Mundo 3.0: La prosperidad global y las vías para alcanzarla

by Pankaj Ghemawat

Desde la crisis financiera de 2008, muchos hemos tenido que replantearnos nuestras convicciones acerca de los mercados y la globalización. ¿En qué grado han de estar integradas las economías realmente? ¿Hasta qué límite es adecuada la regulación? ¿Es cierto que la Tierra es plana, tal y como afirmaba Thomas Friedman, y la globalización un proceso imparable? En Mundo 3.0, el galardonado escritor, profesor del IESE y economista Pankaj Ghemawat propone una política mundial en que la regulación y la integración transfronteriza convivan y se complementen. Empieza por exponer las suposiciones que se argumentan con más frecuencia en torno a la globalización, confrontándolas con los datos reales. Con ello demuestra que el mundo no está, ni por asomo, tan globalizado como creemos, y explica por qué los beneficios potenciales de una mayor integración son mucho más elevados de lo que hasta los defensores de la globalización tienden a creer. Aborda también los fallos y temores del mercado ―pérdidas de empleo, degradación medioambiental, volatilidad macroeconómica y desequilibrios comerciales y de capital― que los detractores de la globalización arguyen a menudo. Partiendo de datos y cifras concluyentes demuestra que una mayor globalización podría realmente aliviar algunos de estos problemas.

Genres: Economics, Nonfiction, Business, Finance, Society, International Relations, Current Affairs

384 pages, Paperback

First published April 26, 2011

Reviews

[Adriaan Jansen · Rating 4 out of 5]

In World 3.0, Ghemawat argues that the world we live in is not a flat, fully globalized world and that differences and distances are still very relevant. In order to prove this point, Ghemawat provides interesting data to prove that cross-border flows of goods, services, capital, information and people are actually a lot more limited that most of us would intuitively assume. An example: Of all the telephone calling minutes worldwide, less than 2% corresponds to international calls. Several other examples indicate that most of our activities are still mostly local or domestic.

Ghemawat starts out by listing 3 common, but very different worldviews, and then adds a fourth one:
- World 0.0 has many tribal characteristics, and is very locally focused.
- World 1.0 is based on the nation-state, a worldview in which borders are still paramount and people tend to think in terms of ‘’us versus them’’.
- World 2.0 is the flat, fully globalized world. In this frame of mind, borders are irrelevant, and so are distances and differences. Examples of key phrases are ''the death of distance'' and Thomas Friedman´s ''the world is flat''.

Ghemawat notices that World 1.0 and World 2.0 correspond to a non-globalized, regulated world and a globalized, completely unregulated world, respectively. The choice between these 2 worldviews means that you seem to have to choose between either regulated non-globalization or globalized deregulation.
According to Ghemawat, the real world is better described by separating these dimensions of choice instead of lumping them together. Hence he proposed a fourth worldview, World 3.0, where globalization and deregulation are decoupled as dimensions of choice. In World 3.0, a globalized but (modestly) regulated world, differences and distances are relevant, and should be taken into account.

Next, Ghemawat introduces the CAGE-framework for analyzing the differences between countries. This framework distinguishes 4 dimensions along which countries can be different, or distant, from each other: Cultural, Administrative, Geographical and Economic distances:
- Cultural distances relate to differences in language, religion, ethnicities, and values.
- Administrative distances are determined by factors such as colonial ties (or the lack thereof), regional trading blocs, common currency, similar legal systems.
- Geographic distances include, apart from physical distance, lack of shared land-border, differences in climates, different time zones.
- Economic distances have to do with differences in consumer incomes, per capita income, and infrastructure.

It turns out that the more distant countries are along one or several of these CAGE dimension, the fewer flows of goods, services, capital, information and people there will be between them. The conclusion is that the world is not uniformly flat, but that we live in a semi-globalized world where differences still matter.

The importance of realizing that we live in World 3.0 is that if we are aware that the world is semi-globalized and that distances and differences are important, then we can create more effective political, business and personal strategies by taking advantages of the conclusions of a CAGE-distance analysis.

The good news is that because World 3.0 recognizes that the world is only semi-globalized, there is room for improvement by further opening up. Ghemawat goes to some length to argue that the benefits of opening up far outweigh the costs. Some estimates indicate that opening up further could grow world GDP by 0,5%, but Ghemawat argues that this could be much more if one takes the evaluation beyond the adding volume and decreasing costs aspects of international trade. He proposes a scorecard for the evaluation of ADDING value (ADDING value stands for Adding volume, Decreasing costs, Differentiation, Intensifying competition, Normalizing risk and Generating knowledge) that adds 4 additional factors to the analysis of the growth opportunities from opening up further.

The middle part of the book aims to dispel some of the most common negative myths about globalization, starting out with market failures (industry concentration, externalities, information asymmetry and risk, global imbalances) and dealing with fears (about exploitation, oppression and homogenization):
- Concentration, i.e. fewer industries dominating world trade, hasn´t increased with more globalization. An example is the auto industry, where over the last century concentrations has gone up: In 2010, six companies accounted for 50% of global auto production. In 1970, five companies accounted for 50%, in the 1950´s just 3 did, and in the 1920’s just one (Ford).
- Externalities: Globalization surely contributes to externalities such as pollution. However, since most of our activities are local or domestic, globalization’s contribution to pollution is dwarfed by the contributions of local transportation (our daily commutes), local energy consumption (heating, cooling and electricity use in our houses) industry and agriculture. ''International air and sea transport emissions, those most directly traceable to globalization, were 1,4% and 2,1% of total energy-related CO2 emissions, respectively''. ''Something carried a very long distance over the ocean may actually cause less harm than something transported a shorter distance over land''.
- Risks can be mitigated by more openness, but not always. Food markets and the capital markets for foreign direct investments (FDI) benefit from more openness, while fast capital flows related to short term debt can do structurally more harm as openness increases. This is an example of the usefulness of the World 3.0 worldview, which separates globalization from deregulation: We can open up food and FDI markets, and regulate other cash flows related to short term debt.
- Global imbalances: Ghemawat notices the imbalances between the US and China, and borrows Nial Ferguson´s term ''Chimerica'' for the strange debt-consumption embrace that these 2 countries seem to be locked in. Another imbalance has to do with population, since some developed countries are getting old and may actually decrease, and developing countries are very young and sometimes overcrowded. Ghemawat argues again for more openness to remediate this issue, but is aware that this will cause issues in receiving and sending countries. An example of fear in sending countries is brain-drain, which Ghemawat dispels with facts: Half of the emigrants return to their home countries, remittances help the sending countries, and the possibility of leaving the country as part of the brain-drain motivates more people to study, and not all, if not most, of them will not end up actually leaving the country.
- Global exploitation: More openness decreases poverty: As exports as % of world GDP has gone up in recent decades, poverty has gone down. Of course there horrible examples of exploitation, but overall people worldwide are better off with more openness.
- Fear of homogenization of culture: Openness will bring gains and losses, but, according to Ghemawat, the gains outweigh the losses. Openness leads to exposure to different cultures ''and there is something intrinsically enriching about having a broader outlook on the world. From this perspective, diversity and difference are worth nourishing in their own right''.

In the final part of the book, Ghemawat advises governments, businesses and individuals how they can move forward in the semi-globalized World 3.0. For businesses, he recommends the AAA strategies framework: Adaptation, Aggregation, and Arbitrage:
- Adaptation: Adjusting to differences
- Aggregation: Overcoming differences to achieve (some) scale economies.
- Arbitrage: Exploiting differences
In his coursera course, Ghemawat noticed that at most you can succeed in 2 out of these 3 strategies: As always, strategy is about making choices. ''You can´t aspire to do everything, and do everything particularly well''.

On the level of the individual, Ghemawat uses the final chapter of the book to make a plea for more tolerance, without mentioning that word explicitly. He focuses on how we can increase our sympathy for others, particularly distant others, through a 3 stage framework: Awareness, Acquaintance, and Altruism. With an open mind ''we can confidently reach out and improve the possibilities for ourselves and for humanity around the world''.

This book gives a refreshing look on globalization. Ghemawat´s facts-driven approach is often convincing, although his focus on facts doesn´t prevent him to make some qualitative doubtful observations, for example that McDonald’s is a great diversifier of culture (just because there is local adaptation on their menus).

Greatest take-aways are that distances and differences are (still) very important and that by opening up more we can gain so much more, as countries, as businesses, and as human beings.

[Alvaro Berrios · Rating 3 out of 5]

If i could give this book 3 1/2 starts that's the actual rating I would give it. I think it's an excellent book, extremely informative and very enlightening. It actually refutes a lot of the claims made in Thomas Friedman's "The World is Flat." A book which I initially rated highly, I now think much less of it thanks to Ghemawat's presentations of actual data. As a result, I think anyone who is involved on the global operations of an enterprise needs to read this book. The world is far from boarderless, but this book demonstrates the strategies you can employ to overcome these difficulties.

The book does have its flaws though. For one, it's abundantly clear that Dr. Ghemawat is not a fan od Thomas Friedman. Although this is very understandable, he's a little immature about it in this book. He continuously harps back to Friedman, making a jibe directed towards him at every opportunity. In other words, it takes away from the professionalism of the book.

Furthermore, Dr. Ghemawat is a Harvard man and he makes it clear very early on that he hates the University of Chicago. He even goes as far as dedicating an entire chapter of the book titled "Harvad vs. Chicago School." I felt that this was an extremely immature and childish portion of the book. I can understand you not being a fan of a rival school, but to dedicate a portion of the book about how your school is so much better than the other school? Seriously? This is the type of behavior I would expect from a third grader.

Overall it's a very good book, the author is just extremely immature at times.

[Nilesh Jasani · Rating 4 out of 5]

World 3.0 is a dated book, especially in the world we are. Given the shapes that anti-globalization arguments have taken since its publication, its premise appears naive at best. Yet, this book, as one of the last globalization champions, from its golden age, is worth reviewing time and again to learn what we are forsaking on our reverse journey.

Imagine an utterly utilitarian world where all humans are deemed the same - i.e., if the gains of one no matter how distant are higher than those of another, however near or dear, the system resulting in a higher total is preferred. In this world without boundaries or local politics, globalization benefits on overall human welfare are easy to see with a reverse analysis. Every artificial barrier may create some local protections and associated gains, but likely taking away more from the overall pool. I can imagine a theoretician in this ideal world, proving the harmful effects of barriers with almost mathematical purity and complete certainty.

Mr Ghemawat's task is more complicated. He uses a vast amount of statistics to argue how the world has benefitted from a freer movement of labour, capital, and trade. Yet, we live in a world where extremely few care about the world overall. When the gains are counted at more societal or local, if not almost personal levels, a lot of arguments lose force as we well know by now given the events since the book's publication.

Anti-globalization forces - a march towards World 1.0 in the author's words - are on the rise. Its proponents are unlikely to accept most of what the book has established as evidence. The plight of someone next door is far easier to empathize with than the hypothetical collective loss of a group of someone distant when we raise various barriers. Not only we feel less for people far away, a point well made in the book in different contexts, but also actual losses are easier to understand than the opportunity or other theoretical losses.

As such, no objective analysis of the kind the author presents can dent the reverse march we have started for a few more years, if not decades. Instead, in the world where politicians deem no previous system constructs as sacrosanct, every global force is at risk. Some countries under their own set of distress may begin by raising the trade barriers while others construct the immigration walls, and still others restrict capital flows. Tit-for-tat wrangles could inflict even more damage as egos and nationalistic fervours take over from objective analysis in policy formation.

The book will stay as a good reminder, once again, of what we are leaving behind in our new quest. It is more for those feeling wistful as it does not have any proselytizing force in its bland objective analysis. In other words, this work is likely to be read voluntarily by only those who need no more convincing.

[Erika RS · Rating 3 out of 5]

There are books full of thought provoking ideas that are, nonetheless, rather a pain to read. This is one of those. The heart of what made this something of a slog was the way that the many detailed discussions of the data and models felt more like a list than a narrative. That said, the core ideas were worthwhile, and I'll focus on those for the rest of the review.

The thesis of World 3.0 is that we tend to look at the world in fixed ways that aren't particularly useful anymore. The World 3.0 view is a contrast to those other ways and, while I wouldn't say it's completely novel, it's interesting to see the practical implications as worked out by Ghemawat.

World 0.0 was the world of small clans. World 1.0 was the world of large scale, strong, mostly independent political entities (e.g., nations). World 2.0 is the "flat earth" view of globalization. World 3.0 is different from these. Note that while you can look at the past and see one or another of these views as representative, the important part is that they're really more perspectives on how people and nations interact rather than hard and fast descriptions of history.

In the World 3.0 view, the world is globally interconnected, but people, groups, and nations are culturally, administratively, geographically, and economically rooted (CAGE framework). Distance matters. National borders are not impermeable walls nor are we one global society. Economically -- and much of this book talks about economics -- this rooted view yields the idea that market integration is inevitable but regulation necessary. The form that globalization and its regulation takes will be influenced by the CAGE factors of distance.

Despite the many assumptions that we're in a World 2.0 world, Ghemawat points out that there is actually much less integration between nations than one would expect in a flat world, and that that integration varies among the cultural, administrative, geographic, and cultural distances between nations. In other words, a World 3.0 view is useful because it seems to better match observed reality.

I'll give an example of how World 3.0 thinking might influence policy. We tend to think of combating climate change as something that's done either as a purely national initiative or something that needs to be done with the whole global community. The World 3.0 view would instead encourage countries that are close to each other along the CAGE dimensions to form coalitions and strategies based on their shared factors -- shared physical environment, shared regulatory environment, shared standard of living, shared attitudes toward the environment.

Much of the book is a discussion of the various failure modes of global market integration without regulation. This is a critique of both the World 2.0 view -- which often sees regulation as problematic -- and the World 1.0 view -- which often denies the reality of global integration. One of the most useful aspects of this discussion is the ABC model of balancing the benefits of openness against its risks. Instead of having hard boundaries to protect national economies, rely on a combination of alarms, breakers, and cushions. Alarms give warning of problems by monitoring changes in key metrics. Breakers are mechanisms for limiting the exposure of one part of the system to problems in other parts (think circuit breakers). Cushions are backup resources and plans that soften the blow when problems do occur. If you are involved with running technical systems at a large scale, these techniques will likely seem familiar, but such an SRE mindset, as I think of it, is rarely applied to economic activity.

By thinking of each individual and each country as rooted but connected, the World 3.0 view helps find the balance between the isolationism of a view that focuses too much on nations and the cultural indifference of a completely open world. At the same time, it requires much more nuanced analysis of problems to find solutions -- there is no one-size-fits-all answer. Given that the world is a complicated place, that lack of simplicity is probably a good thing.

[Matthew · Rating 4 out of 5]

I enjoyed the data driven commentary that pervades most of the book. He thoroughly refutes Thomas Friedman's thesis that the world is flat. It clearly is not and the thing that divide us such as culture, language and political institutions will continue to play a major role in international politics and business. By ignoring this fact we are in danger of returning to a world in which global war is a definitive possibility. However, Ghemawat's conclusion leaves the reader wanting. However, if the reader is wishing for an easy solution to move us towards a world 3.0, there is none coming. The only solution is to embarce our differences and learn to cooperate within this framework. This is much easier said that done. But I do completely agree with one thing in the book, Thomas Friedman's an idiot!

[Tunde · Rating 4 out of 5]

4.5: Fantastic book. Refutes Thomas Friedman’s provocative, thought-provoking but ultimately misleading book the world is flat. Uses fax to the Stabley S-t at the world of semi global and uses the accuracy of the real situation and determined that there is a huge opportunity to be gained from globalization. Covers the common misconceptions of globalization as well as potential risks and issues. Then covers the opportunity for for the globalization although the treatment seem somewhat light. And juice introduces the CAGEE cultural administrative geographical and economic framework for determining how to approach globalization particularly for companies. And ends with some personal and family anecdotes thatAre a bit week.

[Christophe Druet · Rating 5 out of 5]

This book proposes an alternative world between what I would call the "free-market-freak" and the "protectionist-freak". It encourages to think beyond our inner fears about globalization by looking at facts and figures that clearly shows how the benefits largely outweigh the pretended disadvantages.

[Vince · Rating 3 out of 5]

The author made some good points about the dataless nature of some of the books he criticized, such as Thomas Friedman, although I think he overstated his case (The World is Flat does site some real data, even if it lacks graphs and figures.) The authors criticism fell a little flat for me though, when he frequently mentioned correlations without trying to control for outside factors, and assuming causation in some cases.

[LB · Rating 4 out of 5]

Deeply academic look at the globalization we see and what its true extent is. Many facts and figures, but paired with case studies for global business leaders. Terminology heavy, like reading a thesis, but great to understand growing globally is a process.

[Bart · Rating 2 out of 5]

After chapter 1, I discovered that the author thinks the only aim of economic regulation is to create higher GDPs for everyone... Disagreeing with that assumption I decided to skip this one.

[Thomas Burky · Rating 5 out of 5]

This text gets into the real meat of globalization by examing actual data of global trade rather than the giddy "let's all get together" discussion normal held. The author points out that world trade is not nearly as "globalized" as either its proponents or detractors think and systematically discusses the roles of government and markets with specific case studies. If you are interested in global trade and its impacts this is a great read, but you better pack a lunch because it is very in depth.

[Brian · Rating 2 out of 5]

Some interesting insights, particularly when it comes to debunking misperceptions about just how globalized the world is(n't)...but that doesn't outweigh its business-school, jargon-laden style. I think the first draft of this book was a powerpoint deck. It probably should have stayed that way.

[Sebastian Roesinger · Rating 4 out of 5]

Great counter-balance of the work done by Thomas Friedman, backed up with figures.

[Vr Murty · Rating 4 out of 5]

Extension to world is flat and how to do business and win customers

[BLACK CAT · Rating 4 out of 5]

Interesting analysis on globalization: what is the current state of globalization, challenges, risks, benefits... It compares view from other authors and also add data to support his ideas.

[John Favini · Rating 2 out of 5]

Not a huge fan. Author hails from Harvard Business school and the text is covered with neoliberalism, and quite a few inaccuracies.