Enough has been said about the many faults, both in style and substance of Thomas L. Friedman’s “The World is Flat.” But it is important, form this China’s perspective, the topic of this essay, wherein Friedman be taken to account for his shallow treatment of the drill down effect of price reductions, which is largely, quantitative and finite with regard to the concept of globalization. China here is an important singular market, different from others in many respects.
To illustrate: This Christmas, my son bought me some underwear. He bought seven pairs; yes, one for each day of the week. Of the seven, all current models and stock, two were made in India; three were made in China; and two were made in Thailand. What does this tell us? It clearly illustrates that the co-operation; the globalization that Friedman speaks of is largely dependent on price…which must reach a finite point. At some price point, no manufacturer will be able to go lower. That is why there is no loyalty in these three markets for the brand. But what then is left to manipulate in the market? Service? Future concessions? Packaging? Shipping? Brand loyalty (you may find brand loyalty in the consumer but not in the intermediary.)
Friedman also overlooks the psychology of the typical Chinese intermediary as well as the typical consumer in China. It is an ongoing trend that we attribute to globalization processes, that China and to some extent, outside of the service industry India and Thailand have been bent on providing low price to its customers. But how will it end?
The fragile mandarins in a flat world: here is where Friedman really displays his lack of research skills. The young, upwardly mobile, recently arrived or latter day millionaires are not interested in what Friedman calls ‘levelling’ or ‘flattening’ processes. (I will use Friedman’s terms here even though their inadequacy is so poignantly laid out by Matt Taibbi, New York Press, 2007.)
They do not want or need a level playing field in their own country. Certainly, such an environment is desirable in the rest of the world where they would be treated as equal opportunists, but in China they recognize the competitive elements provided by an ‘un-even’ playing field. They want the status quo, where they are treated as the favored ones; not democracy.
Cursed, as the privileged only child, these mandarins are ill equipped for competitive advantage. They have been brought up to expect to instantly receive, any need or want they may have. Yet in this special social favoured class we have three sub-classes; one not envisioned by Freidman. Most children (97%) are from ‘one-child families’. Some families, both poor and rich, have more than one child, but they pay a price. The three sub-classes are: privileged, under-privileged and mediocre (we won’t name them middle class, because technically they are not. What we would normally call middle class, i.e. those who can live comfortably as a result of their livelihood are in China’s case, the privileged.)
Here, the mediocre, are a very big and vast problem, representing 53.6% of the population (Annual income below 24,000 RMB, $3,285.00) (Li Peilin, head of the Finance Institute at CASS, 2007-6). Only 3% of the population regarded themselves in the privileged class and the remainder of people regarded themselves in the under-privileged class, 43.4%, a half a billion people). Oddly, the privileged class regarded themselves as moving downward in the last three years.
We may refer to this 53.6 percent as the mediocre class. Those occupations which receive diminishing rewards due to their redundancy and what may be referred to as their fungible status. And this class is a direct result of the higher education system which is ill-equipped to supply learning material or scholastic standards required to cultivate individual excellence. The concept of ‘individual excellence’ is not the same as we in the west might intuit. In China, individual excellence can only be measured by school marks, not as to quality of intelligence, which is to say, meaningless.
The needs and wants of this mediocre class, (I am reminded by a line in the movie, Amadeus, where Salieri, F. Murray Abraham, states, “It is a sin to reward the mediocre.”) cannot be regarded as similar to our natural and collective understanding of the word. Here ‘mediocre’ must include the notions of hopelessness, vulnerability and fragility. This sub-class, the mediocre, does not have the option to compete; they are incapable; the privileged class has no desire to compete and the under-privileged class has no opportunity to compete either in a flat world or any other shaped world. In fact they all prefer a round world, where they understand the forging factors of ‘them’ versus ‘us’ (or me, in this case.)
How will these Chinese sub-classes fare in a ‘flat world’? Friedman devotes his definition of ‘flat world commerce’ to goods by in large. Services, which are the rising product category in China’s new economy, will account for 70% of the GDP by 2020, which will match the international standard of developed countries. It is those in the mediocre class who will fulfill the task of providing these services and any task that can be relegated to the past by digitalization, automation or outsourcing will be lost, causing the populations of the mediocre to drop to the under-privileged classes which will swell and as noted above, face unclaimed opportunities.
The privileged class, remember, is ill-equipped to compete on an individual scales as the technocrats of India are; where individuality is praised and recognized and subsequently rewarded.
At this time, China can only compete on price, and is therefore ill-prepared for a flat world end scenario. Friedman will find, that the world can only be so ‘flat’ and in the end, individual countries prefer to live in a round world where advantages are clear and only reluctantly join flat forces in attempts to survive the times. And, inexorably, times change.