The flat new global playing field
| Author | Prakash Loungani |
| Position | IMF External Relations Department |
| Pages | 121-127 |
Page 121
Like it or not, everything truly is global now, say Thomas L. Friedman and Pietra Rivoli, whose new books use dramatically different approaches-the big picture and the very specific (the life of a T-shirt)-to examine how small and interconnected the world is becoming. Both authors argue that it is futile to try to erect barriers to slow down the seismic forces of globalization. The wiser course, they suggest, is targeted and skillful adaptation.
Page 126
Georgetown University's Pietra Rivoli takes an oversized issue-whether globalization is a force for good-and shrinks it down to size by telling the story of a simple product, T-shirts, in a global market. At every stage, people try to mitigate the adverse effects of free markets by erecting barriers. But that's increasingly difficult, says New York Times columnist Thomas L. Friedman, because powerful forces are knocking down barriers to global competition and the world is becoming a flatter place.
Three forces are leveling the global playing field, argues Friedman in The World Is Flat: A Brief History of the Twenty- First Century. First, in the aftermath of the collapse of communism, its most potent alternative, market capitalism is spreading around the world. Second, new technologies now allow companies to create a virtual assembly line across the globe. "Bangalore, Beijing, and Bethesda are now next-door neighbors," he said in a recent talk at the IMF.
And, third, global companies now have access to large, low-cost pools of labor as a result of China's and India's embrace of market reform.
How should governments cope with a flat world? Friedman advises the governments of advanced economies, such as the United States, to stay ahead of the competition by investing in education and by constantly upgrading workforce skills rather than by erecting protectionist barriers. He also advocates wage insurance to protect workers displaced by competition and benefits, such as universal health coverage, to provide a more "compassionate capitalism." Emerging markets, such as Mexico, should also eschew protection, he argues, insisting that their interests are better served by "retail reforms." Such micro-level reforms, he says, can spur growth by removing the legal and institutional impediments to doing business.
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