THE WORLD IS FLAT
TheWorld is Flat
TheWorld is Flat
ThomasFriedmanis arguably one of the finest authors in the modern world. In hisbook TheWorld is Flat,Friedman introduces a new thinking about globalization of the worldeconomies and societies. He identifies ten events and developmentthat have had a huge impact on the globalization and continues toinfluence how the world societies and economies relate with eachother. He traces globalization of the world in the past decades andidentifies characteristics of each stage of globalization. This paperlooks at two of the ten flatters identified by Friedman, outsourcingand offshoring. The paper identified online social networking as oneof the flatters that was not discussed by Friedman in his book.
Oneof the flatters of the world identified by Freidman is outsourcing.Outsourcing refers to a process through which some in house tasks arecontracted to another company which is paid to offer the services.This means that instead of employee people to complete the task, thecompany pays another company to do the job at a relatively cheaperprice. One of the most outsourced tasks in the modern businessorganizations is accounting. Companies are able to eliminate theaccounting department, which results into significant reduction inthe cost of operations. This is because of existence of specializedaccounting companies who are able to complete the jobs at reasonablylow prices. As a result of flattening of the world, it has becomepossible to outsource any knowledge based jobs such as accounting andbook keeping and development of software among others. However,outsourcing is supported by internet connectivity, proficiency inuniversal language, mainly English, and the availability of experts.According to Friedman, majority of outsourcing firms are located inIndia. There are several factors that make India the ideal nation forknowledge based outsourcing. In the last decade of the 20thcentury, major companies in the United States laid fiber optic cablesin India, which has enhanced cheap and efficient broadband internetconnectivity in the country. Secondly, India has a well developedtechnical and professional education system with world class statuswhich results into highly qualified workforce and experts. Thirdly,being a former British colony, India has the second largest Englishspeaking population in the world, after the United States. Thus,India has all the three prerequisite conditions for an ideaoutsourcing economy (Friedman, 2007).
Initially,American companies outsourced lower level tasks such as transcriptionand data entry. However, as the world waved goodbye the 20thcentury and welcomed the new millennium, things changed. The Y2K fearemerged in the United States since majority of the electronicinformation held by companies used two digits, for example 98 for1998. This meant that at first of January 2000, the systems willrecord it as year 00” indicating 1900 instead of 2000. An upgradeof the system was inevitable to replace the two digits software. In1999, majority of companies were struggling to be Y2K compliant,which was a challenge due to the limited number of programmersavailable in the United States. This led to the entry of the Indianprogrammers in the market, who proved to be as good as the AmericanIT experts but could provide the same job at a fraction of whatAmerican experts were paid. By engaging Indian IT experts, theAmerican companies were able to cut on cost, while getting highquality products. In the dotcom era, information technology companiesin America started struggling with the need to reduce the cost ofoperations, which created the need to hire back the Indian experts,but never traveled into the United States. Instead, the establishedworkstations in India from where they worked remotely. This resultedinto the modern wave of outsourcing. Today, there are numerous tasksthat require experts which are outsourced to India and other parts ofthe world. For example, it is a common phenomenon in Americanhospitals to use the services of radiologist in India. The hospitalsend the digital X rays and other radio images to an expert in Indiawho makes a report before the doctor gets into the office the nextday. American companies also outsource accounting services where theysend raw data to accountants in a specialized company (Friedman,2007).
Friedmanalso identified offshoring as one the ten flatters of the world.Offshoring refers to a company moving is production units from thehome country to another country. Relocating production to anothercountry is motivated by “cheaper labor, lower taxes, subsidizedenergy and lower health care costs” (Friedman, 2007). Generally,offshoring results into a significant reduction in the cost ofproduction. However, offshoring is different from outsourcing.Outsourcing takes peripheral or secondary tasks and contracts anothercompany to handle it at a cost. On the other had offshoring refers toa company having its manufacturing unit, for example, located inanother country. This has resulted into numerous complains and publicoutcry in some countries such as the United States, where the publicis concerned about production jobs being moved to China. While Indiais the main center for outsourced knowledge and expertise jobs fromthe United States, china has emerged as the major manufacturingoffshoring center. American companies are able to significantlyreduce the cost of production by moving their manufacturing units tochina. Due to the intense competition in the United States commoditymarket, American companies are finding it inevitable to relocatetheir manufacturing units away from the United States. According toFriedman, it has become impossible for labor intensive units tooperate in the United States (Friedman, 2007).
Offshoringin china emerged in the early 2000s when the Peoples Republic ofChina joined the World Trade Organization. Previously, companies fromthe west, especially the United States, found it difficult or riskyto operate in the country. The main reason why china is the leadingoffshoring destination in the world is the huge supply of cheaplabor. To compete with the “china price”, companies in otherparts of the world have to significantly reduce the cost of labor,which is impractical in developed countries such as the United Stateswhere wages for unskilled and semiskilled laborers are relativelyhigh. Thus, the impacts of low cost labor in china on the world arean indication of how the world has become flatter. However, Friedmancautions the western economies against the recent development inchina economy (Friedman, 2007). The cheap unskilled labor whichattracts the manufacturing units to china is a stepping stone toChinese dominance in the economy. There is no doubt that the race tothe top by the Chinese economy is unstoppable. They have sinceentered the highly skilled production sector where they are able toproduce computer processors and other advanced gargets which couldonly by manufactured by the first world economies. Thus, the Chineseeconomy is moving towards where the money is, mainly in creativedesign. The United States economic dominance has been greatlychallenges by the china. Although offshoring is inevitable in themanufacturing sector, more investment in education and research iscritical, considering that the next generation of inventors fromchina has higher potentials compared to the Americans. This is likelyto reverse the process altogether. Despite these concerns, Friedmanhighlights some of the benefits of outsourcing as one of the tenflatters of the world. Most importantly, companies in the UnitedStates are able to sell their products at relatively low prices(Friedman, 2007).
Whileoutsourcing and offshoring have been selected as important flatters,all the ten flatters are very important. Additionally, Friedman’slist of flatters did not exhaust all the aspects of the modern globalworld that have made the world flatter. Arguably, the most importantflatter not mentioned by Friedman is online social networking.Probably, the impacts of social networks such as facebook and twitterhad not been realized when Friedman was writing his book. As a resultof social networking sites, the modern society is more integrated andindividuals are able to share information remotely. This has beengreatly aided by increased internet connectivity and emergency ofinternet enabled mobile gargets such as smart phones. The fact thatsocial media affects all aspects of life, including business,education, culture, politics and governance, religion, health andfamily makes it one of the most important flatter in the modernworld. The more integrated and globalised that before, mainly becauseof the online social networks.
Friedman,T. (2007). Theworld is flat: a brief history of the twenty-first century,Vancouver: Douglas & McIntyre.