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*A Book Review*

The World Is Flat

By Thomas L. Friedman

by Michael C. Gray

June 7, 2013

Most of us can see changes happening in our world that have been revolutionary. Thomas Friedman documents significant relatively recent changes in The World Is Flat.

Our world has become interconnected. American workers and companies aren’t just competing with their neighbors next door or in the U.S., but with workers throughout the world. Even order processing at some McDonald’s franchises is being outsourced to remote locations.

According to Friedman, there are ten forces that “flattened the world.” Three of the key ones, a “triple convergence,” were (1) the fall of the Berlin Wall on November 9, 1989 ended the Cold War and opened up the world for trade, (2) the internet and World Wide Web made communications and collaboration easy and inexpensive, (3) the “Dot.com crash” in 2000 also resulted in the crash of major communication companies, which had installed huge fiber optic cable networks overseas based on unrealistic internet demand projections. The cables were resold at a fraction of their cost, enabling a dramatic reduction of the cost of communication overseas used for outsourcing to Indian, Chinese and other low-cost, highly educated workers. The triple convergence enables individuals and companies to connect and collaborate like never before.

One of the consequences is to enhance globalization of businesses. Many businesses, even small ones, aren’t limited to local operation or affiliation with a country. Even a small business can have internet sales in remote locations and outsource manufacturing or services in many countries.

Although jobs have been exported overseas, American businesses benefit from new markets of newly affluent foreign employees buying American products. Theoretically, everyone should benefit.

Dislocated employees requiring retraining are a challenge to be dealt with. Also, rural areas of developing countries haven’t benefited from globalization as much as the cities like Bangalore where the technology outsourced jobs are located.

In order to remain competitive in the “Brave New World,” the United States has to step up to meet the competitive requirements. More American students need to choose science, mathematics and engineering as majors. Right now, a growing share of the students choosing these majors in American universities are foreign, and foreign universities are producing a growing share of new scientists and engineers. American students have also been demonstrating a lack of interest in working hard to be competitive. In addition, allocations of the Federal budget to basic research has been shrinking, with our tax dollars being spent for foreign wars.

The broadband internet connections in the United States are much slower and have fewer subscribers than in South Korea, Norway, Israel and Finland. The United States is the only industrialized state without an explicit national policy for promoting broadband.

It’s important to understand the world competitive environment whether you are an employee or own a company. Read The World Is Flat.

Buy it on Amazon: The World Is Flat 3.0: A Brief History of the Twenty-first Century.

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Michael Gray, CPA
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