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in Silicon Valley. At one time, Judy was chief technology officer for Cisco. I sat

with them one afternoon and talked about this problem. "When I was eleven years old,"

said Bill, "I knew I was going to be an engineer. I dare you to find an eleven-year-old

in America who wants to be an engineer today. We've turned down the ambition level."

Added Judy, "More of the problem [can be solved by good] parenting than can be solved

from a regulatory or funding move. Everyone wants to fund more of this and that, but

where it starts is with the parents. Ambition comes from the parents. People have

to get it. It will probably take a crisis [to get us refocused]."

In July 2004, comedian Bill Cosby used an appearance at Jesse Jackson's Rainbow/PUSH

Coalition & Citizenship Education Fund's annual conference to upbraid

African-Americans for not teaching their children proper grammar and for black kids

not striving to learn more themselves. Cosby had already declared, "Everybody knows

it's important to speak English except these knuckleheads. You can't be a doctor with

that kind of crap coming out of your mouth." Referring to African-Americans who

squandered their chances for a better life, Cosby told the Rainbow Coalition, "You've

got to stop beating up your women because you can't find a job, because you didn't

want to get an education and now you're [earning]minimum wage. You should have thought

more of yourself when you were in high school, when you had an opportunity."

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When Cosby's remarks attracted a lot of criticism, Reverend Jackson defended him,

arguing, "Bill is saying, let's fight the right fight. Let's level the playing field.

Drunk people can't do that. Illiterate people can't do that."

That is right. Americans are the ones who increasingly need to level the playing

field-not by pulling others down, not by feeling sorry for ourselves, but by lifting

ourselves up. But when it comes to how to do that, Cosby was saying something that

is important for black and white Americans, rich and poor. Education, whether it comes

from parents or schools, has to be about more than just cognitive skills. It also

has to include character building. The fact is, parents and schools and cultures can

and do shape people. The most important influence in my life, outside of my family,

was my high school journalism teacher, Hattie M. Steinberg. She pounded the

fundamentals of journalism into her students-not simply how to write a lead or

accurately transcribe a quote but, more important, how to comport yourself in a

professional way. She was nearing sixty at the time I had her as my teacher and high

school newspaper adviser in the late 1960s. She was the polar opposite of "cool,"

but we hung around her classroom like it was the malt shop and she was Wolfman Jack.

None of us could have articulated it then, but it was because we enjoyed being

harangued by her, disciplined by her, and taught by her. She was a woman of clarity

and principles in an age of uncertainty. I sit up straight just thinking about her!

Our children will increasingly be competing head-to-head with Chinese, Indian, and

Asian kids, whose parents have a lot more of Hattie's character-building approach

than their own American parents. I am not suggesting that we militarize education,

but I am suggesting that we do more to push our young people to go beyond their comfort

zones, to do things right, and to be ready to suffer some short-run pain for longer

gain.

I fear, though, that things will have to get worse before they get better. As Judy

Estrin said, it will probably take a crisis. I would simply add: The crisis is already

here. It is just playing out in slow motion. The flattening of the world is moving

ahead apace, and barring war or some catastrophic terrorist event, nothing is going

to stop it. But what can happen is a decline in our standard of living, if more

Americans are not empow306

ered and educated to participate in a world where all the knowledge centers are being

connected. We have within our society all the ingredients for American individuals

to thrive in this world, but if we squander those ingredients, we will stagnate.

I repeat: This is not a test. This is a crisis, and as Paul Romer has so perceptively

warned, "A crisis is a terrible thing to waste."

Developing Countries and the Flat World

::::: NINE

The Virgin of Guadalupe

It's not that we are becoming more Anglo-Saxon. It's that we are having an encounter

with reality.

- Frank Schirrmacher, publisher of the German newspaper

Frankfurter Allgemeine Zeitung, commenting to

The New York Times about the need for German

workers to retool and work longer hours

Seek knowledge even unto China.

- saying of the Prophet Muhammad

The more I worked on this book, the more I found myself asking people I met around

the world where they were when they first discovered that the world was flat.

In the space of two weeks, I got two revealing answers, one from Mexico, one from

Egypt. I was in Mexico City in the spring of 2004, and I put the question on the table

during lunch with a few Mexican journalist colleagues. One of them said he realized

that he was living in a new world when he started seeing reports appearing in the

Mexican media and on the Internet that some statuettes of Mexico's patron saint, the

Virgin of Guadalupe, were being imported into Mexico from China, probably via ports

in California. When you are Mexico and your claim to fame is that you are a low-wage

manufacturing country, and some of your people are importing statuettes of your own

patron saint from China, because China can make them and ship them all the way across

the

Pacific more cheaply than you can produce them, you are living in a flat world.

You've also got a problem. Over at the Central Bank of Mexico, I asked its governor,

Guillermo Ortiz, whether he was aware of this issue. He rolled his eyes and told me

that for some time now he could feel the competitive playing field being leveled-and

that Mexico was losing some of its natural geographic advantages with the U.S.

market-by just staring at the numbers on his computer screen. "We started looking

at the numbers in 2001 -it was the first year in two decades that [Mexico's] exports

to the U.S. declined," said Ortiz. "That was a real shock. We started reducing our

gains in market share and then started losing them. We said that there is a real change

here . . . And it was about China."

China is such a powerhouse of low-cost manufacturing that even though the NAFTA accord

has given Mexico a leg up with the United States, and even though Mexico is right

next door to us, China in 2003 replaced Mexico as the number two exporter to the United

States. (Canada remains number one.) Though Mexico still has a strong position in

big-ticket exports that are costly to ship, such as cars, auto parts, and

refrigerators, China is coming on strong and has already displaced Mexico in areas

such as computer parts, electrical components, toys, textiles, sporting goods, and

tennis shoes. But what's even worse for Mexico is that China is displacing some Mexican

companies in Mexico, where Chinese-made clothing and toys are now showing up on store

shelves everywhere. No wonder a Mexican journalist told me about the day he

interviewed a Chinese central bank official, who told him something about China's

relationship with America that really rattled him: "First we were afraid of the wolf,

then we wanted to dance with the wolf, and now we want to be the wolf."

A few days after returning from Mexico, I had breakfast in Washington with a friend

from Egypt,Lamees El-Hadidy, a longtime business reporter in Cairo. Naturally I asked

her where she was when she discovered the world was flat. She answered that it was

a just few weeks earlier, during the Muslim holy month of Ramadan. She had done a

story for CNBC Arabiya Television about the colorful lanterns called fawanis,

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each with a burning candle inside,that Egyptian schoolchildren traditionally carried

around during Ramadan, a tradition dating back centuries to the Fatimid period in

Egypt. Kids swing the lanterns and sing songs, and people give them candy or gifts,

as in America on Halloween. For centuries, small, low-wage workshops in Cairo's older

neighborhoods have manufactured these lanterns-until thelast few years.That was when

plastic Chinese-made Ramadan lanterns, each with a battery-powered light instead of

a candle, began flooding the market, crippling the traditional Egyptian workshops.

Said Lamees, "They are invading our tradition -in an innovative way-and we are doing

nothing about it... These lanterns come out of our tradition, our soul, but [the

Chinese versions] are more creative and advanced than the Egyptian ones." Lamees said

that when she asked Egyptians, "Do you know where these are made?," they would all

answer no. Then they would turn the lamps over and see that they came from China.

Many mothers, like Lamees, though, appreciated the fact that the Chinese versions

are safer than the traditional Egyptian ones, which are made with sharp metal edges

and glass, and usually still use candles. The Chinese versions are made of plastic

and feature flashing lights and have an embedded microchip that plays traditional

Egyptian Ramadan tunes and even the theme song to the popular Ramadan TV cartoon series

Bakkar. As Business Monthly, published by the American Chamber of Commerce in Egypt,

reported in its December 2001 issue, Chinese importers "are pitted not only against

each other, but also against the several-hundred-year-old Egyptian industry. But the

Chinese models are destined to prevail, according to [a] famous importer, Taha Zayat.

Imports have definitely cut down on sales of traditional fawanis,' he said. 'Of all

fawanis on the market, I don't think that more than 5 percent are now made in Egypt.'

People with ties to the Egyptian [fawanis] industry believe China has a clear

advantage over Egypt. With its superior technology, they said, China can make mass

quantities, which helps to keep prices relatively low. Egypt's traditional [fawanis]

industry, by contrast, is characterized by a series of workshops specialized in

different stages of the production process. Glassmakers, painters, welders and metal

crafts-

312

men all have their role to play. 'There will always be fawanis in Ramadan, but in

the future I think Egyptian-made ones could become extinct/ Zayat said. 'There is

no way they can ever compete with things made in China.'"

Think how crazy that statement is: Egypt has masses of low-wage workers, like China.

It sits right next to Europe, on the Suez Canal. It could be and should be the Taiwan

of the eastern Mediterranean, but instead it is throwing in the towel to atheistic

China on the manufacture of one of Muslim Egypt's most cherished cultural artifacts.

Ibrahim El Esway, one of the main importers from China of fawanis, gave The Business

Monthly a tour of his warehouse in the Egyptian town of Muski: He had imported sixteen

different models of Ramadan lanterns from China in 2004. "Amid the crowds at Muski,

[El Esway] gestured to one of his employees, who promptly opened a dust-covered box

and pulled out a plastic fawanis shaped like the head of Simba, from The Lion King.

'This is the first model we imported back in 1994,' he said. He switched it on. As

the blue-colored lion's head lit up, the song 'It's a Small World' rang out."

Introspection

The previous section of this book looked at how individuals, particularly Americans,

should think about meeting the challenge posed by the flattening of the world. This

chapter focuses on what sort of policies developing countries need to undertake in

order to create the right environment for their companies and entrepreneurs to thrive

in a flat world, although many of the things I am about to say apply to many developed

countries as well.

When developing countries start thinking about the challenge of flatism, the first

thing they need to do is engage in some brutally honest introspection. A country,

its people and leaders alike, has to be honest with itself and look clearly at exactly

where it stands in relation to other countries and in relation to the ten flatteners.

It has to ask itself, "To what

extent is my country advancing or being left behind by the flattening of the world,

and to what extent is it adapting to and taking advantage of all the new platforms

for collaboration and competition?" As that Chinese banking official boasted to my

Mexican colleague, China is the wolf. Of all the ten flatteners, the entry of China

into the world market is the most important for developing countries, and for many

developed countries. China can do high-quality low-cost manufacturing better than

any other country, and increasingly, it also can do high-quality higher-cost

manufacturing. With China and the other nine flatteners coming on so strong, no

country today can afford to be anything less than brutally honest with itself.

To that end, I believe that what the world needs today is a club that would be modeled

after Alcoholics Anonymous (A.A.). It would be called Developing Countries Anonymous

(D.C.A.). And just as at the first A.A. meeting you attend you have to stand up and

say, "My name is Thomas Friedman and I'm an alcoholic," so at Developing Countries

Anonymous, countries would have to stand up at their first meeting and say, "My name

is Syria and I'm underdeveloped." Or "My name is Argentina and I'm underachieving.

I have not lived up to my potential."

Every country needs "the ability to make your own introspection," since "no country

develops without going through an X-ray of where you are and where your limits are,"