Abstract of the Chapter V
In this particular chapter, Thomas Friedman questions the necessity of the free trade across the globe and whether it will benefit America as a whole. Basically, he spent a significant amount of time thinking if David Ricardo was right or not. Ricardo, the English economist who lived at the turn of the 18th-19th centuries, described the basics of free trade. This is the beneficial cooperation of two or more countries that are concentrated on the production of goods in which they have a comparative cost advantage. So, the question is if America should keep the principles of free trade and remain outsourcing and offshoring or to erect the “wall” and ban those activities?
After Friedman spent some time in India, he had a chance to observe the realities of Indian unemployment rates. There might be over 1 million applications for only 9 thousand job offers. That is why outsourcing becomes more and more popular in this country. Of course, none of us would like an American to lose his job either (what may actually happen due to the rapid development of outsourcing and offshoring). When somebody loses his or her job, the unemployment rate is not less 5%, as the average in the US, but 100%. Indeed, after the author listened to all arguments he concluded that Ricardo is still right: free trade will more benefit America as a whole rather than banning such activities as outsourcing and/or offshoring.
The main argument for erecting the walls is that in the modern world not only goods are tradable, but services as well. In this respect, Western developed countries may face a significant decline, because Western service-oriented companies could not enter the market as it will be not profitable at all (simply, Indians require much less salary than, for instance, British workers).
On the other hand, supporters of free trade provide the following argument: within the period of temporary crisis in the developed countries, the average wage level gets lower and outsourcing would be the way to keep the economy afloat.
Friedman also supports the idea of free trade market with the example of two-country world: China and America. The main point of it is that once China opens its market, its knowledge workers’ salary after some time should become more or less equal to the American ones. It is possible to observe the similar situation in Bangalore, where competition for software engineers rapidly pushed their wage level to almost American-European one.
In addition, the world pie is always growing and there is always a gap for new businesses to enter the market. Mark Andreessen, the cofounder of the Netscape, aptly described this process: “The pie keeps growing because things that look like wants today are needs tomorrow”. Friedman believes that Andreessen is the one we should address to; he forced the developed of the completely new industry we now call E-Commerce. The thing is that human needs (read, wants) are infinite and this the first reason why it is possible to create new and new markets every day. Moreover, throughout the historical look, every time people had more trade, countries had experienced the rapid growth of the economy. Hence, the outsourcing and offshoring might open new horizons and new markets inside the US and give more opportunities to develop the present ones.
At last, Thomas Friedman goes absolutely in line with the most famous economic researches as most of them support the idea of free trade across the globe.
After I read the Chapter V of Thomas Friedman book “The World is Flat”, I discovered several interesting facts of free trade and its benefits to the country’s economy. First of all, when you lose the job, definitely the unemployment rate for you is 100%. However, there are so many opportunities to improve your skills and to find the job elsewhere. The US economy generates a huge number of new workplaces every day and that it is just the matter of time and efforts to get hired again. Additionally, taking into account humans’ wants and needs are infinite, there is always a possibility to invent a new market, a new service and/or good.
Hence, outsourcing and offshoring is not the thing that takes away Americans jobs. Indeed, it just creates workplaces in less developed countries with higher number of low-skilled workers.
The society should put all its forces to help counties like North Korea to open their market and accept the free trade. This would result in the rapid increase of the national level of life. From the 1960s to the 1980s, the US economy had faced a similar situation and a paradigm of free trade resulted in significant raise of wage level. Thus, the overall level of life increased as well.
All in all, I personally believe that the principle of free trade across the globe along outsourcing and offshoring would positively influence the further advancement of both well-developed and just developing countries.
