Welcome To The New "Flat World" Economy
By Jeff Lukens

I recently had problems getting connected to the Internet. After spending several hours on the phone with my internet provider's helpdesk, the technician informed me the problem must lay with my computer's operating system.

So, I called the Microsoft helpdesk. I soon discovered the individual I was talking to was in India. It was late afternoon here in Florida, but in India it was four-something in the morning, and these were his normal working hours. His English was a bit stilted and accented, but with greater attention on my part, understandable. We slogged through the troubleshooting procedures for more than two hours. Afterwards, my computer still did not work. In fact, it did not even turn on anymore.

A few of days at the repair shop and a few hundred dollars later my computer was back in working order. The problem, as I found out, was not with my operating system but with the Internet service provider all along.

Silly me. I believed what the technicians told me. It was totally unnecessary to call Microsoft's experts in India and have them mess up my computer.

This calamity was my introduction to the new economic "flat world," as coined by author and columnist Thomas Friedman. In its most simplistic form, the "flat world" means products are designed in the United States, manufactured in China, sold at Wal-Mart, and serviced in India.

The sudden increase in global telecommunications in the past ten years has "flattened," or leveled, the playing field on which nations now compete.

That, along with the fall of communism and the entry of more than two billion new people into the global workforce, allows many new ways to lower costs. This tends to be good for consumers and bad for producers.

The "flat world" may be just another way to say "cheap labor," but it is more than that. Capital flows to where companies can make a profit, with the best companies outsourcing to win, not just to survive.

Companies are taking an ever-closer look at their processes to identify their core competencies. Competencies not at the core of the company's business function are outsourced. In so doing, a company can innovate faster, gain market share, and thereby hire more people in the company does best. While that sounds good, it is also a painful process for displaced workers.

Globalization is determined less and less by massive, multinational corporations, and ever more by innovative people and startup companies. In India and China especially, companies compete not just for unskilled, low-wage work, but more often for high-end specialized work as well.

Eventually they could take control over most operating functions of a company, including product design, and keep U.S. workers only for distribution and sales.

A common response to such external threats has been protectionist legislation on imports. Such measures have never worked before, and will not work now. Tariffs on textile or steel imports, for example, will not preserve American jobs.

Some innovative American companies in these sectors and others have instead adapted their strategies and practices to thrive in this new world economic order. Adaptation is clearly a key to success.

The real issue is where the American economy is heading. Will we abandon our manufacturing sector? How do we constantly retrain our workforce? And how does our public education system keep up? These issues remain uncertain.

A crisis is arising where people from other nations compete for our jobs by working harder than we do and surpassing our education levels. America's flow of cutting-edge innovations could quickly become yesterday's news if our children's education doesn't keep up.

Friedman makes a folksy contrast from when he was growing up, his parents told him to finish his dinner because people in China and India were starving. Now his advice to his daughters is to finish their homework because people in China and India are starving for their future jobs.

With the coming of the "flat world" economy, we will be running faster just to stay in the same place. We definitely will not compete for the lowest wages against emerging counties. We can only maintain our standard of living by staying leaders in innovation, and that can only happen by excellence in education at all levels.

Unlike my experience servicing my computer, the fall of American economic leadership is a calamity we can avoid. We have much work ahead of us to improve our education system, and the time is already here for us to get busy before we get "flattened" by emerging countries competing for our jobs.

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Copyright 2000-2007, Jeff Lukens