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Last Updated: Sunday, 29 January 2006, 17:12 GMT
Why Bill Gates' world is flat
By Tim Weber
Business Editor, BBC News website, in Davos

A globe
Technology is making the world a flatter place
Globalisation may be unavoidable, but what impact will it have on our lives?

It's ten to seven in the morning; it is dark, snowy and dozens of millionaires are patiently queuing to get inside for breakfast.

The prospect of a 90-minute breakfast conversation with Microsoft boss Bill Gates and New York Times columnist Tom Friedman has persuaded them to brave the freezing cold.

With rapt attention they listen to Mr Gates telling them that "The World is Flat" (which is the title of Mr Friedman's most recent book).

It's a cute little metaphor, and heard in many sessions during the five days of the World Economic Forum.

The big disruption

The argument goes like this: More and more parts of the world are getting the infrastructure that allows them to become part of the always-on world.

China, for example, already has more mobile phones than there are people in the United States and in four years, says Mr Gates, the country will have more broadband connections than there are US households.

Combine this connectivity with good transport links and productivity soars in places like India, Brazil and Russia. More importantly, though, one billion people suddenly join the global workforce.

BT boss Ben Verwaayen explains the impact: "Something profound has happened over the past three years, as disruptive as the invention of the steam engine."

"For the first time", he says, "you don't need physical proximity for a joined up company."

Or as Bill Gates puts it: It doesn't matter whether you sit in Boston, Beijing or Bangalore, if you are smart you can now compete directly with the rest of the world "on a level playing field" - in a world that is flat.

Going to university may no longer guarantee people a job

It obviously works for Microsoft. The Beijing research lab is one of the company's most productive, says Mr Gates.

When he recently met his firm's ten best-performing employees, he says half-jokingly, nine of them "had names I couldn't pronounce".

Losing four million jobs

In this flat world, it doesn't matter whether your accountant sits in Marlborough or Mumbai, and whether your customer care centre is based near Sausalito or Soweto.

Your factory's supply chain is fully integrated, and stretches from Shenzhen and Chennai to Central Europe.

It makes for lean, efficient companies. It drives down cost, improves profits and keeps inflation low.

But it also means that many workers are losing their jobs.

"In Europe we could run out of jobs, and those that still have jobs will have to take care of an ageing population, says Stefan Delacher, a director with Thiel Logistics, which specialises in organising global supply chains.

David Arkless of Manpower predicts that four million people will see their jobs transferred over the next five years.

Search for solutions

"On a macro level," says BT's Ben Verwaayen, "it is easy to see the win-win."

Software company in Bangalore
India's technology and outsourcing industries are growing fast

But if your job goes overseas it is difficult to be positive, he warns.

The fate of the victims of globalisation worried many Davos participants.

"How can workers in the West hang on to their jobs?" was a much debated question.

Be flexible and don't specialise too much, said Jagdish Bhagwati of Columbia University. Health and pensions systems should not be set up so that workers find it difficult to change employers, he added.

Others said lifelong learning could be the answer. Make your job, your work, your knowledge ever more valuable.

But obviously Chinese and Indian workers are doing just the same.

It's wrong to tell people that going to university will guarantee them a job, says Adair Turner, the chairman of the UK's low pay and pensions commissions, because the technology sector simply won't offer that many jobs.

"Everything that can be automated will be automated," he predicts.

"Already we only create jobs that are face-to-face... in hospitality, retail, tourism, healthcare," says Mr Turner.

Chris Dedicoat of technology giant Cisco echoes the argument and says: "The stigma of vocational training has to be removed if the economies of Europe want to have jobs for all".

Don't panic

So should we all become nurses, plumbers and hair dressers?

Not really. Some of India's and China's cost advantages are disappearing already.

It is now more expensive to employ an engineer in Shanghai than in Slovakia.

In Indian call centres, says Jean-Herve Jenn of outsourcing specialist Convergys, wages are rising by 15-20% a year.

This is not the time to panic, says Mr Gates. "Change will not be cataclysmic... it will not happen that fast."

Remember the 1980s, he says, when everybody was worried about Japan. But it was the United States that made the running in the 1990s.

Two billion new customers

We have to realise that globalisation is both a challenge and an opportunity, says Jean-Herve Jenn.

There may be an extra one billion workers, but they come with a new market of 2.3 billion consumers in Brazil, Russia, India and China alone.

Figures before image of Earth   AP
Looking at home - but it cannot go on like this

The biggest surprise, says Mr Gates, is what globalisation has done for poverty reduction in China.

Already China's and India's middle classes form a larger market than the population of the United States, argues Mr Jenn.

And the wealth is spreading.

In India, says the New York Times' Tom Friedman, there are tech islands in a sea of poverty.

"In a two hour drive out of Bangalore, one travels back 12 centuries," he says.

But only a few years back, he says, "it took just 15 minutes."

The non-flat parts of the world are getting smaller.


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