The World Is Flat, But It Tilts

The World Is Flat is the title of a 2005 book by Thomas L. Friedman that was high on the New York Times’ bestseller list for many months. Tom Friedman, a columnist for The New York Times and a well known speaker and TV personality, came to large public notice with his 1989 book From Beirut to Jerusalem, an analysis of the roots of the Middle East conflicts and other recent history, which earned him the Pulitzer Prize. I found this book fascinating. He has written several other books, The World Is Flat being the latest. There are several other facts about him worth mentioning. He is trustworthy. When the Saudi Crown Prince several years ago launched his “Two Countries” peace initiative he decided to publicize it through Friedman. He is also one of the very few non-Arabs with a compassionate view of the Arab populations in the Near East, their poverty, powerlessness and hopelessness because their leadership is more interested in the past than in the future. This theme is also found in The World Is Flat as an example of non-Flatness.

The book is part description, part explanation and part advocacy. The concept of “Flatness” is shorthand for an absence of barriers to the free exchange of goods, communications, and ideas from any place on earth to another, and Friedman considers himself a compassionate “Flattist.” Free Trade is the key and the most important element of Flattism, but it is by no means everything.

The First Chapter, “While I Was Sleeping,” describes the enormous amount of trade as well as other international activities that have essentially ignored borders in the last few years. For example, in 2004, 100,000 U.S. tax returns were processed in India without, however, the names of the taxpayers being “outsourced.” The next 124 pages entitled “The Ten Forces That Flattened the World” are all interesting. The first Force is the collapse of the Berlin Wall and with it the tightly managed economies from the Chinese/Russian border to the German Democratic (sic) Republic. Chosen at random, the second “Flattener” is the arrival of Netscape providing access from most computers to all others gratis. The eighth is “Insourcing” which describes how United Parcel Service (UPS) was not just delivering parcels anymore but was synchronizing global supply chains for companies large and small. It has a fleet of 270 aircraft in the air over most parts of the globe, with its hub near the Louisville International Airport.

The next section of the book, “Triple Convergence,” talks about the impact of electronic technology. For starters, Friedman discovered that an airline that he was using, allowed passengers not only to print their own tickets but the boarding passes as well. He wound up sitting in the wait-list part of the aircraft because he arrived with only an ordinary electronic ticket without a boarding pass. When he later interviewed Secretary of State, Colin Powell, and asked him how Powell discovered that the world was flat, Powell right away cited Google and said that he was doing research himself which formerly was done by assistants.

From a public policy standpoint, Chapter 7, “The Quiet Crisis,” is the most important. It starts with some Olympic statistics indicating that American basketball teams are no longer automatic winners but have to compete hard if they want to get into the medals. It is to Friedman symbolic of other trends. On page 252 he says:

“When we got hit with 9/11, it was a once-in-a generation opportunity to summon the nation to sacrifice, to address some of its pressing fiscal, energy, science and education shortfalls – all the things that we had let slide. But our president did not summon us to sacrifice. He summoned us to go shopping”

He then quotes physicist Shirley Ann Jackson, the president of Rensselaer Polytechnic Institute and the 2004 president of the American Association for the Advancement of Science, who states that the United States is in “a quiet crisis” and is not producing enough scientists and engineers to compete with other countries in a global environment. She observes that graduate enrollment in these fields today is below the level of a decade ago. Similarly, the National Science Board found that the number of American students between 18 -24 years who receive science degrees ranked third worldwide in the 1970s and today rank seventeenth. In a “flat” global economy in which semi-skilled work is being performed at about one twelfth of the cost at home and some skilled work (tax returns, legal research, evaluation of cytological slides, etc.) at about a third, major interest and funding for science and technology has to be forthcoming, and fast.

So far the Book is a big winner in terms of being informative and readable. Does it have major shortcomings? Yes. While Friedman is at his usual high level in description and explanation, his solution to the problems of “Free Trade” in the U.S. and Canada leaves much to be desired: work harder, work smarter and above all, increase your level of skill. In February 2007, The Montreal Gazette reported that Québec alone lost 30,000(!) factory jobs. And this occurred after most of the textile and garment industry had long disappeared. Of the 30,000 workers, perhaps 8000 are eligible for a pension from their employer, and together with government pensions will enjoy a modest level of income. The other 22,000 will have to upgrade their skills, being careful that the level is high enough, so that the new employment will not, in turn, be outsourced. He says that we should have faith that innovative technology and new needs will create new jobs. In addition, there are many jobs which are “anchored” in transportation, construction, health services, hospitality, police, firefighting, teaching and so forth. But he also says that all jobs which are routine, or the repetitive part of jobs which are not otherwise straightforward, are subject to outsourcing. On page 40 of the Book, an estimate by Forrester Research, Inc. is quoted to the effect that by the year 2015 more than 3 million service and professional jobs will have moved abroad. The Economist shares Friedman’s optimism, but I have yet to see an estimate of what percentage of the population is capable of attaining the next level of skill. All that I have seen so far is the stagnation of salaries and wages and the reduction or abolition of pensions in the private sector.

But that’s not all. I found nowhere in the text or index a mention of the U.S. balance of payments. While much of the book applies to Canada as well, the balance of payments situation is very different because of the export to the U.S. of electricity, forest products, and raw materials such as minerals, oil, and hard coal by Canada. In 2005 the United States had a negative balance of trade of approximately $800 billion, most of which was for petroleum imports. Surprisingly, the negative balance of trade with China, made up primarily of visible goods, was about $200 billion, a surprising figure as we constantly see “Made in China” on everything from air conditioners and refrigerators to sweaters and gloves. But we do not see the tankers bringing in oil. By way of comparison, the 2005 trade gap with China was about equal to the Gross Domestic Product of Greece or about half the GDP of the Netherlands. The 2006 trade figures have just been published and the trade deficit with China has risen to 213 billion and the total deficit to 856 billion. There is no sign of a change in this trend. So far the countries that are the creditors have balanced out the equation by buying U.S. Treasury Bonds and other indebtedness. How long can this go on? What is to prevent the petroleum suppliers from investing the surplus in shares traded on the NYX or for China to do so? Is mutual dependence with a tough dictatorship such as China desirable, or with the Near Eastern autocracies? Free Trade is not only to blame for this imbalance, but obviously is making it worse.