Flatitude is supposed to be a play on attitude

I remember reading about Thomas Friedman’s “The World is Flat” thesis years ago. Put simply: he proposed that globalization meant the USA no longer enjoyed a by-default pre-eminance in the world economy. American companies and workers now had to compete with the entire world, and that inevitably would lead to worldwide wages equalizing and other companies rising up to meet American dominance. Gone are the days when an American can work for the world’s biggest company, headquartered in their hometown, and then go on vacation to places where “everything is so cheap!” The world’s biggest companies will be more likely to be headquartered in China and India than America, and wages worldwide will rise to the point that every country is as expensive to visit as America.

20 years on, none of that has happened.

At times and at places, global wages have risen relative to America. At times and at places, global companies have risen into industries once dominated by America. But in 2005, when Friedman published his book, the top 10 global companies by market cap were 80% American. In 2024, they’re 90% American. And in certain years (like 2016 and 2017), they’ve been 100% American. American companies still rule the global roost, and American wages are still the highest on earth. International workers still prefer to immigrate to America, despite the massive costs and uncertainties, rather than find a job with a global company in their home country.

I don’t know how Friedman himself portrayed his thesis in 2005, but in my part of the world (liberal and anti-American-by-default because the sitting president was a Republican), there was a lot of “take that America! You won’t stay on top for long and you’d better get used to it!” I think Friedman had a misread of history, and the readers had an even greater misread of the present.

There is a default mindset that I feel many people fall into when talking about economics. The idea goes: America used to be on top of the world because of unfair, random advantages. Those could be colonialism, those could be early industrialization. But now that the world is more fair (or once we *make it* more fair), America can’t coast on inertia, it will have to compete on a level playing field, and *of course* the rest of the world, which has 95% of the population to America’s 5%, will eventually out-compete it in *many* areas.

I think this belies a misunderstanding of the unfair advantages that America has *right now*. India, Nigeria, and China all have large populations, lots of natural resources, and growing middle classes. But it’s difficult to do business there because of import/export and currency restrictions, and often-times everything can be taken from you by government fiat, so it’s harder to create success and you’re more likely to leave the country if you do manage it. And when you leave the country, you can always go to Europe, but if you want to keep growing your business or your personal finances you go to America where the wages are higher and the business climate friendlier.

Friedman said that globalization, the technology that connects us and the legal/social willingness to offshore jobs and production will inevitably lead to a flattening of global economies and global wages. Why would Microsoft pay $100,000 to a programmer in America, when a programmer just as good in India will cost $10,000? They won’t. And so there will be more demand for Indian programmers and less and less demand for American ones. Law of supply and demand means American wages will fall and Indian wages will rise until the two equalize.

But alternatively, why would Microsoft put its money into India (as it must do in order to have the bank accounts, rental agreements, and so on which allow it to employ Indian workers), when capital controls will restrict its ability to get its money back out again? Companies don’t exist for a country’s good, they exist for their own good, and Microsoft wants to be able to move its money anywhere and everywhere at a moment’s notice. Capital controls, like what the developing world still employs, make it harder to do so, and make companies like Microsoft and others far more leery about investing in those countries.

An employee in America costs 10x as much, but at least your money will never get stuck in America with no way out.

And this is just the one example that leapt off the page at me. There are plenty more reasons why the world is not flat and probably won’t ever be. There are network affects to the USA that may take centuries to undo, such as the preeminence of the US stock markets at the expense of all others. India investors throw their money into the S&P more than the Indian stock markets, so an Indian company looking to grow fast with public money also needs to list on the S&P. That draws it further and further into connecting with the American economy, until it starts making more and more sense to just do its business in America as well. Oh it would never think of uprooting from India (and the government won’t allow it anyway), but it will invest more in American operations and less in Indian operations than it would if it didn’t get drawn to America by all the money that’s there.

Then there’s security. For all the internet memes, America is a safer place with a generally lower death rate than developing nations like India and Nigeria. There’s a whole lot of reasons for this, but it isn’t something that can be fixed quickly and easily with a bit more money. So an Indian worker would still prefer to make their money in America if it means they get to live in America as well, even if they could make the same amount of money in India.

I think there is a general under-estimating of what makes the American economy so strong. A lot of people assume it’s just inertia: America industrialized early, got to coast on colonialism, and then wasn’t destroyed in World War 1 and 2. That meant that it emerged in the 50s as the strongest economy on earth, but without those lucky breaks it has no reason to stay the strongest. So people assume America has just been coasting and the rest of the world will quickly catch up. I don’t think that’s the truth. A lot less attention is paid to just how much America’s laws and economic setup make doing business here easier than anywhere else.

There’s a separate meme about how “lucky” America is that it keeps finding natural resources everywhere. Coal, oil recently Helium, America just seems “lucky.” But while hydrocarbons certainly aren’t found everywhere, America isn’t *really* just lucky. The recent American oil boom is driven by fracking, and Europe could have joined in the boom except that they banned fracking entirely. There is plenty of frack-able (is that a word?) oil underneath Europe, even if there aren’t any Saudi-style oil fields there, but Europe can’t join the oil boom because its laws don’t allow it.

And American finds of lithium, helium and so on aren’t just luck either. In America, if you own a piece of land you generally own the mineral rights beneath it. That makes it economically viable to just start searching the land for any big piles of lithium/helium and so on, because if you find any its yours by default and you win a lot of money.

But in Australia, many mineral rights are held by the states. So why would I ever go hunting for lithium/helium on my land if I may not be able to get money out of it? If I have to pay the state a portion of my winnings? There’s probably just as much ultra-precious metals in Australia as there are in America, but less of it gets found because there’s less incentive. Not to say *nothing* gets found, Australia does have a mining-intensive economy, but less than if individuals had an incentive to go looking.

I just wanted to post this to say that the world is not flat, and America is not just lucky. Luck may play a role, but writers and commentators often don’t understand how America’s current laws and economic setup give it a *current* competitive advantage relative to all the other countries on earth. It isn’t just coasting on its *past* competitive advantage from the 1950s, and there’s no guarantee that the rest of the world *must* catch up to America unless they loosen their economic laws in turn.