Global: Hardly a Flat World
by Stephen Roach
With all due respect to Tom Friedman, there’s nothing flat about this unbalanced global economy. The image of a “flat world” is most appropriate for the endgame of globalization. In my view, that ideal state is decades into the future -- if that. In the meantime, the global economy is distinguished far more by its disparities and tensions -- and how the resulting imbalances are likely to be vented in world financial markets.
I always travel a lot, but recently it’s been off my charts. I am just winding up the second of two spins around the world in the past month. Over that period, I have spent time in Europe, India, Australia, Singapore, Hong Kong, China, and now my first visit to the Middle East. I’ll be home for Thanksgiving to reacquaint myself with the family but then back out to Japan for the final leg of my 2005 globe hopping. It’s been exhausting but exhilarating. I long ago decided that you can’t do global economics by sitting at your desk in New York and reading the FT. There is no substitute for the first-hand impression -- in this case, globalization by immersion.
I give Friedman a lot of credit for bringing globalization to the masses (see his The World Is Flat: A Brief History of the Twenty-first Century, Farrar, Straus, and Giroux, 2005). But to me, “flat” just doesn’t cut it in today’s world. Yes, IT-enabled connectivity has shrunk the world in many new and important respects. But the world is struggling mightily with what this connectivity has brought. China and India are reshaping the global economy as never before. The 40% of the world’s population that lives in these two countries is only just getting a taste of economic prosperity. Not surprisingly, these two behemoths have big appetites and are pushing ahead rapidly with very different development models. China has done it the manufacturing way catering to external demand, whereas in India it’s been more of a services and internal consumption story. The theory of globalization teaches us that this is a “win-win” development. As the Chinas and Indias enter the global economy, they provide cheap goods and now services for the rest of the world, while, at the same time, they create a new class of consumers that will buy things made in developed countries. Who could ask for more?
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