of India’s (also 23% of Brazil’s, 25% of Japan’s, 26% of Europe’s, 70% of Venezuela’s and 89% of Mexico’s). Those numbers provide a certain leverage that some call soft power. A strategic triangle composed of China, India and the US would be a powerful force against terrorist actors and states, to control the spread of nuclear weapons and to combat problems such as the supply of energy and global warming.

Third, I don’t worry at all about the economic competition from China or India. Every decade there is a nouveau power that is going to eclipse us in the world marketplace. First it was Great Britain, then Germany, then Japan and lately the European Union. Competition is good, it gets the American juices flowing –- and we always win!

Finally, what about the person who answered the poll but did not vote? I called it unresponsive, but you be the judge of this reply: “I want a quickie, not a quickie poll … LOL.” I am suspicious that this person did not take our business as seriously as SHE should. But let’s forgive HER.


Anonymous Anonymous said...

Very interesting. All the things that have been on my mind. I watched Tom Friedman last night and again this morning on "Meet the Press". I agree with much of what he says.

I wish our politicians seemed as thoughtful. I've also been looking at China with some apprehension for years.

Thanks for this - it gives me more to ponder.

12:24 PM  
Anonymous Anonymous said...

Hi Bill!
Our Missionary friends from Singapore (who recently traveled to China) gave us three pieces of infor you might find pertinent:

1) Since China is hosting the 2008 Olympics, they are building tons of facilities, fast!

2) The government is requiring the population to learn English by then! (..knowing the "face" they would lose if they don't accomplish these two monumental tasks, my bets on China.)

3) The Chinese government last month approved the selling of Bibles in bookstores. ( No doubt the Chinese want to appear civilized and tolerant to the world.)


9:06 PM  

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