World not as flat as you think

World not as flat as you think

IF HIGHER education were a sprint, Professor Pankaj Ghemawat would probably be its Usain Bolt. He joined Harvard as an undergrad at the age of 16, graduated by 19, finished his PhD by 22 and later became "the youngest full professor in the history" of Harvard Business School, according to the higher education website Poets and Quants.

In an exclusive interview with tabla!, Dr Ghemawat, 56, who is famous for his research that disproved the concept of a "flat world", tells us that the world is much less globalised than people think.

Covering a range of issues, he points out that globalisation tends to open up more cultural options for consumers rather than closing them, that supplementary income for workers moving to lower paying jobs should be connected closely to productivity growth and, in closing, that Singapore trades more with countries with which it shares "geographic proximity as well as other kinds of cultural, administrative/political, and economic linkages".

In other words we are not as global as we think. Well, not yet.

Q: I understand you went to elementary school first in the US before moving to India to finish high school and went back to Harvard for your bachelor's degree and PhD.

Looking back, how did your early years in the two countries influence your current interest in studying globalisation?

The seeds of my interest in globalisation were indeed planted by my family's move from India to the US state of Indiana (for my father's PhD studies) when I was five years old, back to India when I was nine, and then to the US for my own higher education.

The contrasts I was exposed to struck a chord, and my interest grew only as I began formally researching globalisation and its business and public policy implications. I was particularly struck by the contrast between popular rhetoric about the world becoming "flat" and borders ceasing to matter versus the tough challenges real companies faced venturing abroad.

That connected with my own personal experience: India and Indiana sounded alike enough to make for a fun family joke but even as a child they seemed worlds apart.

Q: In this newspaper we ran a feature on the growth of fast food chains in India.

We observed on the one hand that the number of McDonalds, Burger Kings and Pizza Huts are growing in India and on the other hand they are introducing Vegetarian Whopper, and Birizza, (a biryani and pizza combination). With more Golden Arches, is McCulture spreading globally or is it being tamed because local tastes and preferences dominate even their menu?

Birizza sounds interesting - I may have to try that. Recall that hybridisation isn't new as a source of culinary innovation. Indian-Chinese food is another creative hybrid with a loyal fan base, and points to yet another example that helps put fast food in perspective: There are more Chinese restaurants in the US alone than McDonalds locations worldwide!

And as you suggested, the dizzying array of menu adaptations that fast-food chains employ when they go abroad reflects how globalisation does not lead to cultural homogenisation.

Globalisation tends to open up more cultural options for consumers rather than closing them off. There is no evidence I am aware of, for example, that Indian restaurants - offering the wide variety of Indian cuisines - are under threat in India.

If anything, the entry of foreign restaurant chains into India is contributing to innovation on the part of India's own restaurateurs, further expanding the choices available to Indian diners.

Q: Your book, World 3.0, as well as other researches, has shown that Chinese labour gets only 2 per cent of the retail price of Apple products like iPod, iPhone and iPad.

You have pointed out that the majority of the value is actually captured by Apple and other American companies and workers. Does this mean moving high-volume electronics assembly to the US, UK or India is not likely to generate good jobs?

If so, what's the way to employ the millions who are unemployed in these and other countries?

Whether or not these types of assembly jobs are "good" has to be judged relative to the other employment options available to the workers in question.

Given US and UK labour market conditions and wage levels, labour intensive electronics assembly is not likely to become a large scale employer in the foreseeable future. Wages in India, on the other hand, could be internationally competitive for that type of work.

However, wages are not the only consideration that comes into play regarding where this type of work gets located. The multi-country supply base that has been built up for electronics in east Asia is a formidable advantage for that region. And India has well-known deficiencies around infrastructure and other issues that have held back its development in export oriented manufacturing.

Improving India's domestic business environment may be the most effective way for India to benefit more from globalisation.

Q: You have supported supplementary income for workers moving to lower paying jobs. Will that not reduce competitiveness? Is this idea aligned tothe idea of "living income"?

This has to be connected closely to an emphasis on productivity growth. I have written that we should "promote productivity and protect people, rather than protecting jobs". The goal is for people to move from lower income to higher income jobs as productivity rises, but realistically there are cases when a person may require retraining or may need to take a lower paying job.

For example, when a job becomes automated, the economy typically becomes more productive, but the affected worker may not be able to move immediately into a position that pays as well or better. We don't want to slow productivity growth by preserving the jobs of yesterday, but we should not be so cold-hearted as to ignore the pain that a job loss can inflict on a worker and his or her family.

Rather, policy should focus on growing the overall economic pie, and when gains for many imply pains for a few, it is reasonable to use some of those gains to make the adjustment process less painful.

Q: Common currencies like the euro, according to you, increase trade by 114 per cent. Based on this can we say the euro will survive the economic crises in southern European countries?

Common currencies can boost trade, but I would not stake a prediction about the survival of the euro on that basis alone. The euro is essentially a political project - even before it was implemented many economists warned that the Eurozone does not correspond to an optimal currency area.

The crisis in Europe has been so tough in part because the common currency got ahead of other aspects of integration - not only economic ones like bank deposit insurance but also cultural factors as exemplified by the ugly rhetoric thrown back and forth between Greece and Germany.

Ultimately, the future of the euro will continue to depend on politics more than economics.

Q: Has globalisation made people more materialistic, and to spend now rather than save?

I don't think so. My research shows that the world is much less globalised than people think, and that people often blame problems on globalisation when their true root causes are mainly domestic. With regard specifically to materialism, I suspect that people may be confusing globalisation and modernisation.

As economies become more prosperous, people can afford more material goods, there are more consumption options available, and marketing becomes more sophisticated. But deep cultural differences do not disappear. Think of the contrasts between the US and Japan. Both have achieved high levels of prosperity, but they retain very distinct cultures.

Q: Your website has this map of "Singapore's Share of Partner's Imports" prominently displayed. Please explain this to our readers?

Does it indicate that Singapore exports mainly to ASEAN countries, other Asian countries in East Asia to which it is culturally and geographically close and not much to India, Russia and the West? And negligible to Africa and Latin America?

Exactly. This map shows that Singapore - like most countries - exports far more intensively to countries with which it shares geographic proximity as well as other kinds of cultural, administrative and political, and economic linkages.

More than half of exports around the world take place within rather than between roughly continent-sized regions. Singapore's exports are even more regionalised than the world average, but that should not necessarily be a cause for concern.

The world's economic centre of gravity is shifting closer to Singapore, making a focus firstly on connecting South-east, East, and South Asia to each other and then secondly connecting those regions to the rest of the world a very favourable positioning.

  • S.N. Venkat is a senior associate director at Singapore Management University.

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