Ketan Patel and Thomas Friedman: Just stop the world, so the West can get off

Two experts on global economics tell Jason Nissé why the US and Europe can't keep up with a new global order driven by Eastern dynamism and the technological revolution
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The Independent Online

Are we living in a flat world or a world turned upside down? Do we need strategies for a business environment that is changing faster than the fortunes of Liverpool in the Uefa Champions League final? Are the traditional Western capitalist economies, which felt so comfortable in our success only a few years ago, about to be outstripped by the rapid growth of China and India? What does this mean for how we work - and whether we work - in the future?

Are we living in a flat world or a world turned upside down? Do we need strategies for a business environment that is changing faster than the fortunes of Liverpool in the Uefa Champions League final? Are the traditional Western capitalist economies, which felt so comfortable in our success only a few years ago, about to be outstripped by the rapid growth of China and India? What does this mean for how we work - and whether we work - in the future?

"We're in a transition," says Ketan Patel, who quit last month as head of strategy at Goldman Sachs to set up his own consultancy and investment company. "We finished the last century with a quite clear idea of how the world was. The war with communism was over and US-style democratic capitalism was the standard. But in the first four years of this century, so many things have changed."

These have included the exponential growth of China and India, the uncertainties caused by the end of the dot-com boom, the crisis in American corporations triggered by the collapse of Enron and WorldCom, and the terrorist attacks of 9/11. Having spent the past few years "travelling round the world talking to the top 150 CEOs", Patel has come to the belief that: "The world is changing yet many business people are still clinging on to the old themes of price, cost and business process re-engineering."

Thomas Friedman, the New York Times columnist and author on global affairs, is in the midst of a book tour promoting his best-selling work The World Is Flat. The book argues that technological advances, in particular, have levelled the business playing field so that "you can work from north London, North Dakota or north Bangalore". And this process, which he calls "flattening", has enabled one-man bands to compete with massive multinationals, completely changing business models and putting jobs at risk in traditional economic powerhouses such as the US and Europe.

Meeting readers, he has detected a mood, particularly in the US, which has not been there before. "Fear is too strong a word," he says. "There is an undertow of angst that there is something going on in the world that is challenging them on jobs, education and competition."

Outsourcing, most noticeably in IT and the financial services sector, is such big news in the US that it became an election issue, with the Democrats in particular being "weak at the knees", according to Friedman. "There is a complete lack of leadership on the positive side. The US has the best universities in the world, the best capital markets, the best rule of law, the best patent protection. Yet we are threatening to lose a free-trade agreement with Central America."

In a world where the whole sum of human knowledge is downloaded on to the internet and can be accessed in microseconds using Google, and where mobile phone makers will soon have a simple internet-ready cellphone for sale at around $25, more information than our parents could find in a lifetime will shortly be available from a device in your pocket. "The next advance in bioscience will come from some Romanian 15-year-old who has downloaded the map of the human genome," argues Friedman.

Patel believes that IT is changing consumption patterns radically. "At Goldmans, we produced an interesting paper for the IT industry about the disruptive influence of technology. A lot of people have grown up with access to all sorts of information, from Buddha through to how to assemble a nuclear bomb. They have their own digital personalities. They are impatient. They are much less loyal. They often choose different names to hide themselves. And big business has not yet become used to this."

It is not just business. Friedman worries that America does not understand the technological revolution that, up till now, it has led. "We have a government which is catering for people who think that intelligent design came from God not Intel."

Patel worries that the US reaction to the new world order is to put up barriers to the free trade it has traditionally championed. "Protectionist voices are rising within the US," he argues. "Most of the leading thinkers are still hung up on the rhetoric of the late 20th century - free trade, globalisation, multilateralism. America has shifted to a more interventionist, protectionist, bilateralist role."

This has manifested itself in a host of ways, from the US imposing, and then having to withdraw, tariffs on imported steel; to it ignoring the World Trade Organisation's call to conclude bilateral trade agreements with scores of developing countries; to the tough new visa rules supposedly brought in to stop terrorists entering the US, which actually deterred students and IT specialists.

Friedman describes this last move as "telling all the first-choice intellectual draft picks to stay home". Patel says: "I would hope that US protectionism is transitory. America's strength has come from its attractiveness to top talent from around the world. If they start to show protectionism against Indian IT guys, then we all will suffer."

However, Patel argues that protectionism will be more of a factor in the coming years. He believes that China, in particular, and India, to some extent, are presenting a new business model that involves more state intervention than has been seen in the US or Europe.

The rise of China and India - the world's most populous countries - as economic forces has accelerated over the past few years. Friedman cites examples of religious artefacts in Mexico and Egypt being made in China. He also points out that companies like Infosys and Wipro in India are doing the backroom IT work for many US and European firms without their customers, or even many of their staff, realising.

Patel points to the investment that both countries are putting into their IT infrastructure. "I see whole silicon valleys being developed in the US, China and India. But I don't see them in Britain and Europe." He claims that China has a dozen IT clusters developing, while India has at least five.

Both point to the incredible output from the two countries' universities. These are churning out hundreds of thousands of engineering graduates, many fluent in English, every year. "You have high-education and high-aspiration countries," says Friedman. "Put the two together and whammo."

These are people who work hard. Both Friedman and Patel pour scorn on the French 35-hour week. "In India they are aiming for the 35-hour day," argues Friedman, while Patel says: "Are we going to embrace a 35-hour week when China thinks it should be more like 60 hours."

However, instead of fearing the growth of India and China, the West should see this as an opportunity. "In the next 40 to 50 years, half a billion people will come into the consumer cycle," says Patel. These people will be hungry for Western brands, will need Western capital goods and will be challenging for the scarce amount of natural resources. Already Chinese demand is pushing up the price of oil and other commodities and leading to a world shipping shortage. "If we do not sort out alternative energy sources, we will burn up and burn out what we have at the moment," says Friedman.

Patel argues that the need to secure energy supplies for India and China will put countries such as Iran in a very powerful position, regardless of whether the US is able to stabilise Iraq and get the oil flowing from that war-torn country.

However, he believes the pace of change will not be as rapid as many think. "Statistics tell us that it will take India and China at least two decades - maybe even five decades - to develop to the position that would justify the fear that people have of them."

Both thinkers see a bleak future for Europe unless it gets its act together. "America has always known that unless you have the economic clout, you do not get the political or social clout," says Patel.

"In Europe we have to be first an economic bloc, otherwise you have a number of countries just waiting to be picked off."

Friedman is even more blunt. "Other than the UK, I see Europe as an assisted-living facility staffed by Turkish nurses."

The ideas that Friedman and Patel are putting forward are getting an audience far beyond the usual political and business specialists. Friedman's book went to the top of The New York Times best-seller list and was only kept at number two on Amazon by advance orders for the new Harry Potter.

"My book is filling a vacuum," he says. "People want to know what is happening to them and I've made a whack of trying to explain it."

BIOGRAPHYS

Ketan Patel

Age: 43.

Education: London School of Economics and City University Business School.

Career (1988-2000): KPMG - head of business-transformation strategy at the consultancy.

2000-05: Goldman Sachs - head of the strategic group.

Interests: ancient military and esoteric thought; meditation; the Tai Chi and Wing Chun martial arts exercise regimes; yoga; writing poetry; painting and drawing.

Thomas Friedman

Age: 51.

Education: Brandeis University, Massachusetts, and Oxford University.

Career: Joined The New York Times in 1981 as a financial reporter specialising in Opec and oil-related news. Later served as the chief diplomatic, chief White House and international economics correspondent. He has won three Pulitzer Prizes. Previous books include From Beirut to Jerusalem, The Lexus and the Olive Tree and Longitudes and Attitudes: Exploring the World after September 11.

Thomas Friedman's 'The World Is Flat' is published by Penguin. Ketan Patel's 'The Master Strategist' comes out on Thursday, published by Hutchinson.

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