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'The world is not as globalised as we believe'

The author insists the world is not as globalised as we believe, says Srivatsa Krishna.

World 3.0 Global Prosperity and How to Achieve It
World 3.0 Global Prosperity and How to Achieve It
World 3.0 Global Prosperity and How to Achieve It
By Pankaj Ghemawat
Publisher: Harvard Business Review Press
Pages: 386
Price: Rs 695

Tom Friedman said "The World is Flat" but Pankaj Ghemawat attempts to prove him wrong. He argues that a significant percentage of IT companies deliver their work on-site at client locations because linguistic distance matters more than geographic distance! This is despite the fact that India's trade is sensitive to natural resources, geographic distances and historical connections.

For that matter, did you know that even today just two per cent of all telephone calls made are international? Or that only 15 to 20 per cent of venture capital money is deployed outside the investing funds' home country? Consider this even more startling fact - 90 per cent of all fixed investment in the world is still domestic.

Did you know that Apple's iPod, though made in China, has contributions of 400-plus components from other countries of east Asia. Yet these add up to only one per cent of the retail price of $299 and most of the $163 value added goes to American companies, with about half going to Apple itself! Using such examples, Ghemawat argues that the world is not as globalised as we believe and goes on to explain market failures. He demonstrates how increased globalisation can overcome some of these failures as well as produce benefits to counter global problems such as environmental degradation, macroeconomic volatility, and trade and capital imbalances. He thus demolishes the viscera of his critics' arguments against globalisation by showing potential benefits in these very areas. His world view - World 3.0 - builds on his CAGE framework (cultural, administrative, geographic and economic distances) articulated in his earlier book, Redefining Global Strategy. Using data charmingly, Ghemawat argues that in 2000, the US was a larger trading partner than China for roughly 90 per cent of the countries on the planet but in just 10 years thereafter, the figure is down to half. By 2030, China's trade will exceed that of the US with about 80 per cent of the countries - all suggesting how rapidly China has come to dominate world trade.

In an interesting yet highly controversial argument on cultural superiority, Ghemawat tries to map the countries' perceived need for cultural protection versus their perceived cultural superiority. India tops in both! Wherein lies a paradox and begs the question: if indeed Indians think that their culture is superior to others, why would they think it needs need protection too? Is it not strong enough to survive the tests of time on its own strength?

In sum, World 3.0 is a unique look at globalisation, government failure and market failure through the lens of distance, culture, regulation, trade flows, capital movements and the perspective of large countries such as India, China and the US. The fervent cry of the book is for leaders to dispel myths about globalisation and instead understand its true benefits and potential, which taken together can lead to enhanced global prosperity, not just for a handful but for most on this planet.

This is an unusual and compelling reader on globalisation - the data, the analogies, the arguments are all extremely powerful and persuasive. It is no wonder that many regard Ghemawat as the true inheritor of Michael Porter's mantle of being the global strategy guru. Ghemawat is also the youngest person ever to hit the tenure track, at Harvard Business School.
 
The reviewer is an IAS officer. Views are personal



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