Thomas L. Friedman: "The World is Flat: The globalized world in the twenty-first century": A book review towards understanding the information age and the accompanying social responsibilities.

Ar vind Ashta

Burgundy School of Business (Groupe ESC Dijon-Bourgogne)

Oct 2006

I am a discerning reader: I read a book after the whole world has acclaimed it as a great book. Friedman's "The World is Flat" was in the International Herald Tribune bestseller lists for many months before I felt it was justifiable for me to order it in June 2006. Thereafter, I went on holiday to India. In a casual conversation, I realized that my sister, a house-wife converted into a social worker, and my sister-in-law, a school teacher, had both read the book a few months ago. I decided to buy the book rather than wait to get back to France where my copy would be waiting for me. My own family in India had joined in flattening the world. It was time for me to join in.

The book reads like a novel. There is an introduction, there is a galloping history, there is a rich and dazzling present and then there is suspense. Will America make it? And, of course, there is a hurdle stage listing the problems which could keep America from making it. And, finally, Friedman's political viewpoint explains why and how America could make it. Having thus conquered his countrymen's fears, he then gives out advice to developing countries and corporations.

The book has five parts and a conclusion. The first part has four chapters representing almost half the book (260 pages out of 565) that deal with the causes of globalization. The second part is five shorter chapters (130 pages) dealing with America and the flat world. The third and fourth parts are one chapter each (about 30 pages each) and we can feel that Friedman is running out of steam when he discusses, respectively, developing countries and the corporate world in this flat world. But he makes a brief recovery to have a respectable fifth part of three chapters (85 pages) of geopolitics before he concludes in 24 pages. The rest are blank pages.

The first part of the book is a very lucid up-to-date example of technological developments. On its own, it would suffice to teach a course on globalization, and this alone warrants a book review for management scholars. With a very user-friendly writing style, filled with business case studies, Friedman recounts the technological history of the information age. The journalism is so well developed that even someone who dropped out of science well before high-school is able to absorb most of it.

The introduction takes snapshots of major developments of businesses across the world. It differentiates between three stages of globalisation. The first stage was country-led globalisation from 1492 to around 1800, with military might dictating global terms. The second era from 1800 to about 2000 saw the emergence of multi-national companies driving globalization, first due to faster transportation technologies and then through faster communication technologies. Since 2000, Friedman feels we have entered into the third stage, where globalization is driven by individuals, who can now collaborate and compete globally thanks to new technologies and the way they are being used. And it is a globalization where there is little inherent advantage in being American or European. The last mover advantage is lost to the new movers.

The historical reasons for this new flat globalization are recounted by Friedman as ten forces. However, I would say that there are five technological forces which permitted five new business practices, which in turn, led to the flattening of the world. This is illustrated in figure 1.

I won't go into the reasons for these developments so that you can read the book, but  we can gather from Friedman, the speed of information perhaps has resulted in increasing the speed at which products, technologies, best business practices and economic policies are copied around the world. The first mover advantage has therefore shortened.

All this will lead to a new sorting out. What this means, in very old Marxist terms, is that new technologies will establish new economic relations and new superstructures. And this brings us to new questions of social responsibility. Friedman poses some interesting questions.

Having introduced the global environment, in the second part Friedman inquires whether America would make it. The general mood is despondent: according to Friedman, the US has what it takes, but it lacks leadership and direction.

As a start, Friedman commits himself to supporting globalization, because the cost savings would help American enterprises service and as the extra revenue earned abroad would create demand for American goods. However, in a transitional stage, the forces of creative destruction may first destroy jobs or reduce wages in some sectors as jobs shift abroad. Friedman expects that the high-end skilled jobs won't be lost to Americans, but low end jobs would be lost. In fact the high-end workers would be able to work with many more cheaper unskilled workers around the world. Thus, continuing education may be the route to security in globalization.

The survivors would be low end local services (garbage collection, hair-dressing, massage) and high-end high-tech specialists. Between these two ends is the middle-class which would need not only education and intelligence but also specialised skills to survive. These specialized skills could be collaboration or orchestrating, synthesizing between two or more disciplines, explaining specialized technology in simple terms to laymen who could then use it, leveraging technology so that error rates reduce and productivity increases, continuing education to maintain adaptability and versatility, personalized selling, and those entrepreneurs who can localize cheap sources globally.  In all the above, globalisation has just raised the standard.

In a world where technologies are on a short product life cycle, it is obvious that life-long learning is essential and people need to learn how to learn. In addition, they need to instil curiosity and passion, which together are often more productive than intelligence. Social and team playing skills are required. Creative skills will become more important to Americans as analytical jobs will get our-sourced more easily. All this means that the education curriculum would need to be revamped to focus more on science and technology, and within this to specialized courses located in the interactions between two or more disciplines. The problem is that, along with America, the whole world has realized this and no one is waiting for the US to take a great leap forward. The positive aspect, according to Freidman, is that America is the leader in the provision of educational infrastructure and also has a legal infrastructure allowing flexibility in labour laws and protection of intellectual property. It has institutions based on trust, backed by a long legal tradition to guarantee that trust. All these guarantee innovation and inventions. So, the US does have what it takes.

The problem, according to Friedman, is that American strengths are not being harnessed and a quiet crisis is brewing. This crisis will take a few years to unfold and a lot longer to be corrected. The crisis manifests in a number of ways. First, there are less scientists and engineers in the US education system, thus providing a lower future potential of technical inventions and innovations. Second, most of the students who are in science are foreigners, many of whom will return to their countries. The American students are much less passionate about these subjects. Third, ambition is falling, for oneself and for one's children. Thus, the amount of effort being put in to acquire knowledge is mediocre. Fourth, the lower end workers, whose jobs are being outsourced, are not being provided with the right technical training to keep them employable. Fifth, funding priorities are shifting from science and technology, which fuel inventions, to building roads and having wars. Sixth, even the communication infrastructure available to individuals is expensive and sub-standard. Thus, the US considers high-speed household communication at 200 Kb, while in India, the standard is 512 kb and in France its 1 MB. This means that American individuals are less competitive than foreigners. In short, a lot needs to be done.

For this, leadership is required. This leadership needs to make hard decisions and get the backing of the people to invest and sacrifice to make new dreams through new deals. Friedman's new deal is to give the middle and lower classes a chance to be employable throughout their life-times. For this, they need infrastructure to promote mobility and life-long learning. To promote mobility, Friedman is for standardizing retirement and health benefits so that they are transferable more easily from one employer to the other. He is also in favour of revamping unemployment benefits so that they are given only when one has found work and the benefits compensate the lower pay in the new job. For education, he favours making tertiary education free for at least two years. Thus the social responsibility of government is to usher in a period of compassionate "flatism" to enable Americans to cushion the shock from globalization and to help them adjust. Otherwise, he warns that political turmoil might soon arise.

He is an advocate of corporate social activism where NGOs get together with corporations to take on social responsibilities which the government is unable or unwilling to take on. In the information age, NGOs are able to exploit the internet to force companies to do things which they would not otherwise do. It becomes in the interest of the corporation to voluntarily meet social responsibilities to improve brand image.

Finally, he takes on individual social responsibility in addressing the issue of parenting. Parents shape their children. They should ask for school systems which are more demanding and should sacrifice their and their children's leisure for more work. In the information age, American children are spending more time playing computer games and surfing on the internet, and less time reading books and developing language skills and deeper knowledge. 

Thus, the overall slant of the second part of the book is to urge Americans to greater glory (or to maintain existing glory) without questioning whether they have time to consume more. The total leisure time that most American workers have, two weeks, seems to be a constraint to consuming anything more than television and baseball games. So, why should they try to maintain a leadership position in a world where nationalities no longer count?

The third part of the book starts with a brief reminder of the role of infrastructure (bandwidth, etc), education and governance, coupled with appropriate culture, in creating economic development. Although the general reasoning is interesting, it is unfortunate that Freidman uses unscientific means to illustrate his arguments. For example, he feels that Mexico lacks micro level institutional reforms and which is why Mexico is able to send only 10,000 students to the USA as opposed to 50,000 by China or India. What he doesn't mention is that Mexico's population is only 100 million, while India's is 1.1 billion and China's is over 1.3 billion. Thus, on a population adjusted basis, Mexicans are twice as well represented in US universities. Friedman is aware that the population of Mexico is less than that of China (he mentions it in the same example), but he does not indicate the numbers. I would say that Friedman is a bit lazy. He could have taken another country to illustrate his point if Mexico was not working out. That may have been more acceptable than hiding facts. He could, of course, have gone further and tested his facts for a large number of countries and scientifically established his proposition, rather than just jotting down whatever he felt could be sold. In fact, if this note only serves to exercise governance pressures on journalist turned political economists, the purpose would have been well served.

This point is often missed in most media. If Indian and Chinese students are about 37% of students in the best American universities, it is only normal, because India and China represent about 37% of the world population. (If this is slightly more, the question is whether the figures are statistically significant, and if so is it because American students (5% of world population) are under-represented (less than 5%) or because some countries are so poor or are not English speaking that their students are under-represented).  What this illustrates is not that these Indian and Chinese students are overtly bright, but that elite American universities are more open to the rest of the world than elite universities of other countries and are willing to process applications and give means related assistance to encourage merit.

All this is to say that Friedman's points are interesting, but his purpose seems more to heighten the urgency towards reforms to maintain old-guard supremacy than to go into the niceties of checking whether his propositions are as well backed by historical analysis as that of Marx (whom he quotes). This is a pity because Friedman seems to have access to documentalists and sources who could easily have verified his information.

The fourth part of the book looks at companies in the flat world. It is as stimulating as the first part. In fact, it could easily be the first part: only the examples are different. Admittedly, the accent is different. Here, we see Friedman the business consultant giving advice followed by examples, as opposed to the first part where he is making generalizations of the causes, followed by examples. His advice is that each business take a thorough inventory of itself (either alone or through the aid of consultants) and try to exploit its unique features rather than ask for protective walls. (This seems to be a bit contrary to asking governments to be compassionate.) He advises small companies to act big by using all the possible information tools for collaborating and growing big faster. Big companies are advised to be humble and act in the best interests of their customers. For value creation, technological alliances are encouraged because no company would have multiple specialities required to create new inventions and innovations. Outsourcing should be used to get new market share and exploit new markets rather than to shrink. His final advice is that discharging international societal responsibilities may lead to the development of new business opportunities.

The fifth part of the book explores geopolitical issues in the flat world. The first of these chapters deals with issues such as pandemic transportation of bird flu, terrorism linked with anti-globalization, the social crisis between the haves and have-nots in developing countries, and environmental concerns linked with the rising fuel needs of China and India. It also takes up novel methods of cheating (using portable telephones as cameras) and terrorism (using internet) specifically linked to information technologies.

The second chapter deals with globalisation of the local, where Friedman explains that although some products will get globally harmonised, mostly local cultures will get diffused globally to those who seek it (for example the Diaspora). This will permit new media like Zee TV to flourish by providing Indian content and form to Indians the world over through satellite. Thus fears of Americanization are unfounded.

The third chapter expands on the Islamic-fanaticism-bashing. Friedman's previous McDonald's theory of conflict prevention (no two countries with a McDonald's have ever gone to war) is evolved into the Dell theory of conflict prevention (no two countries participating in a global supply chain will go to war). The original theory was based on a country having a minimum standard of living to attract Mc Donald's. The new theory is based on global social implications for business if there is a war in any of these countries. Unfortunately for Friedman, the recent israeli attacks in Lebanon would imply that Israel and Lebanon would not be having a McDonald's nor be involved in a global supply chain! Much of the chapter focuses on Al-Qaeda, a recurrent theme for Friedman. Perhaps this is due to his journalism background which exposes him to daily sensationalism and makes him lose balance of what involves most people and what is now merely a bore to be suffered.

The conclusion gets some perspective back. The forces of the new information age can be used for creation and for destruction. People in democracies would use it for good. People in authoritarian isolated regimes would use the same tools for destruction. To inculcate creativity, we need examples which show people that anyone can succeed.

Having thus summarised the book, let us evaluate it.

Firstly, it is a great book: especially, the first part which comprises nearly half the book. Just reading the history of the information age, based on business case studies is thrilling, entertaining and stimulating.

Thereafter, the book is more views than news. If anyone is lacking in views, it may be a great place to pick up some on some limited issues.

However, the views are often backed by distorted information and a rather lop-sided American perspective. Friedman is not to blame. He is American. There are more chapters on the US than on the developing countries. There are no chapters on Europe. Between the US and the developing countries, the rest of the world has either been annexed by the US or has been relegated to some status of dependency.

Second, Friedman is able to divided social responsibility in the traditional areas of government social responsibilities, corporate social responsibilities and personal social responsibilities. However, he struggles in finding a solution, through a discussion of social responsibilities, to America's problems of disappearing unskilled jobs in a flat world. His solutions, to slow down the decline are compassionate as he puts it. For this, he comes up with governmental, corporate and parental support for continuing education and higher standards.

Admittedly, the question of fairness comes in. Is it fair for some people to lose (and the accompanying depression) whereas others only gain (no matter that they are still close to zero). Note that happiness is not a function of maintaining existing levels (to which one becomes used) but to growing. It is also a function of time spent with close friends and relatives. The information age has increased mobility and reduced family time together. At the same time, through inventions such as E-mail and Skype it has allowed distant families to remain in communication. If we assume that this cancels out, this therefore brings us back to the question of happiness and growth and sadness associated with losing. This is what the developed world is facing. This could therefore be a possible justification of the question of the social responsibility of governments and corporations to keep the masses in the developed world happy.

The problem is that Friedman doesn't understand that nationalism, even compassionate one, cannot function as the means because in his cutthroat world, any compassion will lead to fat and failure (his namesake, the Friedman who got a nobel prize, understood this). Moreover, any national compassion means he is favoring the local to the foreigner. His compassion therefore is limited: how to make the third world better off without making the first world worse off. To some extent, this is similar to Pareto optimality, but doesn't go beyond to social indifference curves deciding to what extent the increase in revenue for a starving Indian justifies the reduction of an American job.

What Friedman ignores is that in a truly globalized world, there are no Americans, there are only Earthlings, or if humane social responsibilities have to be given, there are human beings. The real socially responsible solution, ignored by Freidman, is a global government for a global world, with global transfer payments. This would work out if taxes and transfer payments are all standardized for the whole world. In the interim to creating this, there could be political upheaval. But this upheaval may be necessary for the reform. Once the globe is flattened, individual corporations and individual social responsibilities may decide who is preferred.

In conclusion, I think it is a great book written by an interesting writer. The Islam-fanaticism bashing is a bit long and boring, because one gets enough of it in daily newspapers. The fears being raised, the social issues covered, are real. The solutions proposed may not be new, but are brought together in an acceptable manner. The tendancy to give incomplete information to accommodate his own view point is deplorable, but nobody's perfect. What is notably lacking is his own personal thinking out of the hat and questioning the need for American supremacy, the need for people to continue being slaves to the whip of greed when they already have enough material goods, and almost no discussion on the possibility of a global federal structure which would ensure a new kind of solidarity and level the taxation and social security playing fields.

I strongly recommend you to read it. I feel stimulated enough by it to write my first book review.