Wednesday, February 08, 2006

The World is Flat, by Thomas Friedman

I really enjoyed Thomas Friedman's The World is Flat, even though it's talkative, full of anecdotes, and argues for a point of view I already agree with. Friedman has many useful points to make about globalization, and it seems to me that he makes them in a way that could reach many who are opposed or sceptical if they are exposed to the ideas. The fact that the book is on the bestseller list means that there's a chance that many of these people will hear Friedman's arguments.

Friedman's metaphor is that trade is bringing most of the world closer together, leveling the playing field so everyone can be a supplier to everyone else. The effect of this change is that all businesses are getting more efficient, and delivering better value to customers everywhere. As this continues, everyone with access to the global marketplace is being offered more and better goods and services, and is under constant pressure to use those advances to offer more, better, cheaper, faster services to their customers in turn.

This sometimes leads to companies letting some employees go, or even going out of business as they search for more cost-effective ways to serve customers. But that's only a short-term effect, and everyone benefits from the lower prices and improved quality. So everyone is constantly benefiting from the improvements, and many of us take a turn being inconvenienced. But keeping things the same isn't an option, and hasn't been an option for a long time.

Friedman's point is that the right way to think about the effects of international trade is that trade is good for both parties, and for most of the bystanders as well. It's not always easy to see everyone's gain when something particular that you've grown to rely on changes, but it's there if you look for it. Schumpeter used the term "creative destruction" to describe the way the constantly shifting market is always removing old things in order to bring in new and better approaches.

Friedman includes a fair number of helpful hints for individuals and business leaders trying to find a way to survive the constant changes. Above all, he recommends flexibility. You can't be sure which direction the next change will come from, so you need to keep your ability to learn new skills, and you have to have a cushion so you can survive until you've found your next appropriate strength. Always be looking for ways to enhance your contribution to the global marketplace, because others are doing the same, and they will undercut your current approach in a way you weren't expecting.

I like the way Friedman depicts the entire free world as constantly looking for ways to improve life for everyone. As more people from India, China, Russia, and elsewhere find ways to connect into the global economy, they are all constantly finding ways to provide a new valuable service, or to provide an existing good better, faster or cheaper. As he points out, when communism collapsed in the late eighties, it unleashed 1.5 billion people who each had to do something valuable for someone in order to survive.

He also has constructive ways of thinking about what we lose as we face this constant change. He quotes Michael Sandel as telling him

A flat frictionless world is a mixed blessing. It may be good for global business. But it may also pose a threat to the distinctive places and communities that give us our bearings, that locate us in the world. From the first stirrings of capitalism, people have imagined the possibility of the world as a perfect market — unimpeded by protectionist pressures, disparate legal systems, cultural and linguistic differences, or ideological disagreement. But this vision has always bumped up against the world as it actually is — full of sources of friction and inefficiency. Some obstacles to a frictionless global market are truly sources of waste and lost opportunities. But some of these inefficiencies are institutions, habits, cultures, and traditions that people cherish precisely because they reflect non-market values like social cohesion, religious faith, and national pride. If global markets and new communications technologies flatten those differences, we may lose something important. That is why the debate about capitalism has been, from the very beginning, about which frictions, barriers, and boundaries are mere sources of wasted and inefficiency, and which are sources of identity and belonging that we should try to protect.(italics added)

The flattening international economy isn't something that can be stopped — short of a global holocaust of some sort. Understanding its nature and why it sometimes hurts should make it much easier for people to navigate the constantly changing terrain.

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