Book Reviews & Citations
(06/27/05) Three Billion New Capitalist reviewed in FORTUNE magazine
Will the U.S. be flattened by a flatter world?
6/27/05 Fortune 47
2005 WLNR 9427249
Fortune
Copyright 2005 Time Inc. All rights reserved. Reproduction in whole or in part without permission is prohibited.
June 27, 2005
Volume 151
Section: FORTUNE Global Forum 2005 No. 13 75th-Anniversary Special Issue
Will the U.S. be flattened by a flatter world?
Rik Kirkland
INSIDE BEIJING'S DIAOYUTAI STATE guesthouse on a fine May morning at
the FORTUNE Global Forum--somewhere between a breakout session on
regional power shifts and a panel on technological innovation--I had my
eureka moment. "China," I scribbled on a notepad, "is what the U.S.
economy might look like if it were run by a consortium of folks from
McKinsey, Goldman Sachs, and the CIA." Sure, they'd get plenty wrong,
but more often than not they'd get it right. The proof was all around
us: in the capital's skyscrapers and software parks; in our discussions
("China needs to make enterprises, not universities, the center of
innovation because they'll respond better to the market," said Minister
of Science and Technology Xu Guanhua); and, of course, in the numbers.
Of all the dazzling stats China has posted, the most impressive is
this: In 20 years it has lifted some 400 million of its 1.3 billion
people out of grinding $1-a-day poverty.
But it's not just China, as the several hundred CEOs gathered for the
conference were reminded. One of the liveliest sessions featured Indian
business leaders whose firms are thriving as low-cost sources of
services and information technology. These corporate successes, plus
government reforms, have spurred India's once lumbering economy onto a
rapid growth path and given many of its one billion citizens a new
swagger. "Today the average Indian feels, 'Man, we can take on the
world,'" said Prannoy Roy, head of India's NDTV. Yes, these guys get it
too.
Which raises a big, fat question for U.S. officials, business leaders,
and citizens: Do we get it? Helpfully, there's a flotilla of new books
in the stores claiming to answer the question. While they aim at
different targets, all share a sense of urgency that major changes in
attitudes and policies are essential if the U.S. is going to cope with
the era of China, India, and the Internet.
The flagship, both in physical heft and intellectual throw weight, is
New York Times columnist Thomas Friedman's The World Is Flat: A Brief
History of the 21st Century. Regular readers of magazines like this one
will find some of the territory Friedman "discovers"--they've got
all-night call centers in Bangalore!--familiar. And there's an
empty-your-notebooks quality to the long citations from his interviews.
But in a world overrun with hyperventilating tree-spotters, Friedman's
great gift is that he sees forests--and then makes that big picture
come alive. No one has offered a richer, more coherent explanation of
how the market- opening geopolitical changes set off by the end of the
Cold War, reinforced by technologies like the Internet and digitized
work-flow software and merged into radical new ways of doing business
across borders, have flattened the commercial playing field and opened
it up to "more people in more places on more days in more ways than
anything like it ever before in the history of the world."
Part field guide, part policy analysis, part inspirational sermon, The
World Is Flat directs its message to individuals--Americans, yes, but
also the tens of millions of educated Indians and Chinese and East
Europeans and Latin Americans who can plug into and play in this new
world. Not that policymakers don't face huge challenges; Friedman
compares this moment to the wake-up call America received in 1957 when
the Soviet Union launched Sputnik. But while "the main objective in
that era was building a strong state," he writes, "the main objective
in this era is building strong individuals." To do that, Friedman
advocates changes ranging from making pensions and health insurance
portable (vs. tying them to an employer), to some form of wage
insurance (to ease the job dislocations many will face), to new
subsidies for tertiary education (upgrading human capital is critical
in a flat world), to more good old-fashioned parenting (as in, Hey,
kid, put down that video controller and crack a book!). We'll need even
more than that, but given our political stalemate, any progress along
these lines--while also getting our fiscal house in order--would be a
good start.
In The Opportunity: America's Moment to Alter History's Course, Richard
Haas aims his fire at the suits who still think they run things.
(That's appropriate, since this former presidential advisor now heads
the Council on Foreign Relations.) Haas's briskly argued treatise lays
out "a foreign policy doctrine for both a post-11/9 [as in Nov. 9,
1989, when the Berlin Wall tumbled down] and a post-9/11 world." That
doctrine can be summed up in one word: integration.
Like the containment policy devised by George Kennan, which guided the
West in its 50-year struggle to counter the Soviet Union without going
to war, integration, Haas maintains, is a decades-long, multilateral
project. But he'd like to push well beyond merely avoiding
protectionism or advancing a new trade round. This hard-headed idealist
wants the U.S. to use its unrivaled clout to rally the other great
powers into jointly tackling "the dangerous dimensions of
globalization"--among them, nuclear proliferation, terrorism,
infectious disease, and climate control. The alternative, he fears, is
a gradual drift into "a world of great power competition or a world
overwhelmed by disruptive forces, or both." Since the U.S. can no more
prevent the rise of a China or an India than Europe could bar America's
own climb in the 19th and 20th centuries--and to attempt to do so would
only ensure their enmity--far better to give them "a substantial stake
in the maintenance of order." Keep your friends close, in other words,
and your future geopolitical rivals even closer.
Clyde Prestowitz, a former Reagan-era trade warrior, has no quarrel
with either the necessity of integration or the inevitability of
globalization. In Three Billion New Capitalists: The Great Shift of
Wealth and Power to the East, he just wishes that America's politicians
and business leaders would finally come together to devise a national
economic strategy. "The first priority of American leadership--even
more important than fighting terror or spreading liberty--should be to
ensure long-term U.S. competitiveness," he writes.
Prestowitz covers much of the same ground as Friedman, and his book
suffers by comparison. It's long on numbers and policy prescriptions
and short on the kind of vivid scene-setting and fine rhetoric that
make The World Is Flat so readable. I'm also skeptical of big chunks of
his agenda: Prestowitz is way too impressed by the techno-savviness of
the European Union and has an unwarranted faith in the power of
blue-ribbon commissions or new government agencies to steer industrial
strategy. Still, he's a smart, sophisticated advocate for a more
interventionist policy (not for him the puerile outsourcing bashing of
Lou Dobbs Tonight).
Plowing through these books after the Forum, I was struck by how much
our discussions in Beijing tracked their themes. I recalled George
Colony of Forrester Research insisting that "global innovation
networks," not "research in large monolithic companies," are the only
way corporations can move quickly enough to stay on top. Consultant
C.K. Prahalad underlined the spread of knowledge work: "It used to be
if you tell me what country you're from, I'd tell you if you were rich
or poor. Now I say, Tell me what your profession is." The resistance to
these forces wasn't ignored either. With wages under pressure, warned
Morgan Stanley's Stephen Roach, "politicians in wealthy countries are
losing faith in the hopes and dreams of globalization."
That brings us to the dirty little truth Tom Friedman admits to late in
his book: "The world is not flat." It's merely flattening at a
quickening pace. The trend could be slowed or stopped by any number of
disasters--another 9/11-scale attack, an environmental or health
crisis, or simply a new round of protectionism.
So do we in America get it? Not yet, but I'm sure hoping we will. The
biggest challenge the U.S. faces in the 21st century is not winning the
war on terror but learning how to thrive in this globalized world. If
the U.S. fails, the consequences for the rest of the world are likely
to be bad. That's not merely because America has the world's largest,
richest economy, but because, based on its history, it should be the
model for the kind of flexible, innovative, individualistic society
this era demands. The world must learn to live without relying on the
U.S. as its consumer of last resort. What it can't abide is an end to
America's role, as Friedman puts it, as "the world's greatest dream
machine."