>The World is Flat by Thomas L. Friedman
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**Reviewed by Marc Schulman**
Reading *The World Is Flat* by Thomas Friedman is like reading one of his columns in the New York Times—it is insightful, well-written, and a great read. It may not be what its subtitle calls it—a brief history of the 21st century—but it is an excellent book describing the effects of Globalization 3.0. According to Friedman, Globalization 3.0 has taken place due to the convergence of three factors.
First is the development of tools that allow worldwide collaboration. This collaboration has become possible through the development of web-based tools that enable people around the world to work together. This convergence has been facilitated by worldwide access to the web and a tremendous increase in the ability of people to communicate. Friedman gives the example of airlines offering e-tickets as an illustration of various technologies coming together to allow people to do things differently.
The second convergence is the ubiquity of technology in corporations and homes. For many years, economists wondered why computers did not seem to improve productivity. Then, by the 1990s, productivity kicked in, and companies developed new ways of working that bolstered productivity tremendously.
The final convergence is the opening of the Indian, Chinese, and Eastern European markets to the world market. This opening added 2 billion people to the world markets, creating 2 billion additional potential consumers as well as 2 billion additional competitors.
The book outlines the challenges that America faces in this new flat world and concludes that these challenges are great. However, if the United States takes the right steps, it will be able to compete. Friedman is concerned that necessary actions, including a better education policy, a new national health policy, and, even more importantly, a crash plan for alternative energy, may not take place.
Friedman spends about two-thirds of the book describing with great stories how this convergence has come about and what it means for Americans. He then describes what he sees as the greatest threat to the flat world: Al Qaeda and related terrorist groups. Their actions have the potential to destroy the very flatness. Friedman believes that much of terrorism is driven more than anything else by the humiliations that the societies from which terrorists come have suffered. He describes how the failures of the Arab world in economics, science, and technology have enraged many and driven them to become terrorists. Friedman worries that the same flattening effects that are changing global trade are also empowering terrorists, giving Osama bin Laden and his compatriots the power of the Internet to communicate and gather intelligence.
As the book nears its conclusion, Friedman suggests that one way to fight terrorism is to ensure that the areas of the world that are not flat become flatter, which could defuse much of the anger among those who seek to do us harm. However, he ends on a pessimistic note, describing his feelings as he dropped his daughter off to begin college. He relates his fear that the world his daughter will inherit is much less certain than the one he became an adult in.
It is hard not to agree with the major themes of the book. I do quibble with a few of Friedman’s positions. He reviews the case for free trade and believes that the theories of comparative advantage still hold. He is convinced that if each society is allowed to trade freely, all will ultimately gain. I am not so sure. Friedman underestimates the effect of intellectual property theft on America's economy. In a world of free trade and comparative advantage, America's greatest advantage is in intellectual property. What would the US trade imbalance with China look like if everyone in China paid for a legal copy of Windows and every DVD they watched? When trading lumber and cars, I have greater confidence in Ricardo’s theories. Trading the very items that Friedman claims have made the world flat—bits and bytes—is a whole other matter.
Another missing element from Friedman’s book, subtitled "A Brief History of the 21st Century," is what his previous book referred to as the Olive Tree. In a century that has seen the second Palestinian Intifada against Israel and the rejection of the European constitution, which I at least partially attribute to nascent nationalism, one cannot explain all that is happening in the world in economic terms. Friedman presents a new version of his McDonald's theory from his earlier works, suggesting that no two countries that are part of the Dell global supply chain would fight each other. While his theory sounds plausible, before WWI and WWII, Germany’s largest trade partners were England and France. In that day of rising international trade, many said war was a thing of the past. It is dangerous to underestimate either nationalism or the power of madmen.
As I first started reading *The World Is Flat*, I questioned whether its contents really deserved to be a book, as opposed to a long magazine piece. However, as time goes on, I find myself quoting different elements and stories from the book to friends and colleagues all the time. Despite my disagreements with a number of Friedman’s points, I believe it would be a mistake for anyone who wishes to understand the world around them and the economics of the 21st century not to read this book.
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