Virtual Learning Resource Centre
The world is flat; a brief history of the 21st century
by Thomas L Friedman, Penguin, 2006.
Abstract
This is a book which views the world as having been flattened by the coming down of the barriers between peoples and firms, so that distance and geography have been eroded and people can collaborate closely wherever they live and work, largely through the growth of information technology. The various phases and aspects of the flattened globe are discussed with numerous examples and discussion of some of the problems that have to be overcome.
(Reviewed by Edgar Wille in October 2006)
(These book reviews offer a commentary on some aspects of the contribution the authors are making to management thinking. Neither Ashridge nor the reviewers necessarily agree with the authors’ views and the authors of the books are not responsible for any errors that may have crept in.
We aim to give enough information to enable readers to decide whether a book fits their particular concerns and, if so, to buy it. There is no substitute for reading the whole book and our reviews are no replacement for this. They can give only a broad indication of the value of a book and inevitably miss much of its richness and depth of argument. Nevertheless, we aim to open a window on to some of the benefits awaiting readers of management literature.)
- Introduction
- The history of globalisation
- Ten forces that flattened the world
- Falling walls and rising Windows
- When Netcape went public
- Work flow software
- Open sourcing
- Outsourcing
- Offshoring
- Supply-chaining
- Insourcing
- In-forming
- The steroids
- The triple convergence
- America and the flattened world – an optimistic view
- America’s downside
- Developing countries and the flat world
- The unflat world
- Other insights
Introduction
Thomas L Friedmann is a Pulizer prizewinning journalist who is the foreign affairs columnist with the New York Times with a special interest in globalisation. This book is lively, even racy, peppered with anecdotes about the players in the global drama, but it has a serious message about the need for everyone to understand globalisation, and to look at it in a balanced way.
He starts his journey to investigate the history and current impact of globalisation on a flight to India. Going east he learnt to see the earth as flat, whereas Christopher Columbus went west to discover the world wasn’t flat. Friedmann uses the word flat to describe the situation now that the walls which divided nations and organisations have come down. The interconnections between all countries and corporations have created a level playing field which is worldwide and has made isolationism an impossibility.
India was the place where this perception hit him because he spent time in Bangalore, where the Internet connections with the rest of the business world are striking. He visited companies where not only were call centres operating as if in Europe or America, but fundamental research and design work was being carried out in conjunction with experts from a number of countries many miles apart. Distance has become irrelevant.
The history of globalisation
He views globalisation in three phases:
Globalisation 1 – from the time of Christopher Columbus until around 1800; this shrank the world from a large size to a medium one; it depended on muscles and energy in the form of horse power, wind power, and eventually steam power which considerably integrated the world’s operations.
Globalisation 2 – roughly from 1800 to 2000, interrupted only by two world wars; the world shrank from medium to small; the driving force was the growth of multinational companies, fuelled by the industrial revolution and British joint stock companies, powered by falling transportation costs and later the growth of advanced communication. Through hardware a really global economy emerged.
Globalisation 3 – beginning in the last few years; the world shrank from small to tiny and barriers were flattened; the unique character of this phase is that by the power of the web and fibre optics, individuals can collaborate and compete globally. Through software we all became next door neighbours.
Friedmann illustrates the third phase and the build up toward it toward the end of the second phase with a number of stories about how skilled people moved into the new opportunities and set up companies to which larger companies outsourced work, to be carried out anywhere in the world. He also describes his visit to call centres in India and the way the Indians were handling distant customers as if they were in the same town, even to the point of learning an American accent.
The author also tells stories of people who were able to "homesource", and do quite complex work, without going into an office which might be hundreds of miles away. Examples were given of McDonalds drive in orders being processed, down to the physical detail of preparing the food, by distant order takers and by controllers to ensure that the order was being properly fulfilled. Organisational hierarchies are being flattened by the new freedom to work anywhere. The walls are down and the world is flattened, so that to a large degree place no longer matters. Ten forces that achieved this are presented.
Ten forces that flattened the world
1. Falling walls and rising Windows
The first of these forces links the fall of the Berlin wall with developments such as that by Microsoft with Windows, as fundamental to making the flattening of the world possible. The literal flattening of the Berlin Wall was the symbol of the flattening of the political, commercial and intellectual walls that had seemed so permanent under communism. Decades of restricted living were ended with the demise of the Soviet Empire. Markets began to be freed and the entrepreneurs took over and innovation became rife through the other great flattener – "the diffusion of personal computers, fax machines, Windows, and dial up modems connected to a global telephone network - all came together in the late 1980s and early 1990s to create the basic platform that started the global information system" and led into the third globalisation phase.
There was also a downside to these developments. They could also be used for the creation of evil and were and are so used by Bin Laden and his associates. They were repelled by the widened playing field and they generated political Islamism to resist, using the tools of those they regarded as the enemy.
2. When Netcape went public
The second force was the work of Netcape to bring the browser to the already installed base of PCs, making the computer and its connectivity inherently more useful to millions of people. This sparked off the Internet boom, because everything could be digitised, transported and sold on the Internet.
The author tells the story of how browser technology was developed to take its place as one of the most significant inventions in human history. Websites grew beyond number and in breadth of coverage, irrespective of the computer system anyone was using. It made everything and everyone inter-connectable. With the browser came a family of software products that implemented open standards which Nestcape had insisted upon to ensure universal access.
On the 9th August 1995 Netcape went public and took the Stockmarket by storm. It ultimately could not survive the power of Microsoft, with its large number of programmers to throw at web browsing, and making Internet Explorer free as part of the Windows operating system. So Netcape proved to be but a shooting star, but, Friedmann adds "what a star it was and what a trail it left".
Friedmann also speaks of the dot.com bubble, which burst with a lot of optimistic expectations of unlimited expansion exploded. Nevertheless the outcome was ultimately positive, because so much fibre optic cable was laid that there was a glut of it, which made further developments in connectivity and further flattening of the globe possible at affordable cost.
Another benefit this book offers is offering simple explanations of how the technology works. For example, I now have some idea of how fibre optics works.
3. Work flow software
The next step was that people wanted to go beyond mere connectivity. They wanted to be able to work cooperatively on projects without regard to distance, to shape things, design things, create, buy and sell, keep control of inventories and do these things as teams operating in many countries as if they were in the same room. Already digitised work could flow from one to the other and back again. A patient’s X-rays could be read by a specialist at the other side of the globe. An American’s taxes could be computed in the Philippines.
In order to achieve this, programmers wrote new software and developed transmission protocols, so that everyone’s software could communicate with everyone else’s software. This went beyond connecting people to connecting their software tools, thus enabling them to really work together. At first companies had become internally inter-operable, but soon anyone who wanted to work with others could do so. Geography was banished.
With everyone’s applications able to connect with everyone else’s applications, work flow became more effective than ever; also the opposite – chopping up and disaggregating work for different players to work on parts of it, wherever they happened to be. Also authors of a book or article could bring together material from diverse applications and weave them into a seamless publication. The common standards developed enabled work to be broken up, dealt with anywhere, and put together again for the use of those needing the output. This process could move back and forth between whoever could do any part best. It became the basis of wider use of outsourcing and the unified activity of supply chains. Businesses were more able to collaborate – to build alliances, projects and products together, employing the best expertise from anywhere.
4. Open-sourcing
Open sourcing is a significant flattener because it makes software tools and encyclopedias available with no charge to millions of people who otherwise would have had to buy proprietary software. This is a flattener because it breaks down the barriers to widespread communication and causes distance to become ever less important. Through the organisations dedicated to open sourcing, such as Apache and Linux, hierarchical structures are challenged and costs of the Internet and of computing are driven down. The Economist declared in 2004 that it was being argued by some that the open source approach was giving birth to a new post-capitalist model of production.
Open sourcing really is free. Software enthusiasts have developed computer operating systems and have put them on the Internet, with the source coding, all for free. Those who join the network can develop the software so long as they too make the amendments freely and openly available. Everyone involved in this marvellous "bottom up" professional collaboration is able to check whatever is offered in this way, amending it, creating "patches" to correct faults, so it that has become a vast community of software programmers giving part time unpaid service and receiving the benefits in exchange for their own efforts. Together they build the tools and infrastructure which enable anyone to add to the process and benefit from it. They were, and are, motivated by professional pride, love of discovery and innovation and, if truth be told, getting the opportunity to cock a snook at the established commercial software houses, who were forced to take note of them and make some parallel free offerings. Essentially open sourcing is the exchange of intellectual capital without money exchange.
Everyone in the open source community can use what has been provided, to build their own specific applications software or go on to develop commercial proprietary software for specific purposes, so long as they acknowledge clearly the providers of the open source material. Open sourcing saves them time and cost in the process of such software development. A standard web server architecture so provided has been of inestimable value to web development and the email service. Everyone becomes winners rather than just a few mammoth providers. Commercial software companies have to start to create their proprietary work further up the ladder of development, if they are to differentiate themselves.
Wikipedia, the encyclopedia, is an outstanding example of the open source mindset, using open source software to make its existence possible. Anyone can initiate or amend an entry, with hundreds of knowledgeable people to check it and amend it, so that the best information is consolidated by the efforts of many people, drawn together by a community of interest, not as part of a commercial company. The participants work by consensus. The encyclopedia has its widespread joint quality control, including defence against jokers and vandals. Its aim is to give absolutely everyone "free access to the sum of human knowledge".
Of course, although the free open source providers do have their own licensing system whereby people contract to make their results available freely, there may come a time when some form of governance will have to introduced if sheer volume and variety begin to create chaos. There is debate whether making such important matters free is going to reduce the incentive for innovation, and the generation of income to pay for research and development. Bill Gates has made these points, but the approach shows no signs of diminution. It is certainly making the earth a flatter place; more walls have come crumbling down.
5. Outsourcing
This has been around for some time as means of getting mundane jobs done more cheaply. But over the past few years it has been viewed more strategically as a means of freeing your company to focus at what it is best at. This enables a company to concentrate on its core competences, the activities where it has clear competitive advantage, while many of the supporting and peripheral activities can be carried out more efficiently by companies for whom they are their main area of expertise. This is clearly explained in Michael Corbett’s book The Outsourcing Revolution, reviewed elsewhere on Ashridge VLRC. It was a significant piece of flattening of the globe, where geography no longer mattered and vertical integration lost its appeal.
But the biggest flattening happened in India, where there were thousands of well trained IT people who, however, could advance their careers only by leaving India and going to work, for example, in America, which only a minority of them could do. However the bursting of the dot.com bubble meant that fibre optics spanning the globe had become very cheap and Indians could advance their careers without having to leave their shores. Just as this development was occurring there came the big new millennium scare about getting the dates right (Y2K as it is called). Would most computers go back to 1900 with resultant financial chaos all over the world? The task was enormous, but there was this army of trained Indians who could sort it out without leaving India, thanks to cheap fibre optics and the excellence of training in Indian institutes.
And sort it out they did, placing themselves firmly on the world software map. It was an outstanding experience of globe flattening.
6. Offshoring
Building on the experience of outsourcing, which took such a turn through the Y2K opportunity, many companies began to realise that the whole world was available to them for choosing to outsource, and beyond just saving money by getting simple jobs done in countries where labour costs were low.
Particularly it became evident that if China was flooding the world with good quality, low cost products, then they had the skills to work for Western corporations which could set up business in China and use the skills, in addition to the low costs. China was the big example, but other countries, particularly in Asia, were in the same bracket. China joined the World Trade Organisation to get the benefits of trade with the West and to attract ever more inward investment. Oded Shenkar has written about this in his book The Chinese Century, reviewed elsewhere on Ashridge VLRC. Many countries have also scrambled to get on the same band wagon.
China and other countries are moving from merely manufacturing to design and other service functions and Western companies are bringing in their own chains of stores because indigenous tastes for branded goods are growing among the more prosperous parts of the population. As outsourcing leads to close cooperation between teams in the richer countries and those in the emerging countries, they gain in understanding normally associated with being under the same roof. The roof has expanded globally to cover the impact of a flattened earth.
The greater efficiency of this kind of connectivity actually brings advantages to all participants; the country which "offshores" does not ultimately create unemployment at home, but increases domestic prosperity by the expanding range of opportunity. From this perspective, Friedmann says "three United States are better than one and five would be better than three", though he acknowledges that there could be some pain along the way.
7. Supply chaining
This is all of one piece with the previous two flatteners. Once your whole supply chain could operate as if it were part of the main company, then distance became irrelevant and the processes involved were all flattened. The barriers to collaboration disappeared and the speed of information flow through the Internet enabled everyone in the chain to know where they stood and what needed to be done to fulfil their contracted purposes. The principal company could help its suppliers to reduce costs, both of manufacture and distribution and would know exactly what was going on, so that it could ensure that customers were satisfied with the resultant service.
Wal-Mart with its vast distribution centres which collect from all over the world and then supply all their stores, wherever they are, is an outstanding example of this kind of flattening. Not only does Wal-Mart have all this information about its suppliers, stores and customers, but the suppliers are able to key into the data and discover where the strong and weak selling points are, so that they can create production plans which will match the situation and the trends showing up.
Friedmann does not hide the fact that there is a certain ruthlessness in Wal-Mart in their getting the last half cent of benefit out of suppliers, but on the other hand enough of their suppliers have to be treated fairly or they would have no suppliers. The newer management is quoted as having become aware of the need to satisfy society as well as customers and to follow methods which are not seen as lacking ethical probity.
The principle is clear that supply chains are reaching new heights of unified activity; the old barriers are being flattened.
8. Insourcing
A firm like UPS is thought of as a worldwide package delivery service. However it does much more than that. It enables even small companies to act as if they were large and large ones to act as if they were small. It does this by taking over many of the functions which are usually associated with straightforward supply chaining. It even has workshops where small items returned to manufacturers, are repaired by trained people without going back to the manufacturers thus saving days of delay. They drive vans with customer companies’ insignias to give them the speed which comes from being part of the UPS logistics system, without having to forfeit vehicles carrying their insignia.
UPS will work with their customers to rearrange affairs so that the quickest delivery links with all the other steps to be taken by a company. They cooperatively delve into a company’s processes to make this happen. They will do many of the labelling, payment picking up and similar jobs for the customer company, while entering into the supply chain to ensure it works with the utmost efficiency, saving vast sums of working capital.
It is called "insourcing" and enables standards of supply chaining to be leveraged which could normally be afforded only by a firm like Wal-Mart. Many small companies have been enabled by this kind of flattening to go global in ways that would have not been possible on their own. It is horizontal value creation based on a close degree of trust. It does for companies what they may not have the necessary core competencies to do themselves. It takes a firm like UPS well beyond its original purpose of delivering packages.
Among large companies, Ford allowed UPS deep into their company to devise better methods of distributing cars from factories to dealers and got the time down from months to days, with none disappearing in transit. Ford were enabled to keep track of all their cars en route to anywhere. UPS have a vast delivery capacity; it is said that any one time 2% of the world’s GDP is on UPS vehicles, of which they have 88,000! They will even put up the capital for a small company to revolutionise its supply chain. UPS will do everything from the order taking all the way to the delivery. They synchronise not just your package, but the whole company’s interactions with both customers and suppliers.
Friedmann gives only the example of UPS as the hub of insourcing; but for it to be a key flattener there must be other companies, such as FEDEX and DHL, doing something similar.
9. In-forming
Does globe flattening include searching for a lost relative or finding out whether someone is to be trusted? If that’s what you want then Google can give you the facts. They organise the vast amount of information that is around so that they can give you the bit you need, and they do it in one hundred languages. It is the individual’s version of outsourcing, in-sourcing, supply chaining and off-shoring. Other search engines similarly do more than just help you find a computer file. Yahoo is also mentioned, but Google is the daddy of them all. The author comments that there is no bigger flattener than making a big chunk of the world’s knowledge available to anyone, anywhere, at any time.
Everyone is empowered to be their own researcher, editor, seeker for likeminded people. 18 months ago from the time this review appears, there were about one billion searches per day on Google!! Yahoo’s co-founder considers that the democratisation of information is having a profound effect on society. Small towns have as much access as large ones. There is no discrimination as to who can use the search facility.
What might be a disadvantage to this in-forming business is that it leaves you with nowhere to hide. The author’s daughter knew all about her fellow students before she arrived in college. She had Googled them
10. The steroids
This flattener is the use of wireless devices for receiving the answers to whatever concerns you, probably on your handheld PC.
Under this heading the author feeds our sense of amazement by talking of what has made all these flatteners possible. He walks us through the growth of the three essentials of computers – computational capability, storage capacity and input/output capacity, which is the speed by which the information is drawn in and out of storage. And in the forty years I have worked with computers we have come from the bulky mainframes, in their special air conditioned rooms, to the handheld computer of vastly more capacity. In 30 years we have come from microprocessors producing 60,000 instructions a second to the theoretical possibility of 10.8 billion instructions per second.
Friedmann goes on to talk about video conferencing where the illusion is created that you are all sitting round the same table; about phone calls over the Internet by turning voice into data packets; about phoning, where how long you talk and from what distance will not matter, because you will pay only for the add-ons; about mobile phones able to operate as credit cards; about distant diagnosis and correction of planes with engine trouble and so on and so on. These are the kinds of thing that empowers all existing flatteners and will go on developing, turning the world more and more of a level playing field.
The triple convergence
Three elements are converging in the development of the level playing field:
- the ten flatteners already described
- the merging of these with new ways of doing business, such as moving from vertical integration to more horizontal ways of creating value
- millions of new players on the field from China, India, Russia and elsewhere.
The first created the opportunity to share knowledge and work in real time, irrespective of geography, distance and, soon, even language. Added scope has been given for more and more people and organisations to collaborate positively to mutual advantage.
The second was when the potential of the first became part of the way of thought and action of a substantial number of people, so that they could be comfortable with the new ways of doing things, new processes and new skills. This is work in progress, but the next generation are already teaching their elders. Horizontal cooperation calls for a different mindset and different skills from top down approaches. Organisationally it involves the move from the old departmental approach to one where all employees in a company are seen as part of a large pool which is constantly assembled horizontally into collaborative teams, depending on the specific issue in hand.
The third converging aspect was the joining of a large number of people of equal potential from countries which had been previously frozen out of the world where people compete and collaborate. They had lived in closed economies, with vertical, hierarchical structures. Now they are raring to succeed in the market economy, and each year thousands more are added who can perform in the new conditions.
Friedmann sees these three converging factors as the key to the way global economics and politics are going to develop in the still young century. He gives examples of how this is proceeding in a world where travel is freer than it has ever been (even with the threats of terrorism), where Boeing employs 1000 engineers in Russia on design and development, where the world is becoming one market place. At this point I was beginning to be irritated by the optimistic tone which seemed to ignore the downside of the condition of the world and the three or four billion who have no opportunity to share in this marketplace, because they are so poor. But eventually he gets round to these issues and comes up with some positive ways of dealing with these negatives.
In a chapter on the "great sorting out" he cites examples of how this is all working out. There was an Indian firm that was able to grossly undercut world famous consultants to undertake a multi million upgrade of the Indiana Unemployment Department. Who was exploiting whom? he asks. He recognises that shareholders and companies will do well out of outsourcing and offshoring, but many workers will feel pain, which he believes ultimately turns to good, but there is sorting out to do. He recognises defects for example in some of Wal-Mart’s behaviour, such as not paying some employees enough to keep them off welfare.
Ownership and copyright issues are discussed; also whether stripping things to their barest dimensions doesn’t take some of the personal touch out of life. Friedmann asks whether there is a need to preserve some things and values from the onward rush of the flattening process.
America and the flat world – an optimistic view
Part Two of the book deals with America’s relationship to a flatter world. In doing so Friedmann reinforces the principles he has already set out, as they affect his country, but also supporting his earlier arguments. You don’t have to be American to benefit by entering into debate with him. He is wrestling inwardly with the fear that ultimately India and China will diminish the opportunities for the next generation to have fruitful careers, but he concludes that the free market overall is for the good of America. More Americans will be better off if they refrain from erecting barriers to outsourcing, off-shoring and supply chaining, even though the transition may be difficult for some of them. Ultimately in his view there will be enough of the global pie for all of them.
The theory that there are not enough jobs in the world for everyone is, he considers, only true if innovation ceases and everything that can be invented has already been invented. Nevertheless low skilled workers will face a problem in the flat world. The large number of low skilled workers in countries like China will have the effect of depressing wages or creating unemployment of similar workers in America. The author believes that there is a limit to how many factory jobs can be created but there is no limit to the potential for idea creating jobs which give rise to more markets. Human needs and wants are infinite and America should do well if it continues to churn out a high number of knowledge workers.
Imagination is needed, and the countries with the high ratio of knowledge workers will have to move higher up the innovation tree and value chain as they have in the past. India and China are also aiming to move upwards; they are not content to be low cost labour providers and this will keep the more developed countries looking to their laurels. Friedmann recognises that this is a matter of faith, but not without evidence from the past. If clothes firms are threatened by low costs elsewhere in the world, they will move to design and produce unique offerings.
Examples are given of where setting up factories in China has enabled American firms to keep them also at home, to meet the extra demand that the bigger enterprise both creates and fulfils. The author believes that America is well placed in terms of potential for higher education and research activity. Its flexible labour laws also help; they mean that employee numbers can go up and down, dependent on demand, unhampered by restrictive laws as in Germany. There is some recognition that there is a downside to these conditions, especially for people who never know when they are going to be laid off.
The final factor which makes the author so optimistic is that America has far and away the largest consumer market in the world. He also notes that it is the meeting place for the world where many people get together all the time to exchange ideas and learn from one another.
America’s downside
After his burst of optimism, Friedmann reports on factors which should discourage complacency. He notes with concern the fall in science and engineering degrees being awarded in America compared with some Asian universities. He speaks of "get rich quick" mentality which is inhibiting the enthusiasm for sound academic learning, especially in maths and engineering. The scientific and engineering professions are being sustained by older people and the younger generation do not appear to be coming forward in numbers that will replace them and enable America to maintain its lead.
Growing up in a wealthy country has had the effect of depressing ambition, because the wealth is taken for granted. The author believes there is a quiet crisis which could have dire results.
He goes on to stress the need for a safety net for all people in the country, but that it should be associated with a requirement that people learn and train for the new economy. People have to get used to the fact that there will be no lifetime jobs, but more importantly, what is needed is lifetime employability. Government, business and labour need to collaborate in the building of a society which promotes self-reliance, though does not leave people just to fend for themselves.
He comes up with some practical ideas, such the development of a wage insurance scheme where people pay premiums to insure against reduction in wage levels through transitions in the economy or in their part of it.
Friedmann also devotes a few pages to recognising that employers need to have a responsible attitude to society, particularly in relation to the use of the earth’s resources. McDonald’s now talk of a "socially responsible food supply" and they and similar companies subscribe to the need to follow environmentally friendly policies. It is admitted that this change in attitudes is improving their global brand by being seen to be acting as good global citizens. IBM, Dell and HP have joined forces to propound an electronic industry code of practice for responsible manufacturing. They hope by this also to exercise influence in emerging markets.
The last section in this part of the book makes an appeal for better parenting and ensuring that families again become fundamental to the health of society. Parents need to understand the world in which their children are growing up and what it will take for them to thrive.
Developing countries and the flat world
A significant chapter is devoted to this theme. The author here tends to focus on the policies that should be adopted by the governments of developing countries, though he does look in a chapter or so later, at the plight of people at the bottom of the economic pyramid, mired in deep poverty. He recognises the size of the problem of billions of people living in poverty, and encourages their governments to work with the international organisations and other governments, to get involved in economic growth and trade, as the best antipoverty programme in the world. He calls this the "reform wholesale" approach, although its prescriptions are inappropriate for the poorest of the poor.
Then he goes on to "reform retail". This is more than just opening a country to foreign trade and investment and making a few macro-economic changes from the top; that is "reform wholesale". "Reform retail" involves looking at four key aspects of a society – its infrastructure, regulatory institutions, education and culture and upgrading each one to remove as many friction points as possible. The population of a developing country needs to be given sound legal and institutional frameworks "within which to innovate, start companies and become attractive partners for those who want to collaborate with them from elsewhere in the world".
Countries, according to Friedmann, grow out of poverty when they create an environment below, that makes it easy for their people to start businesses, raise capital and become entrepreneurs, and when they subject their people to at least some competition from beyond – because companies and countries with competitors always innovate more and faster. But it is not really as simple as that.
The whole problem, as set out by Hernando de Soto, is that the countries for whom Friedmann offers these simple recipes, just do not have legal systems and contractual arrangements which can be depended on. Neither do they have clear ownership of the assets which could be turned into capital – nearly everyone at the bottom of the pyramid is squatting in property that they do not own and which is often not clearly owned by anyone. All this is clearly documented by Hernando de Soto in his book The mystery of capital (De Soto’s book is reviewed on the Ashridge VLRC in the Globalisation Section.). The sub title displays less optimism than Friedmann does in this chapter, where he mentions de Soto’s influence in Peru.
Added to this, the majority of the governments of developing countries or least developed countries (LDCs) are chronically unstable with corruption rampant and self seeking rulers, often building palaces while the poor die in thousands. However Friedmann is right when he says that there is an entrepreneurial spirit among the poor of these countries, which at least enables some of them to survive, but which only a minority can exercise to leave poverty behind. The Microcredit movement is helping many of them with unsecured loans to start little businesses, but that is due to private institutions and NGOs, notably Muhammad Yunus of the Grameen Bank, who, recently received the Nobel Peace prize. (To read more about Yunus and Microcredit and how the loans get repaid, search on Google under Grameen)
Friedmann gives evidence of the difficulties in his section on obstacles, for example in Mexico, when there has been some attempt to give the country a better infrastructure. He does however tend to look at the problems of the LDCs through the eyes of a Western capitalist, used to flexible labour laws, a clear legal system and a large consumer market.
The unflat world
A few pages later, Friedmann balances his understanding of the plight of the three or four billion poor people at the bottom of the pyramid (BOP), by recognising that they are the part of the world that has not been flattened and are currently unable to join in the benefits of the flattened earth. How the flattening process could go wrong is the subject of this later chapter. He sees it as vital that the flattened world should cooperate to overcome the problems impeding the flattening process reaching the whole world.
At the bottom of the pyramid, poverty breeds undernourishment and susceptibility to sickness such as malaria and TB, which are then compounded by HIV-AIDS. In this unflat, undeveloped world children are ten times more likely to die of vaccine preventable diseases than children in the developed flat world. In rural Southern Africa one third of pregnant women are HIV positive and the AIDS epidemic leaves young children as orphans, cared for by a grandmother or teenage sibling, with no chance to go to school.
Bill Gates spoke to Friedmann about the trap that 3 billion people are caught in, and "they may never get into the virtuous cycle of more education, more health, more capitalism, more rule of law, more wealth…. I am worried that it could just be half the world that is flat and that it stays that way". The Bill and Melinda GatesFoundation is dedicated to the relief of the poverty and ill health in the underdeveloped world and has contributed considerably to seeking to abolish diseases like malaria that in the unflat world takes a million lives a year, and to change the circumstances which allow that to happen.
Friedmann believes that the people in this unflat world will never get into a virtuous cycle until there is a real humanitarian push by flat world businesses, philanthropies and governments to devote more resources to their problems. "The only way out is through new ways of collaboration between the flat and unflat parts of the world." He quotes Bill Gates talking about the appeal to scientists to come up with solutions, which yielded sixteen hundred proposals from scientists in 75 countries. Some of the proposals were medical, others related to the environment which produced the problems. Poverty and ill health prevent the poor from getting even on to the first rung of the ladder toward becoming part of the flat world. The flat world should help, not by charity, but by enabling the poverty stricken people to cooperate in their own liberation, and becoming involved in the new economy of the flat world. It will be in the flat world’s own interests to do so, if it is to avoid a threat to what it has achieved.
An important sentence in his discussion of unflat world is: "collaboration in poverty alleviation is not just for NGOs. It is also for multinational corporations." And he proceeds to give examples such as the work of Hewlett Packard in this regard. "The rural poor of India, Africa and China represent a huge market, and it is possible to make money there and serve them – if companies are ready to collaborate horizontally with the poor." These ideas resonate with those of two other books we have reviewed on the Ashridge VLRC: The Fortune at the Bottom of the Pyramid by CK Prahalad and Capitalism at the crossroads by Stuart L Hart (see Globalisation section).
Other insights
Other aspects of the flattened earth are discussed in the last few chapters, which are more discursive than the earlier parts, but full of challenge and interesting anecdotes and conversations with significant players in the drama.
He deals with the disparate nature of the protest groups who lined up against globalisation, from anarchists to serious thinkers and how many of the latter, in his view, misunderstood the nature of the beast they were resisting.
He discusses how the development of the flattened earth is misused by organisations such as Al Qaeda for their own nefarious purposes. He also considers the tendency toward disaffection in many parts of the Muslim world toward many aspects of the flat world, which could pose a serious threat, if it were to lead to walls being erected and the flatness being lost. Some of that anger and its related Anti-Americanism could be connected with the anger they feel about the backwardness they experience compared with the prosperity of the "infidel" world, which they despise as the antithesis of what their imams tell them the Quran stands for. Many young people are susceptible to this talk and join the extremist forces.
Friedmann has an interesting chapter on the theory of Dell, the computer innovator. He maintains that business coordination all over the world is the best way to avoid conflicts. If firms are part of each other’s supply chains and are intimately bound in collaboration and competition they become a force which cannot easily be unravelled to enable wars to be undertaken. The business relationship of China and Taiwan is a telling example. India’s role as a key player in the world’s supply chain, especially of services, may have influenced the Indian government to tone down its rhetoric against Pakistan when the nuclear crisis escalated.
Friedmann has written an interesting and challenging book. If at times it lacks academic rigour, it provides an example of intellectual impressionism, which leaves a vivid picture of the changes that have taken place and which are still developing, enabling small firms to act like big ones and big ones to act like small ones, of a world in which the complexities are too vast for even any one nation to manage them on their own, and in which collaboration is created by the crisscrossing of connections, fuelled by modern information technology. Which according to books by CK Prahalad The Fortune at the Bottom of the Pyramid and Capitalism at the crossroads by Stuart L Hart , which we have reviewed on VLRC, is a key issue.