June 13, 2005
In the middle of Thomas Friedman's The World is Flat is a long quote that towers over the intellectual landscape of the rest of the book like a mountain over low hills. It is Marx and Engels' celebrated prophecy of globalization - "All that is solid melts into air" - from the Communist Manifesto. Friedman has apparently just discovered it and is "in awe at how incisively Marx detailed the forces that were flattening the world during the rise of the Industrial Revolution, and how much he foreshadowed the way these same forces would keep flattening the world right up to the present."
Friedman is right to be impressed, however belatedly. After the long detour of Second- and Third-World pseudo-socialism, capitalism has resumed the path Marx and Engels foresaw: toward one wholly rationalized, seamlessly integrated world; with everything for sale; with no one and no activity exempt from the pressure of competition, the risk of obsolescence, the specter of ruin; with no rest, no external haven, no inner sanctuary. A flat world.
This second great age of globalization began, by Friedman's reckoning, on "11/9." (The Berlin Wall came down on November 9, 1989.) "In the Cold War era," he explained in his bestselling The Lexus and the Olive Tree (1999), "capital could not move across borders the way it can in today's globalization system." Many national governments did not permit foreign ownership of core industries, foreign speculation in their currencies, or unrestricted foreign access to their domestic markets. (Since the United States was the world's dominant economy, for "foreign" read "American.") They could get away with this because, in the pseudo-socialist bloc, people were not free and in any case did not know what they were missing out on, and in the Free World, the US was wary of alienating its geopolitical allies. Friedman's account of "the Cold War system" in The Lexus and the Olive Tree is accurate and illuminating, as far as it goes. There is no damned nonsense (or very little) here about "freedom" - except for the freedom of those with a lot of capital to do anything they pleased with it. That is indeed what the Cold War was about.
The end of the Cold War made it politically feasible, and computerization made it technically feasible, to move capital around the world at dazzling speeds and staggering volumes without interference from any but the most determined governments. This allows large investors to buy control of a country's key resources, industries, and infrastructure, to put intense upward or downward pressure on its currency, and thereby to influence, or even dictate, its fiscal, environmental, labor, and tax policies. These new masters of the universe, gathered around computer screens in New York, London, Frankfurt, and Tokyo, are the subject of the most memorable of Friedman's many piquant coinages, the "Electronic Herd."
What lures the Herd to graze in an economy is a favorable investment climate; or, in another charming Friedmanism, the "Golden Straitjacket." Donning the Straitjacket means low social-welfare expenditures, low or no tariffs or subsidies to protect domestic industries, no barriers to foreign ownership, currency speculation, or profit repatriation, and a flexible labor market, i.e., no unions. (If you want to know more precisely what a "favorable investment climate" looks like, study the decrees of the Coalition Provisional Authority, which were designed - without consulting any non-rich Iraqis - to fit post-Saddam Iraq for the Straitjacket.) All this is bitter medicine, but salutary. "Governments which deviate too far from the core rules will see their investors stampede away, interest rates rise, and stock market valuations fall. The only way to get more room to maneuver in the Golden Straitjacket is by growing it, and the only way to grow it is to keep it on tight. ... The tighter you wear it, the more gold it produces and the more padding you can then put into it for your society."
Such is the canonical view of globalization. Friedman is exceptionally, exuberantly in-our-face about it, insisting that its harsh discipline is not merely a necessary evil but also fair, economically rewarding, and in fact democracy-enhancing. You can rail at the stampeding Herd for leaving your country's social safety net in tatters, your unemployment rate several points higher, and many people's life savings diminished as the currency plummets. It's no one's fault, though, but yours and your spendthrift government's. "There's no one in charge!" Friedman admonishes. Capital-attraction and capital-repulsion are neutral processes, like laws of nature.
And playing by the "core rules" will not only make your society richer; it will also make you freer. (Friedman's boosterish, lapel-grabbing use of the second-person pronoun is contagious, I'm afraid.) "The democratizations of technology, finance, and information," he enthuses, "are at the heart of the globalization system." You can't keep your population down on the farm, politically speaking, once they've plugged into the Net. Moreover, corruption, nepotism, bureaucratic incompetence, and arbitrary power (unless it's awfully secure - more secure than despots tend to be these days) are bad for business; the rule of law, a professional civil service, accurate and accessible statistics, and a stable, legitimate government are good for business. If your society wants to prosper, it will shape up. This "revolution from beyond" Friedman calls "globalution."
The World Is Flat is an updated report from the field. Whatever one thinks of Friedman as a thinker (and I'd say there's only one possible opinion of him as a prose stylist), he's an energetic reporter and a good storyteller. His new book teems with interesting anecdotes about innovative companies, technologies, and business processes. Everyone's heard by now of the book's opening gambit: his wide-eyed tour of the call centers of Bangalore, India, where adolescents re-christened "Derek" and "Daisy" practice saying "Thirty little turtles in a bottle of bottled water" in order to communicate with Americans frantic about lost luggage or frozen computers. There's also a brief history of open-sourcing: of how Linux and Apache grew, on virtually pure anarchist principles, to become the backbone of the Internet. In counterpoint, one learns how Walmart (of whose principles there's no need to speak) conquered the world by becoming "the best supply-chain operator of all time," in the words of an awed business consultant.
Supply-chaining is one of the world-flattening forces that are kicking globalization up another level. Outsourcing, offshoring, work flow software, digitization - every new organizational and technological development tends to divide, isolate, simplify, and cheapen the production process. An old friend of Friedman's used to be an illustrator. Now, thanks to computer design programs like Quark and Photoshop, he's JAFA (Just Another Fucking Artist). His skills have become "vanilla" - Friedmanese for expendable, a mere commodity - so he has "transformed himself into an ideas consultant," supplying drawing concepts that are outsourced for production. This is the fate of a good half the characters who crowd Friedman's book. While unassumingly making a living, they are overtaken by labor-saving technology and turned into inexpensive vanilla ice cream. Fortunately, they somehow manage to reinvent themselves as a pricier "chocolate sauce" or "cherry topping," and the GDP continues its steady ascent.
The book's other characters include dynamic executives who are sponsoring all this outsourcing, offshoring, and vanilla-ization. The go-go chairman of Rolls Royce Ltd. (which naturally doesn't make cars any more - too vanilla) spouts this choice bit of New Economy-speak, which greatly impresses Friedman: "We own the ability to identify and define what product is required by our customers, we own the ability to integrate the latest science into making these products, we own the route to the market for these products, and we own the ability to collect and understand the data generated by those customers using our products, enabling us to support that product while in service and constantly add value." Can you guess from that babble what Rolls Royce does make now?
Perhaps most impressive and intimidating are the "zippies," the alpha fauna of Friedman's brave new flat world. Zippies are "the huge cohort of Indian youth who are the first to come of age since India shifted away from socialism and dived headfirst into global trade and turned itself into the world's service center." An Indian magazine calls them "Liberalization's Children," and they rule: "young city or suburban resident, between 15 and 25, with a zip in the stride. Belongs to Generation Z. Can be male or female, studying or working. Oozes attitude, ambition, and aspiration. Cool, confident, and creative. Seeks challenges, loves risks, and shuns fear ... destination-driven, outward looking, not inward, upwardly mobile, not stuck-in-my-station-in-life." An even bigger cohort of Chinese zippies, Friedman promises, are only a few years behind them, and together they are going to blow their lazy, spoiled American contemporaries away.
It's tempting to smirk at this ad-copy prose and at the rest of Friedman's hymn to the Grand Global March of Productivity. There are serious empirical and analytical questions about it all, too. As Doug Henwood in After the New Economy and Eamonn Fingleton in Unsustainable have shown, prophecies of permanent, turbocharged, cybero-digitally-driven prosperity look pretty dubious. Real pay for most US workers, Henwood notes, is lower than in 1973; and as Fingleton points out, "with almost no exceptions, manufacturing-oriented economies have outpaced the United States in income growth" in the 1980s and 90s. And that income growth was more evenly distributed: it's highly plausible that the growth of the income economy has contributed to America's notable income inequality. In fact, virtually the only industry in which information technology has made an unquestioned and substantial contribution to productivity is financial services. And that, from society's point of view, may well be no more beneficial than gains in the gaming industry would be - of which, arguably, the capital markets deserve to be considered a part.
Bringing the blessings of capital markets to the rest of the world was one of the chief benefits of globalization in the 1990s, Friedman wrote in Lexus. In one of that book's most obnoxious passages he announced: "I believe globalization did us all a favor by melting down the economies of Thailand, Korea, Malaysia, Indonesia, Mexico, Russia, and Brazil in the 1990s, because it laid bare a lot of rotten practices and institutions in countries that had prematurely globalized." Apart from its callousness, this and Friedman's other comments on the Asian financial crisis of 1997-98 made clear that he had misunderstood its lessons: that someone is in charge of the Electronic Herd and the capital markets; that it's the IMF (which takes its orders from the US Treasury); and that following the IMF's prescriptions left countries more, not less, vulnerable to being whipsawed.
Still, Friedman is far from heartless. There's a frank recognition of the pain of globalization in Lexus, and even the surprising statement that "you dare not be a globalizer today without being a social democrat." In The World Is Flat he writes: "The social contract that progressives should try to enforce between government and workers, and companies and workers, is one in which government and companies say, "We cannot guarantee you any lifetime employment. But we can guarantee you that government and companies will focus on giving you the tools to make you more lifetime employable.'" In a flat world, "the individual worker is going to become more and more responsible for managing his or her own career, risks, and economic security, and the job of government and business is to help workers build the necessary muscles to do that."
Friedman offers three simple, sensible muscle-building proposals: portable-pension legislation, portable health insurance (with plans negotiated by government, not individual employers), and two years of government-subsidized tertiary education for everyone. (He might, if he were a bit braver, have emphasized that all this and much more like it could have been accomplished for a fraction of the amount wasted on the richest 1% by the Bush tax cuts.) He even has a suggestion for the anti-globalization left, whose idealism he professes to admire: form NGOs in Africa, India, and China that will "promote accountability, transparency, education, and property rights" and help "ensure that the poor get the infrastructure and budgets to which they are entitled." After all, the poor, too, yearn to join the flat world . "The wretched of the earth want to go to Disneyland, not to the barricades."
I wouldn't presume to badmouth Disneyland to the poor. But one may well feel a bit uneasy about the quality of life in the flat world. Thoreau is said to have replied, when informed excitedly by a mid-19th-century Thomas Friedman that Maine and Texas could now communicate, "But what if Maine and Texas have nothing to say to each other?" History does not record Friedman-then's reply, but Friedman-now would have absolutely no idea what Thoreau was talking about. That information technology might have the effect of making life, at least in some respects, less gracious, subtle, sensuous, and profound, but instead more sterile, frenetic, shallow, and routine - there is no inkling of this in The World Is Flat.
"If you are a little too slow or too costly - in a world where the walls around your business have been removed and competition can now come from anywhere - you will be left as roadkill before you know what hit you." It sounds like the war of all against all - "turbocharged," to use one of Friedman's favorite adjectives; and the ultimate weapon, the focus of creativity, the highest achievement of this new stage of civilization is apparently ... ever-newer operations flow software, to optimize your business process. Except for those Third World NGOs, no one in the flat world seems to be doing anything of loftier significance than getting Walmart's suppliers to make deliveries just a few minutes nearer to ship-time or inventing a new radio-frequency identification microchip to track its inventory.
Well, it will be the zippies' world, not mine. I'm sure they will be fully as cool, confident, and creative, as ambitious, aspiring, and attitudinous, as Friedman promises. I only hope they'll have enough imagination to be bored.