Sunday, August 07, 2005

Warning: globalization metaphor overload

Via Drezner, Jagdish Bhagwati argues that the world isn't flat - flatter, perhaps, but still pretty bumpy:

In truth, the flat road is not flat at all. Take the supply of educated manpower in India. Of the numbers in the age cohort for college education, only about 6% make it to college. Of these, only two-thirds graduate, and just a small fraction can read English. Of these, a further fraction can speak it; and of these, a smaller fraction still can speak it in a way which you and I can understand. The truth of the matter, therefore, is that even for the call-answer and back-office services, the numbers who will compete are only a very small fraction of the numbers being thrown about. India's huge size and the dazzle of the few Institutes of Technology are totally misleading. The road is not flat; the gradient becomes steep as wages rise for those who can manage while others cannot qualify.

A good point: There are still all those people out there living in poverty, somewhere out beyond the edge of Friedman's flat earth, missing out on the frictionless flow of goods and services.

Bhagwati goes on to point out that global competition is increasing. This isn't exactly flatness, but more like a bumpy roller coaster:

The real problem in the increasingly globalized economy is rather that most producers in traded activities -- an expanding set because services have become steadily more tradeable -- face intensified competition. A specific producer here will find rival suppliers stealing up on him from somewhere, whether Portugal, Brazil or Malaysia, indeed from sources which may not include India and China. In consequence, almost no producer is truly relaxed. I was at a Parents' Day at my daughter's camp in 1991 in Vermont and talked to a father producing chips in Silicon Valley. He lamented, as did Bill Clinton soon after, that competition from Japan and South Korea was fierce (and wicked). So I turned to another dad listening in on us and asked him what he did. "I grow mushrooms," he said. "Ah, you must be happier," I remarked. He replied, tearing at his hair: "Oh no, Taiwan is killing me!"