Why the World Isn't Flat

Globalization has bound people, countries, and markets closer than ever, rendering national borders relics of a bygone era -- or so we're told. But a close look at the data reveals a world that's just a fraction as integrated as the one we thought we knew. In fact, more than 90 percent of all phone calls, Web traffic, and investment is local. What’s more, even this small level of globalization could still slip away.

BY PANKAJ GHEMAWAT | FEBRUARY 14, 2007

Ideas will spread faster, leaping borders. Poor countries will have immediate access to information that was once restricted to the industrial world and traveled only slowly, if at all, beyond it. Entire electorates will learn things that once only a few bureaucrats knew. Small companies will offer services that previously only giants could provide. In all these ways, the communications revolution is profoundly democratic and liberating, leveling the imbalance between large and small, rich and poor." The global vision that Frances Cairncross predicted in her Death of Distance appears to be upon us. We seem to live in a world that is no longer a collection of isolated, "local" nations, effectively separated by high tariff walls, poor communications networks, and mutual suspicion. It's a world that, if you believe the most prominent proponents of globalization, is increasingly wired, informed, and, well, "flat."

It's an attractive idea. And if publishing trends are any indication, globalization is more than just a powerful economic and political transformation; it's a booming cottage industry. According to the U.S. Library of Congress’s catalog, in the 1990s, about 500 books were published on globalization. Between 2000 and 2004, there were more than 4,000. In fact, between the mid-1990s and 2003, the rate of increase in globalization-related titles more than doubled every 18 months.

Amid all this clutter, several books on the subject have managed to attract significant attention. During a recent TV interview, the first question I was asked -- quite earnestly -- was why I still thought the world was round. The interviewer was referring of course to the thesis of New York Times columnist Thomas L. Friedman's bestselling book The World Is Flat. Friedman asserts that 10 forces -- most of which enable connectivity and collaboration at a distance -- are "flattening" the Earth and leveling a playing field of global competitiveness, the likes of which the world has never before seen.

It sounds compelling enough. But Friedman's assertions are simply the latest in a series of exaggerated visions that also include the “end of history” and the "convergence of tastes." Some writers in this vein view globalization as a good thing -- an escape from the ancient tribal rifts that have divided humans, or an opportunity to sell the same thing to everyone on Earth. Others lament its cancerous spread, a process at the end of which everyone will be eating the same fast food. Their arguments are mostly characterized by emotional rather than cerebral appeals, a reliance on prophecy, semiotic arousal (that is, treating everything as a sign), a focus on technology as the driver of change, an emphasis on education that creates "new" people, and perhaps above all, a clamor for attention. But they all have one thing in common: They're wrong.

In truth, the world is not nearly as connected as these writers would have us believe. Despite talk of a new, wired world where information, ideas, money, and people can move around the planet faster than ever before, just a fraction of what we consider globalization actually exists. The portrait that emerges from a hard look at the way companies, people, and states interact is a world that’s only beginning to realize the potential of true global integration. And what these trend's backers won’t tell you is that globalization’s future is more fragile than you know.

 

Pankaj Ghemawat is the Anselmo Rubiralta professor of global strategy at IESE Business School and the Jaime and Josefina Chua Tiampo professor of business administration at Harvard Business School. His new book is Redefining Global Strategy (Boston: Harvard Business School Press, September 2007).

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