Is the World Flat?

Pankaj Ghemawat says the world is not flat ("Why the World Isn’t Flat," March/April 2007). No kidding. In arguing that globalization and economic integration are still far from a reality, Ghemawat fails to take into account the bigger picture of what is actually taking place in the business world. His narrow focus on the "10 percent" of internationalization across certain industries obscures my basic argument about the future of globalization. Obviously, the world is not yet flat. But my larger point is that the "flattening" technologies and processes of globalization now under way are the most important developments not just in economics but also in government, politics, war, finance, journalism, innovation, and society in general. Flattening technologies are empowering individuals, in previously unheard of ways, to reach farther, faster, deeper, and cheaper than ever before. Big institutions, from newspapers and television networks to software firms and Texas power companies, are being fundamentally transformed or challenged by these super-empowered individuals. Two tiny environmental groups just held up the biggest leveraged buyout in history — the deal for TXU, the Texas electrical utility — until it was reshaped to their liking. Tell them the world is not flat.

You need only look at the front pages of the paper every day to see it. And anyone who thinks that some protectionist measures are going to put YouTube back in the bottle — not to mention the Web, bloggers, global cell-phone networks, work-flow software, and the logic of outsourcing — is blind to the dramatic changes that have already taken hold. This is not about a snapshot, a "10 percent presumption" of integration at a moment in time. This is about trend lines and a scale of change brought on by these new technologies. Ghemawat might want to get out of his ivory tower and actually go out into the business world to see the incredibly diverse global companies that individuals are putting together with very little capital. Ghemawat’s argument is just the latest in a series dismissing the notion that the world is flat since my book was released. But just ask yourself: Which direction have events been going?

THOMAS L. FRIEDMAN
Columnist
The New York Times
Bethesda, Md.

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Just how dead is distance? It seems Ghemawat believes it is very much alive. He is correct that most social and economic activity remains local, or at least national. There are still national tastes, cultures, ideas, and policies, all of which reflect large crinkles on the surface of a supposedly flat world. What’s more, many economic activities continue to depend on "face time." Complex human interactions — deal-making, top-level advice, or delicate conversations — are easier between people in the same room.

But globalization has already changed much, and it will change more. First, international trade as a share of the world economy is larger than ever before. One major consequence is that surges in the labor markets of China and India influence wages around the world. As education levels rise in these countries and throughout Asia, their impact on developed economies will grow. Second, the seismic shift in the costs of digital communications is already transferring jobs — though often a few layers in a company move abroad, not a whole industry. Other shifts will take time to have their full effect. Remember that it took a century from the invention of the telephone for banking to migrate from the high street to the wires.

The developing world’s output is now greater than that of the developed world. Some analysts predict that the economies of China and India will become larger than the United States’ within a lifetime. That shift of economic power will have momentous consequences, including massive political implications. The world may not be flat, but mountains are crumbling.

FRANCES CAIRNCROSS
Rector
Exeter College
University of Oxford
Oxford, England

Rather than considering whether the world is flat, Ghemawat instead should have addressed where, when, and for whom this is the case. Advances in communications and ease of travel to distant locations illustrate how, for some, the world certainly is flat. However, as Ghemawat demonstrates, that is not the story for everyone.

After 10 years of conducting research in sub-Saharan Africa, I am convinced that globalization has produced a very potent, and possibly toxic, mix of extremes. It can increase levels of poverty, marginalization, and exclusion in exactly the same places where it produces wealth, integration, and inclusion. An example is the global trade in colored gemstones, such as sapphires. In Madagascar, for instance, you can find wealthy gemstone dealers alongside illicit mining with extremely poor working conditions, massive poverty, and extensive environmental degradation. Or consider tourism, one of the world’s biggest industries, as yet another example of globalization’s uneven nature. Wealthy Western tourists visit developing countries and stay in five-star hotels. They gaze at the rampant poverty outside their resorts and are persuaded by hoteliers and tour operators that what they see is traditional life. This is the toxic mix produced by globalization and the real danger to which Ghemawat alludes.

ROSALEEN DUFFY
Associate Professor of Politics
Centre for International Politics
Manchester University
Manchester, England

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Pankaj Ghemawat replies:

Thomas Friedman seems not to have read beyond the title of my article. If he had, he would have realized that the 10 percent presumption isn’t based on a narrow focus on "certain industries." My measures of the internationalization of investment, for example, aggregate across all industries. But such a realization probably wouldn’t have made much of a difference, since Friedman has very little use for data. The 450-plus pages of his World Is Flat do not contain a single table, chart, or footnote. Instead, we get a jumble of stories held together with hyperbole.

Friedman’s response also fails to address his anecdote that I dealt with at length in my article: software firms setting up delivery centers in Latin America — despite labor costs being significantly higher than in India — to overcome differences in time zones and language, as well as to take advantage of proximity to clients’ local operations. The examples that Friedman does mention are more mystifying. I don’t see what two environmental groups holding up the TXU deal has to do with globalization — and I’ve even read Friedman’s column on the topic. Surely, the more interesting globalization-related headline out of Texas in recent months concerns Halliburton’s relocation of its corporate headquarters to Dubai, a move that would be unnecessary in a flat world. And YouTube’s most obvious (if still tenuous) connection to our debate is through peer-to-peer traffic, which, according to experts, is not only becoming the largest component of traffic on the Internet but is also quite localized.

Exaggeration is also my issue with Frances Cairncross, whose work I otherwise find interesting. In response, I would argue that some measures of internationalization — immigration intensity, for example — appear to have peaked before World War I. Others, such as foreign direct investment, are indeed setting new records, but only relatively recently. And finally, when we look at the global trade-to-gross domestic product (GDP) ratio, we see an increase from 20 percent in 1979 to 27 percent in 2004. Extrapolating over the next 25 years despite currently stalled trade talks gives us a trade-to-GDP ratio of less than 35 percent by 2030 — unprecedented, but hardly revolutionary.

Finally, I am mystified by Rosaleen Duffy’s insistence that I should have written my article about something other than what I did. Although the impact of globalization on poverty is one of the most important issues of our time, so is assessing how much globalization actually exists. Given Friedman’s and Cairncross’s influential, book-length arguments that the world is flat and distance is dead, there seems to be room for a seven-page article that relies on data to argue the opposite.

Editor’s Note:
The opening text of Pankaj Ghemawat’s essay, Why the World Isn’t Flat , in the March/April issue included Web traffic as one of the components of globalization that is less than 10 percent international. Although Web traffic does tend to be highly localized, figures for global Web traffic are not available. We regret the error.