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they can ossify. All that is solid melts into air, all that is holy is profaned, and

man is at last compelled to face with sober senses his real conditions of life and

his relations with his kind. The need of a constantly expanding market for its products

chases the bourgeoisie over the whole surface

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of the globe. It must nestle everywhere, settle everywhere, establish connections

everywhere. The bourgeoisie has through its exploitation of the world market given

a cosmopolitan character to production and consumption in every country. To the great

chagrin of reactionaries, it has drawn from under the feet of industry the national

ground on which it stood. All old-established national industries have been destroyed

or are daily being destroyed. They are dislodged by new industries, whose introduction

becomes a life and death question for all civilised nations, by industries that no

longer work up indigenous raw material, but raw material drawn from the remotest zones;

industries whose products are consumed, not only at home, but in every quarter of

the globe. In place of the old wants, satisfied by the production of the country,

we find new wants, requiring for their satisfaction the products of distant lands

and climes. In place of the old local and national seclusion and self-sufficiency,

we have intercourse in every direction, universal inter-dependence of nations. And

as in material, so also in intellectual production. The intellectual creations of

individual nations become common property. National one-sidedness and

narrow-mindedness become more and more impossible, and from the numerous national

and local literatures there arises a world literature.

The bourgeoisie, by the rapid improvement of all instruments of production, by the

immensely facilitated means of communication, draws all, even the most barbarian

nations into civilisation. The cheap prices of commodities are the heavy artillery

with which it barters down all Chinese walls, with which it forces the barbarians'

intensely obstinate hatred of foreigners to capitulate. It compels all nations, on

pain of extinction, to adopt the bourgeois mode of production; it compels them to

introduce what it calls civilisation into their midst, i.e., to become bourgeois

themselves. In one word, it creates a world after its own image.

It is hard to believe that Marx published that in 1848. Referring to the Communist

Manifesto, Sandel told me, "You are arguing something sim204

ilar. What you are arguing is that developments in information technology are enabling

companies to squeeze out all the inefficiencies and friction from their markets and

business operations. That is what your notion of'flattening' really means. But a flat,

frictionless world is a mixed blessing. It may, as you suggest, be good for global

business. Or it may, as Marx believed, augur well for a proletarian revolution. But

it may also pose a threat to the distinctive places and communities that give us our

bearings, that locate us in the world. From the first stirrings of capitalism, people

have imagined the possibility of the world as a perfect market-unimpeded by

protectionist pressures, disparate legal systems, cultural and linguistic

differences, or ideological disagreement. But this vision has always bumped up

against the world as it actually is-full of sources of friction and inefficiency.

Some obstacles to a frictionless global market are truly sources of waste and lost

opportunities. But some of these inefficiencies are institutions, habits, cultures,

and traditions that people cherish precisely because they reflect nonmarket values

like social cohesion, religious faith, and national pride. If global markets and new

communications technologies flatten those differences, we may lose something

important. That is why the debate about capitalism has been, from the very beginning,

about which frictions, barriers, and boundaries are mere sources of waste and

inefficiency, and which are sources of identity and belonging that we should try to

protect. From the telegraph to the Internet, every new communications technology has

promised to shrink the distance between people, to increase access to information,

and to bring us ever closer to the dream of a perfectly efficient, frictionless global

market. And each time, the question for society arises with renewed urgency: To what

extent should we stand aside, 'get with the program,' and do all we can to squeeze

out yet more inefficiencies, and to what extent should we lean against the current

for the sake of values that global markets can't supply? Some sources of friction

are worth protecting, even in the face of a global economy that threatens to flatten

them."

The biggest source of friction, of course, has always been the nation-state, with

its clearly defined boundaries and laws. Are national boundaries a source of friction

we should want to preserve, or even can preserve, in a flat world? What about legal

barriers to the free flow of in-

formation, intellectualproperty, and capital-such ascopyrights, worker protections,

and minimum wages? In the wake of the triple convergence, the more the flattening

forces reduce friction and barriers, the sharper the challenge they will pose to the

nation-state and to the particular cultures, values, national identities, democratic

traditions, and bonds of restraint that have historically provided some protection

and cushioning for workers and communities. Which do we keep and which do we let melt

away into air so we can all collaborate more easily?

This will take some sorting out, which is why the point that Michael Sandel raises

is critical and is sure to be at the forefront of political debate both within and

between nation-states in the flat world. As Sandel argued, what I call collaboration

could be seen by others as just a nice name for the ability to hire cheap labor in

India. You cannot deny that when you look at it from an American perspective. But

that is only if you look at it from one side. From the Indian worker's perspective,

that same form of collaboration, outsourcing, could be seen as another name for

empowering individuals in the developing world as never before, enabling them to

nurture, exploit, and profit from their God-given intellectual talents-talents that

before the flattening of the world often rotted on the docks of Bombay and Calcutta.

Looking at it from the American corner of the flat world, you might conclude that

the frictions, barriers, and values that restrain outsourcing should be maintained,

maybe even strengthened. But from the point of view of Indians, fairness, justice,

and their own aspirations demand that those same barriers and sources of friction

be removed. In the flat world, one person's economic liberation could be another's

unemployment.

India versus Indiana: Who Is Exploiting Whom?

Consider this case of multiple identity disorder. In 2003, the state of Indiana put

out to bid a contract to upgrade the state's computer systems that process

unemployment claims. Guess who won? Tata

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America International, which isthe U.S.-based subsidiary ofIndia's Tata Consultancy

Services Ltd. Tata's bid of $15.2 million came in $8.1 million lower than that of

its closest rivals, the New York-based companies Deloitte Consulting and Accenture

Ltd. No Indiana firms bid on the contract, because it was too big for them to handle.

In other words, an Indian consulting firm won the contract to upgrade the unemployment

department of the state of Indiana! You couldn't make this up. Indiana was outsourcing

the very department that would cushion the people of Indiana from the effects of

outsourcing. Tata was planning to send some sixty-five contract employees to work

in the Indiana Government Center, alongside eighteen state workers. Tata also said

it would hire local subcontractors and do some local recruiting, but most workers

would come from India to do the computer overhauls, which, once completed, were

"supposed to speed the processing of unemployment claims, as well as save postage

and reduce hassles for businesses that pay unemployment taxes," the Indianapolis Star

reported on June 25, 2004. You can probably guess how the story ended. "Top aides

to then-Gov. Frank O'Bannon had signed off on the politically sensitive, four-year

contract before his death [on] September 13, [2003]," the Star reported. But when

word of the contract was made public, Republicans made it a campaign issue. It became

such a political hot potato that Governor Joe Kernan, a Democrat who had succeeded

O'Bannon, ordered the state agency, which helps out-of-work Indiana residents, to

cancel the contract-and also to put up some legal barriers and friction to prevent

such a thing from happening again. He also ordered that the contract be broken up

into smaller bites that Indiana firms could bid for-good for Indiana firms but very

costly and inefficient for the state. The Indianapolis Star reported that a check

for $993,587 was sent to pay off Tata for eight weeks of work, during which it had

trained forty-five state programmers in the development and engineering of up-to-date

software: "'The company was great to work with,' said Alan Degner, Indiana's

commissioner of workforce development."

So now I have just one simple question: Who is the exploiter and who is the exploited

in this India-Indiana story? The American arm of an Indian consulting firm proposes

to save the taxpayers of Indiana $8.1 mil207

lion by revamping their computers -using both its Indian employees and local hires

from Indiana. The deal would greatly benefit the American arm of the Indian

consultancy; it would benefit some Indiana tech workers; and it would save Indiana

state residents precious tax dollars that could be deployed to hire more state workers

somewhere else, or build new schools that would permanently shrink its roles of

unemployed. And yet the whole contract, which was signed by pro-labor Democrats, got

torn up under pressure from free-trade Republicans.

Sort that out.

In the old world, where value was largely being created vertically, usually within

a single company and from the top down, it was very easy to see who was on the top

and who was on the bottom, who was exploiting and who was being exploited. But when

the world starts to flatten out and value increasingly gets created horizontally

(through multiple forms of collaboration, in which individuals and little guys have

much more power), who is on the top and who is on the bottom, who is exploiter and

who is exploited, gets very complicated. Some of our old political reflexes no longer

apply. Were the Indian engineers not being "exploited" when their government educated

them in some of the best technical institutes in the world inside India, but then

that same Indian government pursued a socialist economic policy that could not provide

those engineers with work in India, so that those who could not get out of India had

to drive taxis to eat? Are those same engineers now being exploited when they join

the biggest consulting company in India, are paid a very comfortable wage in Indian

terms, and, thanks to the flat world, can now apply their skills globally? Or are

those Indian engineers now exploiting the people of Indiana by offering to revamp

their state unemployment system for much less money than an American consulting firm?

Or were the people of Indiana exploiting those cheaper Indian engineers? Someone

please tell me: Who is exploiting whom in this story? With whom does the traditional

Left stand in this story? With the knowledge workers from the developing world, being

paid a decent wage, who are trying to use their hard-won talents in the developed

world? Or with the politicians of Indiana, who wanted to deprive these Indian

engineers of work so that it could be done, more expensively, by their constituents?

And with whom does the traditional Right stand in this story? With those who want

to hold down taxes and shrink the state budget of Indiana by outsourcing some work,

or with those who say, "Let's raise taxes more in order to reserve the work here and

reserve it just for people from Indiana"? With those who want to keep some friction

in the system, even though that goes against every Republican instinct on free trade,

just to help people from Indiana? If you are against globalization because you think

it harms people in developing countries, whose side are you on in this story: India's

or Indiana's?

The India versus Indiana dispute highlights the difficulties in drawing lines between

the interests of two communities that never before imagined they were connected, much

less collaborators. But suddenly they each woke up anddiscovered thatin a flat world,

where work increasingly becomes a horizontal collaboration, they were not only

connected and collaborating but badly in need of a social contract to govern their

relations.

The larger point here is this: Whether we are talking about management science or

political science, manufacturing or research and development, many, many players and

processes are going to have to come to grips with "horizontalization." And it is going

to take a lot of sorting out.

Where Do Companies Stop and Start?

Tust as the relationship between different groups of workers will have to I be sorted

out in a flat world, so too will the relationship between companies and the communities

in which they operate. Whose values will govern a particular company and whose

interests will that company respect and promote? It used to be said that as General

Motors goes, so goes America. But today it would be said, "As Dell goes, so goes

Malaysia, Taiwan, China, Ireland, India . . ." HP today has 142,000 employees in 178

countries. It is not only the largest consumer technology company in the world; it

is the largest IT company in Europe, the largest

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