The world is now a plateau

The world is now a plateau

As everyone knows,the world has been “flattening” for the past three decades

Samuel J. Palmisano

As everyone knows,the world has been “flattening” for the past three decades. This has opened the door for dozens of nations and billions of people to enter the global economy. What many do not realise is that this era is coming to an end.

Not that global integration is over,or even slowing down. Far from it. But the developing world has reached the end of its rapid path to rising GDP and per capita income. Some call this the “middle-income trap” — the idea that it is a lot easier to go from a low-income to a middle-income economy than it is to jump to the next level.

As if that weren’t challenging enough,this shift is happening at the same time all around the world. Every market is now in a competitive race with all the others,which have also been sprinting for the last 15 years to arrive at this same spot.


Simply put,these growth markets have plucked the low-hanging fruit of Global Integration,Act I. Now they face a radically more competitive arena,requiring higher degrees of regulation,higher standards and higher expectations for everything — from product and service quality to working conditions to protection of intellectual property and the rule of law. The playing field is still flat,but the game is moving to a higher plateau.

Despite the gloom and doom one hears,this moment actually presents exciting new opportunities for the developed world. Many of the capabilities and skills sought by an innovation-based global economy are deeply engrained in Europe,Japan and the United States. However,these economies — and in particular their government leaders — must also tackle some very big challenges if they are to compete successfully in the years ahead.

Just as emerging markets are facing the middle-income trap at once,so the developed world finds itself having to address all of its huge structural overhangs,and with great urgency,thanks to the ongoing financial crisis. The new “great game” of global competition will not wait to start play while we get our house in order. How to do that? Let me suggest three broad steps.

First,we must invest in the future. We need increased investments in areas like infrastructure,education and deep research,along with greater flexibility through smarter labour and trade regulations. We cannot simply cost-cut our way to competitiveness. To pull that off,we will need both balanced fiscal policies and far deeper collaboration among government,business and all of civil society.

Second,every player in this game needs to deliver unique value. This is something every business knows: If you want to be competitive,you have to be really good at something people value. The localities and economies that succeed will have clarity on the kind of economic and societal innovation they do uniquely well — what makes them stand out in the global competitive market for talent and investment. And they will invest in that.

Finally,government must become smarter,and I don’t just mean it should digitise its public services. Government is in desperate need of an infusion of modern subject-matter expertise. Take public safety. We used to measure crime-fighting by the size of our police forces and the state of the art of their equipment. But more and more police departments are fighting crime with data. That’s why New York City is now one of the safest large cities in the world.

The good news is that a new generation of leaders gets it. They embrace technology. They think in terms of large-scale,sustainable systems. And they’re highly pragmatic.

What the discovery of steam power was to the 18th century,the explosion of data will be to the 21st. Its economic and societal value is incalculable. If we seize upon this new resource,future historians will look back on this moment as the dawn of a new golden age of innovation.

The writer is the chairman of IBM