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Indeed, talk to young Arabs and Muslims anywhere, and this cognitive dissonance and the word “humiliation” always come up very quickly in conversation. It was revealing that when Mahathir Mohammed made his October 16, 2003, farewell speech as prime minister of Malaysia at an Islamic summit he was hosting in his own country, he built his remarks to his fellow Muslim leaders around the question of why their civilization had become so humiliated-a term he used five times. “I will not enumerate the instances of our humiliation,” said Mahathir. “Our only reaction is to become more and more angry. Angry people cannot think properly. There is a feeling of hopelessness among the Muslim countries and their people. They feel they can do nothing right...”
This humiliation is the key. It has always been my view that terrorism is not spawned by the poverty of money. It is spawned by the poverty of dignity. Humiliation is the most underestimated force in international relations and in human relations. It is when people or nations are humiliated that they really lash out and engage in extreme violence. When you take the economic and political backwardness of much of the Arab-Muslim world today, add its past grandeur and self-image of religious superiority, and combine it with the discrimination and alienation these Arab-Muslim males face when they leave home and move to Europe, or when they grow up in Europe, you have one powerful cocktail of rage. As my friend the Egyptian playwright Ali Salem said of the 9/11 hijackers, they “are walking the streets of life, searching for tall buildings-for towers to bring down, because they are not able to be tall like them.”
I fear that this sense of frustration that feeds recruits to bin Laden may get worse before it gets better. In the old days, leaders could count on walls and mountains and valleys to obstruct their people's view and keep them ignorant and passive about where they stood in comparison to others. You could see only to the next village. But as the world gets flatter, people can see for miles and miles.
In the flat world you get your humiliation dished up to you fiber-optically. I stumbled across a fascinating example of this involving bin Laden himself. On January 4, 2004, bin Laden issued one of his taped messages through al-Jazeera, the satellite television network based in Qatar. On March 7, the Web site of the Islamic Studies and Research Center published the entire text. One paragraph jumped out at me. It is in the middle of a section in which bin Laden is discussing the various evils of Arab rulers, particularly the Saudi ruling family.
“Thus, the situation of all Arab countries suffers from great deterioration in all walks of life, in religious and worldly matters,” says bin Laden.
“It is enough to know that the economy of all Arab countries is weaker than the economy of one country that had once been part of our [Islamic] world when we used to truly adhere to Islam. That country is the lost Andalusia. Spain is an infidel country, but its economy is stronger than our economy because the ruler there is accountable. In our countries, there is no accountability or punishment, but there is only obedience to the rulers and prayers of long life for them.”
The hair on my arms stood up when I read that. Why? Because what bin Laden was referring to was the first Arab Human Development Report, which came out in July 2002, well after he had been evicted from Afghanistan and was probably hiding out in a cave somewhere. The Arab authors of the report wanted to grab the attention of the Arab world as to how far behind it had fallen. So they looked for a country that had a GDP slightly more than that of all twenty-two Arab states combined. When they ran down the tables, the country that fit that bill perfectly was Spain. It could have been Norway or Italy, but Spain happened to have a GDP just slightly larger than all the Arab states together. Somehow, bin Laden heard or read about this first Arab Human Development Report from his cave. For all I know, he may have read my own column about it, which was the first to highlight the report and stressed the comparison with Spain. Or maybe he got it off the Internet. The report was downloaded from the Internet some 1 million times. So even though he was off in a cave somewhere, he could still get this report, and its humiliating conclusion, shoved right in his face-negatively comparing the Arab states to Spain, no less! And when he heard that comparison, wherever he was hiding, bin Laden took it as an insult, as a humiliation-the notion that Christian Spain, a country that was once controlled by Muslims, had a greater GDP today than all the Arab states combined. The authors of this report were themselves Arabs and Muslims; they were not trying to humiliate anyone-but that was how bin Laden interpreted it. And I am certain he got this dose of humiliation over a modem at 56K. They may even have broadband now in Tora Bora.
And having gotten his dose of humiliation this way, bin Laden and his emulators have learned to give it right back in the same coin. Want to understand why the Islamo-Leninists behead Americans in Iraq and Saudi Arabia and then distribute pictures on the Internet with the bloody head of the body resting on the headless corpse? It is because there is no more humiliating form of execution than chopping off someone's head. It is a way of showing utter contempt for that person and his or her physical being. It is no accident that the groups in Iraq who beheaded Americans dressed them first in the same orange jumpsuits that al-Qaeda prisoners in Guantanamo Bay are forced to wear. They had to learn about those jumpsuits either over the Internet or satellite TV. But it amazes me that in the middle of the Iraq war they were able to have the exact same jumpsuits made in Iraq to dress their prisoners in. You humiliate me, I humiliate you. And what do you suppose terrorist leader Abu Musab al-Zarqawi said in his audiotape released on September 11, 2004, the third anniversary of 9/11? He said, “The holy warriors made the international coalition taste humiliation... lessons from which they are still burning.” The tape was titled “Where Is the Honor?”
As I said, however, this frustration and humiliation is not confined to the Islamist fringes. The reason why the Islamo-Leninists have become the most energized and pronounced opponents of globalization/ Americanization and the biggest threat to the flattening of the world today is not simply their extraordinary violence, but also because they enjoy some passive support around the Arab-Muslim world.
In part, this is because most governments in the Arab-Muslim world have refused to take on these radicals in a war of ideas. While Arab regimes have been very active in jailing their Islamo-Leninists when they can find and arrest them, they have been very passive in countering them with a modern, progressive interpretation of Islam. This is because almost all of these Arab-Muslim leaders are illegitimate themselves. Having come to power by force, they have no credibility as carriers of a moderate, progressive Islam, and they always feel vulnerable to hard-line Muslim preachers, who denounce them for not being good Muslims. So instead of taking on the Muslim radicals, the Arab regimes either throw them in jail or try to buy them off. This leaves a terrible spiritual and political void.
But the other reason for the passive support that the Islamo-Leninists enjoy-and the fact that they are able to raise so much money through charities and mosques in the Arab-Muslim world-is that too many good decent people there feel the same frustration and tinge of humiliation that many of their most enraged youth do. And there is a certain respect for the way these violent youth have been ready to stand up to the world and to their own leaders and defend the honor of their civilization. When I visited Qatar a few months after 9/11, a friend of mine there-a sweet, thoughtful, liberal person who works for the Qatari government— confided to me something in a whisper that was deeply troubling to him: “My eleven-year-old son thinks bin Laden is a good man.”
Most middle-class Arabs and Muslims, I am convinced, were not celebrating the death of three thousand innocent Americans on 9/11. I know my Arab and Muslim friends were not. But many Arabs and Muslims were celebrating the idea of putting a fist in America's face— and they were quietly applauding the men who did it. They were happy to see someone humiliating the people and the country that they felt was humiliating them and supporting what they saw as injustice in their world-whether it is America's backing of Arab kings and dictators who export oil to it or America's backing of Israel whether it does the right things or the wrong things.
Most American blacks, I am sure, had little doubt that O. J. Simpson murdered his ex-wife, but they applauded his acquittal as a stick in the eye of the Los Angeles Police Department and a justice system that they saw as consistently humiliating and unfair to them. Humiliation does that to people. Bin Laden is to the Arab masses what O.J. was to many American blacks-the stick they poke in the eye of an “unfair” America and their own leaders. I once interviewed Dyab Abou Jahjah, often called the Malcolm X of Belgium's alienated Moroccan youth. I asked him what he and his friends thought when they saw the World Trade Center being smashed. He said, “I think if we are honest with ourselves, most of the Muslims all over the world felt that... America got hit in the face and that cannot be bad. I don't want to make an intellectual answer for that. I'll give it very simply. America was kicking our butts for fifty years. And really badly. Supporting the bullies in the region, whether it is Israel or our own regimes, [America] is giving us not only a bleeding nose, but breaking a lot of our necks.”
Just as America's economic depression in the 1920s and 1930s made many normal, intelligent, thinking Americans passive or active supporters of communism, so the humiliating economic, military, and emotional depression of the Arab-Muslim world has made too many normal, intelligent, and thinking Arabs and Muslims passive supporters of bin Ladenism.
Former Kuwaiti minister of information Dr. Sa'd Bin Tefla, a journalist, wrote an essay in the London Arabic daily Al-Sharq Al-Awsat on the third anniversary of September 11 titled “We Are All Bin Laden,” which went right to this point. He asked why it is that Muslim scholars and clerics eagerly supported fatwas condemning Salman Rushdie to death for writing an allegedly blasphemous novel, The Satanic Verses, that wove in themes about the Prophet Muhammad, but to this day no Muslim cleric has issued a fatwa condemning Osama bin Laden for murdering three thousand innocent civilians. After the fatwa was declared against Salman Rushdie, Muslims staged protests against the book at British embassies all over the Islamic world and burned Salman Rushdie dolls along with copies of his book. Nine people were killed in an anti-Rushdie protest in Pakistan.
“Religious legal rulings were disseminated one after another banning Salman Rushdie's book and calling for him to be killed,” Bin Tefla wrote. “Iran earmarked a reward of $ 1 million for whoever would implement Imam Khomeini's fatwa and kill Salman Rushdie.” And bin Laden? Nothing-no condemnation. “Despite the fact that bin Laden murdered thousands of innocents in the name of our religion and despite the damage that he has caused to Muslims everywhere, and especially to innocent Muslims in the West, whose life is much better than the life of Muslims in Islamic lands, to this date not a single fatwa has been issued calling for the killing of bin Laden, on the pretext that bin Laden still proclaims 'there is no God other than Allah,'” Tefla wrote. Worse, he added, Arab and Muslim satellite television channels have “competed amongst themselves in broadcasting [bin Laden's] sermons and fatwas, instead of preventing their dissemination as they did in the case of Rushdie's book... With our equivocal stance on bin Laden, we from the very start left the world with the impression that we are all bin Laden.”
Germany was humiliated after World War I, but it had the modern economic foundations to produce a state response to that humiliation—in the form of the Third Reich. The Arab world, by contrast, could not produce a state response to its humiliation. Instead, it has rattled the world stage in the last fifty years with two larger-than-life figures, rather than states, noted political theorist Yaron Ezrahi: One was the Saudi oil minister Ahmed Zaki Yamani, and the other was Osama bin Laden. Each achieved global notoriety, each briefly held the world in his palm-one by using oil as a weapon and the other by using the most unconventional suicide violence imaginable. Each gave a temporary “high” to the Arab-Muslim world, a feeling that it was exercising power on the world stage. But bin Laden and Yamani were only the illusions of power, noted Ezrahi: The Saudi oil weapon is economic power without productivity, and bin Laden's terrorism weapon is military force without a real army, state, economy, and engine of innovation to support it.
What makes Yamanism and bin Ladenism so unfortunate as strategies for Arab influence in the world is that they ignore the examples within Arab culture and civilization-when it was at its height-of discipline, hard work, knowledge, achievement, scientific inquiry, and pluralism. As Nayan Chanda, the editor of YaleGlobal Online, pointed out to me, it was the Arab-Muslim world that gave birth to algebra and algorithms, terms both derived from Arabic words. In other words, noted Chanda, “The entire modern information revolution, which is built to a large degree on algorithms, can trace its roots all the way back to Arab-Muslim civilization and the great learning centers of Baghdad and Alexandria,” which first introduced these concepts, then transferred them to Europe through Muslim Spain. The Arab-Muslim peoples have an incredibly rich cultural tradition and civilization, with long periods of success and innovation to draw on for inspiration and example for their young people. They have all the resources necessary for modernization in their own cultural terms, if they want to summon them.
Unfortunately, there is huge resistance to such modernization from the authoritarian and religiously obscurantist forces within the Arab-Muslim world. That is why this part of the world will be liberated, and feel truly empowered, only if it goes through its own war of ideas—and the moderates there win. We had a civil war in America some 150 years ago over ideas-the ideas of tolerance, pluralism, human dignity, and equality. The best thing outsiders can do for the Arab-Muslim world today is try to collaborate with its progressive forces in every way possible— from trying to solve the Arab-Israeli conflict, to stabilizing Iraq, to signing free-trade agreements with as many Arab countries as possible-so as to foster a similar war of ideas within their civilization. There is no other way. Otherwise this part of the world has the potential to be a huge un-flattening force. We have to wish the good people there well. But the battle will be one for them to fight and to win. No one can do it for them.
No one has expressed what is needed better than Abdel Rahman al-Rashed, the general manager of the London-based al-Arabiya news channel. One of the best-known and most respected Arab journalists working today, he wrote the following, in Al-Sharq Al-Awsat (September 6, 2004), after a series of violent incidents involving Muslim extremist groups from Chechnya to Saudi Arabia to Iraq: “Self-cure starts with self-realization and confession. We should then run after our terrorist sons, in the full knowledge that they are the sour grapes of a deformed culture... The mosque used to be a haven, and the voice of religion used to be that of peace and reconciliation. Religious sermons were warm behests for a moral order and an ethical life. Then came the neo-Muslims. An innocent and benevolent religion, whose verses prohibit the felling of trees in the absence of urgent necessity, that calls murder the most heinous of crimes, that says explicitly that if you kill one person you have killed humanity as a whole, has been turned into a global message of hate and a universal war cry... We cannot clear our names unless we own up to the shameful fact that terrorism has become an Islamic enterprise; an almost exclusive monopoly, implemented by Muslim men and women. We cannot redeem our extremist youth, who commit all these heinous crimes, without confronting the Sheikhs who thought it ennobling to reinvent themselves as revolutionary ideologues, sending other people's sons and daughters to certain death, while sending their own children to European and American schools and colleges.”
Too Many Toyotas
The problems of the too sick, the too disempowered, and the too humiliated are all in their own ways keeping the world from becoming entirely flat. They may do so even more in the future, if they are not properly addressed. But another barrier to the flattening of the world is emerging, one that is not a human constraint but a natural resource constraint. If millions of people from India, China, Latin America, and the former Soviet Empire who were living largely outside the flat world all start to walk onto the flat world playing field at once-and all come with their own dream of owning a car, a house, a refrigerator, a microwave, and a toaster-we are going to experience either a serious energy shortage or, worse, wars over energy that would have a profoundly unflattening effect on the world.
As I mentioned earlier, I visited Beijing in the summer of 2004 with my wife and teenage daughter, Natalie. Before we left, I said to Natalie, “You're really going to like this city. They have these big bicycle lanes on all the main roads. Maybe when we get there we can rent bikes and just ride around Beijing. I did that last time I was there, and it was a lot of fun.”
Silly Tom. I hadn't been to Beijing in three years, and just in that brief period of time the explosive growth there had wiped out many of those charming bicycle lanes. They had been either shrunken or eliminated to add another lane for automobiles and buses. The only biking I did there was on the stationary exercise bike in our hotel, which was a good antidote for having to spend so much time sitting in cars stuck in Beijing traffic jams. I was in Beijing to attend an international business conference, and while there I discovered why all the bikes had disappeared. According to one speaker at the conference, some thirty thousand new cars were being added to the roads in Beijing every month-one thousand new cars a day! I found that statistic so unbelievable that I asked Michael Zhao, a young researcher in the Times's Beijing bureau, to double-check it, and he wrote me back the following e-mail:
Hi Tom, Hope this email finds you well. On your question about how many cars are added each day in Beijing, I did some research on the Internet and found that... car sales in [Beijing] for April 2004 were 43,000—24.1% more than same period last year. So that is 1,433 cars added [daily] to Beijing, but including secondhand car sales. New car sales this month were 30,000, or 1,000 cars each day added to the city. The total car sales from Jan. to April 2004 were 165,000, that is about 1,375 cars added each day to Beijing over this period. This data is from the Beijing Municipal Bureau of Commerce. The city's bureau of statistics has it that the total car sales in 2003 were 407,649, or 1,117 cars each day added. The new car sales last year were 292,858, or 802 new cars each day... The total number of cars in Beijing is 2.1 million... But the recent months seem to have witnessed surging sales. Also noteworthy is last year's SARS outbreak, during which period a lot of families bought cars, due to panic about public contact and a sort of doomsday-stimulated enjoy-life mentality. And many new car owners did enjoy their time driving, as the traffic in the city so much improved with a lot of people voluntarily caged at home, without daring to go out. Since then, coupled with dropping car prices due to China's commitment to reduce tariffs after joining the WTO, a large number of families have advanced their timetable of buying a car, although some others decided to wait for further drops of prices. All the best, Michael.
As Michael's note indicated, you can see China's middle class rising right before your eyes, and it is going to have enormous energy and environmental spillover. The Great Chinese Dream, like the Great Indian Dream, the Great Russian Dream, and the Great American Dream, is built around a high-energy, high-electricity, high-bent-metal lifestyle. To put it another way, the thirty thousand new cars a month in Beijing, and the cloud of haze that envelops the city on so many days, and the fact that the city's official Web site actually keeps track of “blue sky” days all testify to the environmental destruction that could arise from the triple convergence-if clean alternative renewable energies are not developed soon. Already, according to the World Bank, sixteen of the twenty most polluted cities in the world are in China, and that pollution and environmental degradation together cost China $170 billion a year (The Economist, August 21, 2004).
And we have not seen anything yet. China, with its own oil and gas reserves, was once a net exporter. Not anymore. In 2003 China surged ahead of Japan as the second largest importer of oil in the world, after the United States. Right now about 700 to 800 million of China's 1.3 billion people live in the countryside, but they are heading for the flat world, and roughly half are expected to try to migrate to the cities over the next two decades, if they can find work. This will spur a huge surge in demand for cars, houses, steel beams, power plants, school buildings, sewage plants, electricity grids-the energy implications of which are unprecedented in the history of Planet Earth, round or flat.
At the business conference I was attending in Beijing, I kept hearing references to the Strait of Malacca-the narrow passage between Malaysia and Indonesia that is patrolled by the U.S. Navy and controls all the oil tanker traffic from the Middle East to China and Japan. I hadn't heard anyone talking about the Strait of Malacca since the 1970s oil crises. But evidently Chinese strategic planners have begun to grow increasingly concerned that the United States could choke off China's economy at any time by just closing the Strait of Malacca, and this threat is now being increasingly and openly discussed in Chinese military circles. It is just a small hint of the potential struggle for power-energy power-that could ensue if the Great American Dream and the Great Chinese Dream and the Great Indian Dream and the Great Russian Dream come to be seen as mutually exclusive in energy terms.
China's foreign policy today consists of two things: preventing Taiwan from becoming independent and searching for oil. China is now obsessed with acquiring secure oil supplies from countries that would not retaliate against China if it invaded Taiwan, and this is driving China to get cozy with some of the worst regimes in the world. The Islamic fundamentalist government in Sudan now supplies China with 7 percent of its oil supplies and China has invested $3 billion in oil drilling infrastructure there.
In September 2004, China threatened to veto a move by the United Nations to impose sanctions on Sudan for the genocide that it is perpetrating in its Darfur province. China followed by opposing any move to refer Iran's obvious attempts to develop nuclear-weapons-grade fuel to the United Nations Security Council. Iran supplies 13 percent of China's oil supplies. Meanwhile, as the Daily Telegraph reported (November 19, 2004), China has begun drilling for gas in the East China Sea, just west of the line that Japan regards as its border: “Japan protested, to no avail, that the project should be a joint one. The two are also set to clash over Russia's oil wealth. China is furious that Japan has outbid it in their battle to determine the route of the pipeline that Russia intends to build to the Far East.” At the same time it was reported that a Chinese nuclear submarine had accidentally strayed into Japanese territorial waters. The Chinese government apologized for the “technical error.” If you believe that, I have an oil well in Hawaii I would like to sell you...
In 2004, China began competing with the United States for oil exploration opportunities in Canada and Venezuela. If China has its way, it will stick a straw into Canada and Venezuela and suck out every drop of oil, which will have the side effect of making America more dependent on Saudi Arabia.
I interviewed the Japanese manager of a major U.S. multinational that was headquartered in Dalian, in northeastern China. “China is following the path of Japan and Korea,” said the executive, on the condition that he and his company not be quoted by name, “and the big question is, Can the world afford to have 1.3 billion people following that path and driving the same cars and using the same amount of energy? So I see the flattening, but the challenge of the twenty-first century is, Are we going to hit another oil crisis? The oil crisis in the 1970s coincided with Japan and Europe rising. [There was a time] when the U.S. was the only big consumer of oil, but when Japan and Europe came in, OPEC got the power. But when China and India come into being the consumers, it will be a huge challenge that is an order of magnitude different. It is megapolitics. The limits of growth in the 1970s were overcome with technology. We got smarter than before, equipment became more efficient, and energy consumption per head was lower. But now [with China, India, and Russia all coming on strong] it is multiplied by a factor of ten. There is something we really need to be serious about. We cannot restrict China, [Russia,] and India. They will grow and they must grow.”
One thing we will not be able to do is tell young Indians, Russians, Poles, or Chinese that just when they are arriving on the leveled playing field, they have to hold back and consume less for the greater global good. While giving a talk to students at the Beijing College of Foreign Affairs, I spoke about the most important issues that could threaten global stability, including the competition for oil and other energy resources that would naturally occur as China, India, and the former Soviet Union began to consume more oil. No sooner did I finish than a young Chinese woman student shot up her hand and asked basically the following question: “Why should China have to restrain its energy consumption and worry about the environment, when America and Europe got to consume all they energy they wanted when they were developing?” I did not have a good answer. China is a high-pride country. Telling China, India, and Russia to consume less could have the same geopolitical impact that the world's inability to accommodate a rising Japan and Germany had after World War I.
If current trends hold, China will go from importing 7 million barrels of oil today to 14 million a day by 2012. For the world to accommodate that increase it would have to find another Saudi Arabia. That is not likely, which doesn't leave many good options. “For geopolitical reasons, we cannot tell them no, we cannot tell China and India, it is not your turn,” said Philip K. Verleger Jr., a leading oil economist. “And for moral reasons, we have lost the ability to lecture anyone.” But if we do nothing, several things will likely result. First, gasoline prices will continue to trend higher and higher. Second, we will be strengthening the very worst political systems in the world-like Sudan, Iran, and Saudi Arabia. And third, the environment will be damaged more and more. Already, the newspaper headlines in China every day are about energy shortages, blackouts, and brownouts. U.S. officials estimate that twenty-four out of China's thirty-one provinces are now experiencing power shortages.
We are all stewards of the planet, and the test for our generation is whether we will pass on a planet in as good or better shape than we found it. The flattening process is going to challenge that responsibility. “Aldo Leopold, the father of wildlife ecology, once said: 'The first rule of intelligent tinkering is save all the pieces,'” remarked Glenn Prickett, senior vice president of Conservation International. “What if we don't? What if the 3 billion new entrants start gobbling up all the resources? Species and ecosystems can't adapt that fast, and we will lose a major portion of the earth's remaining biological diversity.” Already, noted Prickett, if you look at what is happening in the Congo Basin, the Amazon, the rain forest of Indonesia-the last great wilderness areas-you find that they are being devoured by China's rising appetite. More and more palm oil is being extracted from Indonesia and Malaysia, soybeans out of Brazil, timber out of central Africa, and natural gas out of all of the above to serve China-and, as a result, threatening all sorts of natural habitats. If these trends go on unchecked, with all the natural habitats being converted to farmland and urban areas, and the globe getting warmer, many of the currently threatened species will be condemned to extinction.
The move to sharply reduce energy consumption has to come from within China, as the Chinese confront what the need for fuel is doing to their own environment and growth aspirations. The only thing-and the best thing-we in the United States and Western Europe can do to nudge China toward that understanding is set an example by changing our own consumption patterns. That would give us some credibility to lecture others. “Restoring our moral standing on energy is now a vital national security and environmental issue,” said Verleger. That requires doing everything more seriously-more serious government funding for alternatives, a real push by the federal government to promote conservation, a gasoline tax that will drive more consumers to buy hybrid vehicles and smaller cars, legislation to force Detroit to make more fuel-efficient vehicles, and yes, more domestic exploration. Together, added Verleger, that could help stabilize the price at around $25 a barrel, “which seems to be the ideal range for sustainable global growth.”
In sum, we in the West have a fundamental interest in keeping the American dream alive in Beijing and Boise and Bangalore. But we have to stop fooling ourselves that it can be done in a flat world with 3 billion potential new consumers-if we don't find a radical new approach to energy usage and conservation. If we fail to do so, we will be courting both an environmental and geopolitical whirlwind. If there was ever a time for some big collaboration, it is now, and the subject is energy. I would love to see a grand China-United States Manhattan Project, a crash program to jointly develop clean alternative energies, bringing together China's best scientists and its political ability to implement pilot projects, with America's best brains, technology, and money. It would be the ideal model and the ideal project for creating value horizontally, with each side contributing its strength. Said Scott Roberts, the Cambridge Energy Research Associates analyst in China, “When it comes to renewable technology and sustainable energy, China could be the laboratory of the world-not just the workshop of the world.” Why not?
TWELVE: The Dell Theory of Conflict Prevention, Old-Time Versus Just-in-Time
“In an average day, we sell 140,000 to 150,000 computers,” explained Dick Hunter, one of Dell's three global production managers. “Those orders come in over Dell.com or over the telephone. As soon these orders come in, our suppliers know about it. They get a signal based on every component in the machine you ordered, so the supplier knows just what he has to deliver. If you are supplying power cords for desktops, you can see minute by minute how many power cords you are going to have to deliver.” Every two hours, the Dell factory in Penang sends an e-mail to the various SLCs nearby, telling each one what parts and what quantities of those parts it wants delivered within the next ninety minutes-and not one minute later. Within ninety minutes, trucks from the various SLCs around Penang pull up to the Dell manufacturing plant and unload the parts needed for all those notebooks ordered in the last two hours. This goes on all day, every two hours. As soon as those parts arrive at the factory, it takes thirty minutes for Dell employees to unload the parts, register their bar codes, and put them into the bins for assembly. “We know where every part in every SLC is in the Dell system at all times,” said Hunter.
So where did the parts for my notebook come from? I asked Hunter. To begin with, he said, the notebook was codesigned in Austin, Texas, and in Taiwan by a team of Dell engineers and a team of Taiwanese notebook designers. “The customer's needs, required technologies, and Dell's design innovations were all determined by Dell through our direct relationship with customers,” he explained. “The basic design of the motherboard and case-the basic functionality of your machine-was designed to those specifications by an ODM [original design manufacturer] in Taiwan. We put our engineers in their facilities and they come to Austin and we actually codesign these systems. This global teamwork brings an added benefit-a globally distributed virtually twenty-four-hour-per-day development cycle. Our partners do the basic electronics and we help them design customer and reliability features that we know our customers want. We know the customers better than our suppliers and our competition, because we are dealing directly with them every day.” Dell notebooks are completely redesigned roughly every twelve months, but new features are constantly added during the year— through the supply chain-as the hardware and software components advance.
It happened that when my notebook order hit the Dell factory in Penang, one part was not available-the wireless card-due to a quality control issue, so the assembly of the notebook was delayed for a few days. Then the truck full of good wireless cards arrived. On April 13, at 10:15 a.m., a Dell Malaysia worker pulled the order slip that automatically popped up once all my parts had arrived from the SLCs to the Penang factory. Another Dell Malaysia employee then took out a “traveler”-a special carrying tote designed to hold and protect parts-and started plucking all the parts that went into my notebook.
Where did those parts come from? Dell uses multiple suppliers for most of the thirty key components that go into its notebooks. That way if one supplier breaks down or cannot meet a surge in demand, Dell is not left in the lurch. So here are the key suppliers for my Inspiron 600m notebook: The Intel microprocessor came from an Intel factory either in the Philippines, Costa Rica, Malaysia, or China. The memory came from a Korean-owned factory in Korea (Samsung), a Taiwanese-owned factory in Taiwan (Nanya), a German-owned factory in Germany (Infineon), or a Japanese-owned factory in Japan (Elpida). My graphics card was shipped from either a Taiwanese-owned factory in China (MSI) or a Chinese-run factory in China (Foxconn). The cooling fan came from a Taiwanese-owned factory in Taiwan (CCI or Auras). The motherboard came from either a Korean-owned factory in Shanghai (Samsung), a Taiwanese-owned factory in Shanghai (Quanta), or a Taiwanese-owned factory in Taiwan (Compal or Wistron). The keyboard came from either a Japanese-owned company in Tianjin, China (Alps), a Taiwanese-owned factory in Shenzen, China (Sunrex), or a Taiwanese-owned factory in Suzhou, China (Darfon). The LCD display was made in either South Korea (Samsung or LG.Philips LCD), Japan (Toshiba or Sharp), or Taiwan (Chi Mei Optoelectronics, Hannstar Display, or AU Optronics). The wireless card came from either an American-owned factory in China (Agere) or Malaysia (Arrow), or a Taiwanese-owned factory in Taiwan (Askey or Gemtek) or China (USI). The modem was made by either a Taiwanese-owned company in China (Asustek or Liteon) or a Chinese-run company in China (Foxconn). The battery came from an American-owned factory in Malaysia (Motorola), a Japanese-owned factory in Mexico or Malaysia or China (Sanyo), or a South Korean or Taiwanese factory in either of those two countries (SDI or Simplo). The hard disk drive was made by an American-owned factory in Singapore (Seagate), a Japanese-owned company in Thailand (Hitachi or Fujitsu), or a Japanese-owned factory in the Philippines (Toshiba). The CD/DVD drive came from a South Korean-owned company with factories in Indonesia and the Philippines (Samsung); a Japanese-owned factory in China or Malaysia (NEC); a Japanese-owned factory in Indonesia, China, or Malaysia (Teac); or a Japanese-owned factory in China (Sony). The notebook carrying bag was made by either an Irish-owned company in China (Tenba) or an American-owned company in China (Targus, Samsonite, or Pacific Design). The power adapter was made by either a Thai-owned factory in Thailand (Delta) or a Taiwanese, Korean, or American-owned factory in China (Liteon, Samsung, or Mobility). The power cord was made by a British-owned company with factories in China, Malaysia, and India (Volex). The removable memory stick was made by either an Israeli-owned company in Israel (M-System) or an American-owned company with a factory in Malaysia (Smart Modular).
This supply chain symphony-from my order over the phone to production to delivery to my house-is one of the wonders of the flat world.
“We have to do a lot of collaborating,” said Hunter. “Michael [Dell] personally knows the CEOs of these companies, and we are constantly working with them on process improvements and real-time demand/supply balancing.” Demand shaping goes on constantly, said Hunter. What is “demand shaping”? It works like this: At 10 a.m. Austin time, Dell discovers that so many customers have ordered notebooks with 40-gigabyte hard drives since the morning that its supply chain will run short in two hours. That signal is automatically relayed to Dell's marketing department and to Dell.com and to all the Dell phone operators taking orders. If you happen to call to place your Dell order at 10:30 a.m., the Dell representative will say to you, “Tom, it's your lucky day! For the next hour we are offering 60-gigabyte hard drives with the notebook you want-for only $10 more than the 40-gig drive. And if you act now, Dell will throw in a carrying case along with your purchase, because we so value you as a customer.” In an hour or two, using such promotions, Dell can reshape the demand for any part of any notebook or desktop to correspond with the projected supply in its global supply chain. Today memory might be on sale, tomorrow it might be CD-ROMs.
Picking up the story of my notebook, on April 13, at 11:29 a.m., all the parts had been plucked from the just-in-time inventory bins in Penang, and the computer was assembled there by A. Sathini, a team member “who manually screwed together all of the parts from kitting as well as the labels needed for Tom's system,” said Dell in their production report to me. “The system was then sent down the conveyor to go to burn, where Tom's specified software was downloaded.” Dell has huge server banks stocked with the latest in Microsoft, Norton Utilities, and other popular software applications, which are downloaded into each new computer according to the specific tastes of the customer.
“By 2:45 p.m., Tom's software had been successfully downloaded, and [was] manually moved to the boxing line. By 4:05 p.m., Tom's system [was] placed in protective foam and a shuttle box, with a label, which contains his order number, tracking code, system type, and shipping code. By 6:04 p.m., Tom's system had been loaded on a pallet with a specified manifest, which gives the Merge facility visibility to when the system will arrive, what pallet it will be on (out of 75+ pallets with 152 systems per pallet), and to what address Tom's system will ship. By 6:26 p.m., Tom's system left [the Dell factory] to head to the Penang, Malaysia, airport.”
Six days a week Dell charters a China Airlines 747 out of Taiwan and flies it from Penang to Nashville via Taipei. Each 747 leaves with twenty-five thousand Dell notebooks that weigh altogether 110,000 kilograms, or 50,000 pounds. It is the only 747 that ever lands in Nashville, except Air Force One, when the president visits. “By April 15, 2004, at 7:41 a.m., Tom's system arrived at [Nashville] with other Dell systems from Penang and Limerick. By 11:58 a.m., Tom's system [was] inserted into a larger box, which went down the boxing line to the specific external parts that Tom had ordered.”
That was thirteen days after I'd ordered it. Had there not been a parts delay in Malaysia when my order first arrived, the time between when I phoned in my purchase, when the notebook was assembled in Penang, and its arrival in Nashville would have been only four days. Hunter said the total supply chain for my computer, including suppliers of suppliers, involved about four hundred companies in North America, Europe, and primarily Asia, but with thirty key players. Somehow, though, it all came together. As Dell reported: On April 15, 2004, at 12:59 p.m., “Tom's system had been shipped from [Nashville] and was tenured by UPS shipping LTL (3-5-day ground, specified by Tom), with UPS tracking number 1Z13WA374253514697. By April 19, 2004, at 6:41 p.m., Tom's system arrived in Bethesda, MD, and was signed for.”
I am telling you the story of my notebook to tell a larger story of geopolitics in the flat world. To all the forces mentioned in the previous chapter that are still holding back the flattening of the world, or could actually reverse the process, one has to add a more traditional threat, and that is an outbreak of a good, old-fashioned, world-shaking, economy-destroying war. It could be China deciding once and for all to eliminate Taiwan as an independent state; or North Korea, out of fear or insanity, using one of its nuclear weapons against South Korea or Japan; or Israel and a soon-to-be-nuclear Iran going at each other; or India and Pakistan finally nuking it out. These and other classic geopolitical conflicts could erupt at any time and either slow the flattening of the world or seriously unflatten it.
This humiliation is the key. It has always been my view that terrorism is not spawned by the poverty of money. It is spawned by the poverty of dignity. Humiliation is the most underestimated force in international relations and in human relations. It is when people or nations are humiliated that they really lash out and engage in extreme violence. When you take the economic and political backwardness of much of the Arab-Muslim world today, add its past grandeur and self-image of religious superiority, and combine it with the discrimination and alienation these Arab-Muslim males face when they leave home and move to Europe, or when they grow up in Europe, you have one powerful cocktail of rage. As my friend the Egyptian playwright Ali Salem said of the 9/11 hijackers, they “are walking the streets of life, searching for tall buildings-for towers to bring down, because they are not able to be tall like them.”
I fear that this sense of frustration that feeds recruits to bin Laden may get worse before it gets better. In the old days, leaders could count on walls and mountains and valleys to obstruct their people's view and keep them ignorant and passive about where they stood in comparison to others. You could see only to the next village. But as the world gets flatter, people can see for miles and miles.
In the flat world you get your humiliation dished up to you fiber-optically. I stumbled across a fascinating example of this involving bin Laden himself. On January 4, 2004, bin Laden issued one of his taped messages through al-Jazeera, the satellite television network based in Qatar. On March 7, the Web site of the Islamic Studies and Research Center published the entire text. One paragraph jumped out at me. It is in the middle of a section in which bin Laden is discussing the various evils of Arab rulers, particularly the Saudi ruling family.
“Thus, the situation of all Arab countries suffers from great deterioration in all walks of life, in religious and worldly matters,” says bin Laden.
“It is enough to know that the economy of all Arab countries is weaker than the economy of one country that had once been part of our [Islamic] world when we used to truly adhere to Islam. That country is the lost Andalusia. Spain is an infidel country, but its economy is stronger than our economy because the ruler there is accountable. In our countries, there is no accountability or punishment, but there is only obedience to the rulers and prayers of long life for them.”
The hair on my arms stood up when I read that. Why? Because what bin Laden was referring to was the first Arab Human Development Report, which came out in July 2002, well after he had been evicted from Afghanistan and was probably hiding out in a cave somewhere. The Arab authors of the report wanted to grab the attention of the Arab world as to how far behind it had fallen. So they looked for a country that had a GDP slightly more than that of all twenty-two Arab states combined. When they ran down the tables, the country that fit that bill perfectly was Spain. It could have been Norway or Italy, but Spain happened to have a GDP just slightly larger than all the Arab states together. Somehow, bin Laden heard or read about this first Arab Human Development Report from his cave. For all I know, he may have read my own column about it, which was the first to highlight the report and stressed the comparison with Spain. Or maybe he got it off the Internet. The report was downloaded from the Internet some 1 million times. So even though he was off in a cave somewhere, he could still get this report, and its humiliating conclusion, shoved right in his face-negatively comparing the Arab states to Spain, no less! And when he heard that comparison, wherever he was hiding, bin Laden took it as an insult, as a humiliation-the notion that Christian Spain, a country that was once controlled by Muslims, had a greater GDP today than all the Arab states combined. The authors of this report were themselves Arabs and Muslims; they were not trying to humiliate anyone-but that was how bin Laden interpreted it. And I am certain he got this dose of humiliation over a modem at 56K. They may even have broadband now in Tora Bora.
And having gotten his dose of humiliation this way, bin Laden and his emulators have learned to give it right back in the same coin. Want to understand why the Islamo-Leninists behead Americans in Iraq and Saudi Arabia and then distribute pictures on the Internet with the bloody head of the body resting on the headless corpse? It is because there is no more humiliating form of execution than chopping off someone's head. It is a way of showing utter contempt for that person and his or her physical being. It is no accident that the groups in Iraq who beheaded Americans dressed them first in the same orange jumpsuits that al-Qaeda prisoners in Guantanamo Bay are forced to wear. They had to learn about those jumpsuits either over the Internet or satellite TV. But it amazes me that in the middle of the Iraq war they were able to have the exact same jumpsuits made in Iraq to dress their prisoners in. You humiliate me, I humiliate you. And what do you suppose terrorist leader Abu Musab al-Zarqawi said in his audiotape released on September 11, 2004, the third anniversary of 9/11? He said, “The holy warriors made the international coalition taste humiliation... lessons from which they are still burning.” The tape was titled “Where Is the Honor?”
As I said, however, this frustration and humiliation is not confined to the Islamist fringes. The reason why the Islamo-Leninists have become the most energized and pronounced opponents of globalization/ Americanization and the biggest threat to the flattening of the world today is not simply their extraordinary violence, but also because they enjoy some passive support around the Arab-Muslim world.
In part, this is because most governments in the Arab-Muslim world have refused to take on these radicals in a war of ideas. While Arab regimes have been very active in jailing their Islamo-Leninists when they can find and arrest them, they have been very passive in countering them with a modern, progressive interpretation of Islam. This is because almost all of these Arab-Muslim leaders are illegitimate themselves. Having come to power by force, they have no credibility as carriers of a moderate, progressive Islam, and they always feel vulnerable to hard-line Muslim preachers, who denounce them for not being good Muslims. So instead of taking on the Muslim radicals, the Arab regimes either throw them in jail or try to buy them off. This leaves a terrible spiritual and political void.
But the other reason for the passive support that the Islamo-Leninists enjoy-and the fact that they are able to raise so much money through charities and mosques in the Arab-Muslim world-is that too many good decent people there feel the same frustration and tinge of humiliation that many of their most enraged youth do. And there is a certain respect for the way these violent youth have been ready to stand up to the world and to their own leaders and defend the honor of their civilization. When I visited Qatar a few months after 9/11, a friend of mine there-a sweet, thoughtful, liberal person who works for the Qatari government— confided to me something in a whisper that was deeply troubling to him: “My eleven-year-old son thinks bin Laden is a good man.”
Most middle-class Arabs and Muslims, I am convinced, were not celebrating the death of three thousand innocent Americans on 9/11. I know my Arab and Muslim friends were not. But many Arabs and Muslims were celebrating the idea of putting a fist in America's face— and they were quietly applauding the men who did it. They were happy to see someone humiliating the people and the country that they felt was humiliating them and supporting what they saw as injustice in their world-whether it is America's backing of Arab kings and dictators who export oil to it or America's backing of Israel whether it does the right things or the wrong things.
Most American blacks, I am sure, had little doubt that O. J. Simpson murdered his ex-wife, but they applauded his acquittal as a stick in the eye of the Los Angeles Police Department and a justice system that they saw as consistently humiliating and unfair to them. Humiliation does that to people. Bin Laden is to the Arab masses what O.J. was to many American blacks-the stick they poke in the eye of an “unfair” America and their own leaders. I once interviewed Dyab Abou Jahjah, often called the Malcolm X of Belgium's alienated Moroccan youth. I asked him what he and his friends thought when they saw the World Trade Center being smashed. He said, “I think if we are honest with ourselves, most of the Muslims all over the world felt that... America got hit in the face and that cannot be bad. I don't want to make an intellectual answer for that. I'll give it very simply. America was kicking our butts for fifty years. And really badly. Supporting the bullies in the region, whether it is Israel or our own regimes, [America] is giving us not only a bleeding nose, but breaking a lot of our necks.”
Just as America's economic depression in the 1920s and 1930s made many normal, intelligent, thinking Americans passive or active supporters of communism, so the humiliating economic, military, and emotional depression of the Arab-Muslim world has made too many normal, intelligent, and thinking Arabs and Muslims passive supporters of bin Ladenism.
Former Kuwaiti minister of information Dr. Sa'd Bin Tefla, a journalist, wrote an essay in the London Arabic daily Al-Sharq Al-Awsat on the third anniversary of September 11 titled “We Are All Bin Laden,” which went right to this point. He asked why it is that Muslim scholars and clerics eagerly supported fatwas condemning Salman Rushdie to death for writing an allegedly blasphemous novel, The Satanic Verses, that wove in themes about the Prophet Muhammad, but to this day no Muslim cleric has issued a fatwa condemning Osama bin Laden for murdering three thousand innocent civilians. After the fatwa was declared against Salman Rushdie, Muslims staged protests against the book at British embassies all over the Islamic world and burned Salman Rushdie dolls along with copies of his book. Nine people were killed in an anti-Rushdie protest in Pakistan.
“Religious legal rulings were disseminated one after another banning Salman Rushdie's book and calling for him to be killed,” Bin Tefla wrote. “Iran earmarked a reward of $ 1 million for whoever would implement Imam Khomeini's fatwa and kill Salman Rushdie.” And bin Laden? Nothing-no condemnation. “Despite the fact that bin Laden murdered thousands of innocents in the name of our religion and despite the damage that he has caused to Muslims everywhere, and especially to innocent Muslims in the West, whose life is much better than the life of Muslims in Islamic lands, to this date not a single fatwa has been issued calling for the killing of bin Laden, on the pretext that bin Laden still proclaims 'there is no God other than Allah,'” Tefla wrote. Worse, he added, Arab and Muslim satellite television channels have “competed amongst themselves in broadcasting [bin Laden's] sermons and fatwas, instead of preventing their dissemination as they did in the case of Rushdie's book... With our equivocal stance on bin Laden, we from the very start left the world with the impression that we are all bin Laden.”
Germany was humiliated after World War I, but it had the modern economic foundations to produce a state response to that humiliation—in the form of the Third Reich. The Arab world, by contrast, could not produce a state response to its humiliation. Instead, it has rattled the world stage in the last fifty years with two larger-than-life figures, rather than states, noted political theorist Yaron Ezrahi: One was the Saudi oil minister Ahmed Zaki Yamani, and the other was Osama bin Laden. Each achieved global notoriety, each briefly held the world in his palm-one by using oil as a weapon and the other by using the most unconventional suicide violence imaginable. Each gave a temporary “high” to the Arab-Muslim world, a feeling that it was exercising power on the world stage. But bin Laden and Yamani were only the illusions of power, noted Ezrahi: The Saudi oil weapon is economic power without productivity, and bin Laden's terrorism weapon is military force without a real army, state, economy, and engine of innovation to support it.
What makes Yamanism and bin Ladenism so unfortunate as strategies for Arab influence in the world is that they ignore the examples within Arab culture and civilization-when it was at its height-of discipline, hard work, knowledge, achievement, scientific inquiry, and pluralism. As Nayan Chanda, the editor of YaleGlobal Online, pointed out to me, it was the Arab-Muslim world that gave birth to algebra and algorithms, terms both derived from Arabic words. In other words, noted Chanda, “The entire modern information revolution, which is built to a large degree on algorithms, can trace its roots all the way back to Arab-Muslim civilization and the great learning centers of Baghdad and Alexandria,” which first introduced these concepts, then transferred them to Europe through Muslim Spain. The Arab-Muslim peoples have an incredibly rich cultural tradition and civilization, with long periods of success and innovation to draw on for inspiration and example for their young people. They have all the resources necessary for modernization in their own cultural terms, if they want to summon them.
Unfortunately, there is huge resistance to such modernization from the authoritarian and religiously obscurantist forces within the Arab-Muslim world. That is why this part of the world will be liberated, and feel truly empowered, only if it goes through its own war of ideas—and the moderates there win. We had a civil war in America some 150 years ago over ideas-the ideas of tolerance, pluralism, human dignity, and equality. The best thing outsiders can do for the Arab-Muslim world today is try to collaborate with its progressive forces in every way possible— from trying to solve the Arab-Israeli conflict, to stabilizing Iraq, to signing free-trade agreements with as many Arab countries as possible-so as to foster a similar war of ideas within their civilization. There is no other way. Otherwise this part of the world has the potential to be a huge un-flattening force. We have to wish the good people there well. But the battle will be one for them to fight and to win. No one can do it for them.
No one has expressed what is needed better than Abdel Rahman al-Rashed, the general manager of the London-based al-Arabiya news channel. One of the best-known and most respected Arab journalists working today, he wrote the following, in Al-Sharq Al-Awsat (September 6, 2004), after a series of violent incidents involving Muslim extremist groups from Chechnya to Saudi Arabia to Iraq: “Self-cure starts with self-realization and confession. We should then run after our terrorist sons, in the full knowledge that they are the sour grapes of a deformed culture... The mosque used to be a haven, and the voice of religion used to be that of peace and reconciliation. Religious sermons were warm behests for a moral order and an ethical life. Then came the neo-Muslims. An innocent and benevolent religion, whose verses prohibit the felling of trees in the absence of urgent necessity, that calls murder the most heinous of crimes, that says explicitly that if you kill one person you have killed humanity as a whole, has been turned into a global message of hate and a universal war cry... We cannot clear our names unless we own up to the shameful fact that terrorism has become an Islamic enterprise; an almost exclusive monopoly, implemented by Muslim men and women. We cannot redeem our extremist youth, who commit all these heinous crimes, without confronting the Sheikhs who thought it ennobling to reinvent themselves as revolutionary ideologues, sending other people's sons and daughters to certain death, while sending their own children to European and American schools and colleges.”
Too Many Toyotas
The problems of the too sick, the too disempowered, and the too humiliated are all in their own ways keeping the world from becoming entirely flat. They may do so even more in the future, if they are not properly addressed. But another barrier to the flattening of the world is emerging, one that is not a human constraint but a natural resource constraint. If millions of people from India, China, Latin America, and the former Soviet Empire who were living largely outside the flat world all start to walk onto the flat world playing field at once-and all come with their own dream of owning a car, a house, a refrigerator, a microwave, and a toaster-we are going to experience either a serious energy shortage or, worse, wars over energy that would have a profoundly unflattening effect on the world.
As I mentioned earlier, I visited Beijing in the summer of 2004 with my wife and teenage daughter, Natalie. Before we left, I said to Natalie, “You're really going to like this city. They have these big bicycle lanes on all the main roads. Maybe when we get there we can rent bikes and just ride around Beijing. I did that last time I was there, and it was a lot of fun.”
Silly Tom. I hadn't been to Beijing in three years, and just in that brief period of time the explosive growth there had wiped out many of those charming bicycle lanes. They had been either shrunken or eliminated to add another lane for automobiles and buses. The only biking I did there was on the stationary exercise bike in our hotel, which was a good antidote for having to spend so much time sitting in cars stuck in Beijing traffic jams. I was in Beijing to attend an international business conference, and while there I discovered why all the bikes had disappeared. According to one speaker at the conference, some thirty thousand new cars were being added to the roads in Beijing every month-one thousand new cars a day! I found that statistic so unbelievable that I asked Michael Zhao, a young researcher in the Times's Beijing bureau, to double-check it, and he wrote me back the following e-mail:
Hi Tom, Hope this email finds you well. On your question about how many cars are added each day in Beijing, I did some research on the Internet and found that... car sales in [Beijing] for April 2004 were 43,000—24.1% more than same period last year. So that is 1,433 cars added [daily] to Beijing, but including secondhand car sales. New car sales this month were 30,000, or 1,000 cars each day added to the city. The total car sales from Jan. to April 2004 were 165,000, that is about 1,375 cars added each day to Beijing over this period. This data is from the Beijing Municipal Bureau of Commerce. The city's bureau of statistics has it that the total car sales in 2003 were 407,649, or 1,117 cars each day added. The new car sales last year were 292,858, or 802 new cars each day... The total number of cars in Beijing is 2.1 million... But the recent months seem to have witnessed surging sales. Also noteworthy is last year's SARS outbreak, during which period a lot of families bought cars, due to panic about public contact and a sort of doomsday-stimulated enjoy-life mentality. And many new car owners did enjoy their time driving, as the traffic in the city so much improved with a lot of people voluntarily caged at home, without daring to go out. Since then, coupled with dropping car prices due to China's commitment to reduce tariffs after joining the WTO, a large number of families have advanced their timetable of buying a car, although some others decided to wait for further drops of prices. All the best, Michael.
As Michael's note indicated, you can see China's middle class rising right before your eyes, and it is going to have enormous energy and environmental spillover. The Great Chinese Dream, like the Great Indian Dream, the Great Russian Dream, and the Great American Dream, is built around a high-energy, high-electricity, high-bent-metal lifestyle. To put it another way, the thirty thousand new cars a month in Beijing, and the cloud of haze that envelops the city on so many days, and the fact that the city's official Web site actually keeps track of “blue sky” days all testify to the environmental destruction that could arise from the triple convergence-if clean alternative renewable energies are not developed soon. Already, according to the World Bank, sixteen of the twenty most polluted cities in the world are in China, and that pollution and environmental degradation together cost China $170 billion a year (The Economist, August 21, 2004).
And we have not seen anything yet. China, with its own oil and gas reserves, was once a net exporter. Not anymore. In 2003 China surged ahead of Japan as the second largest importer of oil in the world, after the United States. Right now about 700 to 800 million of China's 1.3 billion people live in the countryside, but they are heading for the flat world, and roughly half are expected to try to migrate to the cities over the next two decades, if they can find work. This will spur a huge surge in demand for cars, houses, steel beams, power plants, school buildings, sewage plants, electricity grids-the energy implications of which are unprecedented in the history of Planet Earth, round or flat.
At the business conference I was attending in Beijing, I kept hearing references to the Strait of Malacca-the narrow passage between Malaysia and Indonesia that is patrolled by the U.S. Navy and controls all the oil tanker traffic from the Middle East to China and Japan. I hadn't heard anyone talking about the Strait of Malacca since the 1970s oil crises. But evidently Chinese strategic planners have begun to grow increasingly concerned that the United States could choke off China's economy at any time by just closing the Strait of Malacca, and this threat is now being increasingly and openly discussed in Chinese military circles. It is just a small hint of the potential struggle for power-energy power-that could ensue if the Great American Dream and the Great Chinese Dream and the Great Indian Dream and the Great Russian Dream come to be seen as mutually exclusive in energy terms.
China's foreign policy today consists of two things: preventing Taiwan from becoming independent and searching for oil. China is now obsessed with acquiring secure oil supplies from countries that would not retaliate against China if it invaded Taiwan, and this is driving China to get cozy with some of the worst regimes in the world. The Islamic fundamentalist government in Sudan now supplies China with 7 percent of its oil supplies and China has invested $3 billion in oil drilling infrastructure there.
In September 2004, China threatened to veto a move by the United Nations to impose sanctions on Sudan for the genocide that it is perpetrating in its Darfur province. China followed by opposing any move to refer Iran's obvious attempts to develop nuclear-weapons-grade fuel to the United Nations Security Council. Iran supplies 13 percent of China's oil supplies. Meanwhile, as the Daily Telegraph reported (November 19, 2004), China has begun drilling for gas in the East China Sea, just west of the line that Japan regards as its border: “Japan protested, to no avail, that the project should be a joint one. The two are also set to clash over Russia's oil wealth. China is furious that Japan has outbid it in their battle to determine the route of the pipeline that Russia intends to build to the Far East.” At the same time it was reported that a Chinese nuclear submarine had accidentally strayed into Japanese territorial waters. The Chinese government apologized for the “technical error.” If you believe that, I have an oil well in Hawaii I would like to sell you...
In 2004, China began competing with the United States for oil exploration opportunities in Canada and Venezuela. If China has its way, it will stick a straw into Canada and Venezuela and suck out every drop of oil, which will have the side effect of making America more dependent on Saudi Arabia.
I interviewed the Japanese manager of a major U.S. multinational that was headquartered in Dalian, in northeastern China. “China is following the path of Japan and Korea,” said the executive, on the condition that he and his company not be quoted by name, “and the big question is, Can the world afford to have 1.3 billion people following that path and driving the same cars and using the same amount of energy? So I see the flattening, but the challenge of the twenty-first century is, Are we going to hit another oil crisis? The oil crisis in the 1970s coincided with Japan and Europe rising. [There was a time] when the U.S. was the only big consumer of oil, but when Japan and Europe came in, OPEC got the power. But when China and India come into being the consumers, it will be a huge challenge that is an order of magnitude different. It is megapolitics. The limits of growth in the 1970s were overcome with technology. We got smarter than before, equipment became more efficient, and energy consumption per head was lower. But now [with China, India, and Russia all coming on strong] it is multiplied by a factor of ten. There is something we really need to be serious about. We cannot restrict China, [Russia,] and India. They will grow and they must grow.”
One thing we will not be able to do is tell young Indians, Russians, Poles, or Chinese that just when they are arriving on the leveled playing field, they have to hold back and consume less for the greater global good. While giving a talk to students at the Beijing College of Foreign Affairs, I spoke about the most important issues that could threaten global stability, including the competition for oil and other energy resources that would naturally occur as China, India, and the former Soviet Union began to consume more oil. No sooner did I finish than a young Chinese woman student shot up her hand and asked basically the following question: “Why should China have to restrain its energy consumption and worry about the environment, when America and Europe got to consume all they energy they wanted when they were developing?” I did not have a good answer. China is a high-pride country. Telling China, India, and Russia to consume less could have the same geopolitical impact that the world's inability to accommodate a rising Japan and Germany had after World War I.
If current trends hold, China will go from importing 7 million barrels of oil today to 14 million a day by 2012. For the world to accommodate that increase it would have to find another Saudi Arabia. That is not likely, which doesn't leave many good options. “For geopolitical reasons, we cannot tell them no, we cannot tell China and India, it is not your turn,” said Philip K. Verleger Jr., a leading oil economist. “And for moral reasons, we have lost the ability to lecture anyone.” But if we do nothing, several things will likely result. First, gasoline prices will continue to trend higher and higher. Second, we will be strengthening the very worst political systems in the world-like Sudan, Iran, and Saudi Arabia. And third, the environment will be damaged more and more. Already, the newspaper headlines in China every day are about energy shortages, blackouts, and brownouts. U.S. officials estimate that twenty-four out of China's thirty-one provinces are now experiencing power shortages.
We are all stewards of the planet, and the test for our generation is whether we will pass on a planet in as good or better shape than we found it. The flattening process is going to challenge that responsibility. “Aldo Leopold, the father of wildlife ecology, once said: 'The first rule of intelligent tinkering is save all the pieces,'” remarked Glenn Prickett, senior vice president of Conservation International. “What if we don't? What if the 3 billion new entrants start gobbling up all the resources? Species and ecosystems can't adapt that fast, and we will lose a major portion of the earth's remaining biological diversity.” Already, noted Prickett, if you look at what is happening in the Congo Basin, the Amazon, the rain forest of Indonesia-the last great wilderness areas-you find that they are being devoured by China's rising appetite. More and more palm oil is being extracted from Indonesia and Malaysia, soybeans out of Brazil, timber out of central Africa, and natural gas out of all of the above to serve China-and, as a result, threatening all sorts of natural habitats. If these trends go on unchecked, with all the natural habitats being converted to farmland and urban areas, and the globe getting warmer, many of the currently threatened species will be condemned to extinction.
The move to sharply reduce energy consumption has to come from within China, as the Chinese confront what the need for fuel is doing to their own environment and growth aspirations. The only thing-and the best thing-we in the United States and Western Europe can do to nudge China toward that understanding is set an example by changing our own consumption patterns. That would give us some credibility to lecture others. “Restoring our moral standing on energy is now a vital national security and environmental issue,” said Verleger. That requires doing everything more seriously-more serious government funding for alternatives, a real push by the federal government to promote conservation, a gasoline tax that will drive more consumers to buy hybrid vehicles and smaller cars, legislation to force Detroit to make more fuel-efficient vehicles, and yes, more domestic exploration. Together, added Verleger, that could help stabilize the price at around $25 a barrel, “which seems to be the ideal range for sustainable global growth.”
In sum, we in the West have a fundamental interest in keeping the American dream alive in Beijing and Boise and Bangalore. But we have to stop fooling ourselves that it can be done in a flat world with 3 billion potential new consumers-if we don't find a radical new approach to energy usage and conservation. If we fail to do so, we will be courting both an environmental and geopolitical whirlwind. If there was ever a time for some big collaboration, it is now, and the subject is energy. I would love to see a grand China-United States Manhattan Project, a crash program to jointly develop clean alternative energies, bringing together China's best scientists and its political ability to implement pilot projects, with America's best brains, technology, and money. It would be the ideal model and the ideal project for creating value horizontally, with each side contributing its strength. Said Scott Roberts, the Cambridge Energy Research Associates analyst in China, “When it comes to renewable technology and sustainable energy, China could be the laboratory of the world-not just the workshop of the world.” Why not?
TWELVE: The Dell Theory of Conflict Prevention, Old-Time Versus Just-in-Time
Free Trade is God's diplomacy. There is no other certain way of uniting people in the bonds of peace.Before I share with you the subject of this chapter, I have to tell you a little bit about the computer that I wrote this book on. It's related to the theme I am about to discuss. This book was largely written on a Dell Inspiron 600m notebook, service tag number 9ZRJP41. As part of the research for this book71 visited with the management team at Dell near Austin, Texas. I shared with them the ideas in this book and in return I asked for one favor: I asked them to trace for me the entire global supply chain that produced my Dell notebook. Here is their report: My computer was conceived when I phoned Dell's 800 number on April 2, 2004, and was connected to sales representative Mujteba Naqvi, who immediately entered my order into Dell's order management system. He typed in both the type of notebook I ordered as well as the special features I wanted, along with my personal information, shipping address, billing address, and credit card information. My credit card was verified by Dell through its work flow connection with Visa, and my order was then released to Dell's production system. Dell has six factories around the world-in Limerick, Ireland; Xiamen, China; Eldorado do Sul, Brazil; Nashville, Tennesee; Austin, Texas; and Penang, Malaysia. My order went out by e-mail to the Dell notebook factory in Malaysia, where the parts for the computer were immediately ordered from the supplier logistics centers (SLCs) next to the Penang factory. Surrounding every Dell factory in the world are these supplier logistics centers, owned by the different suppliers of Dell parts. These SLCs are like staging areas. If you are a Dell supplier anywhere in the world, your job is to keep your SLC full of your specific parts so they can constantly be trucked over to the Dell factory for just-in-time manufacturing.
—British politician Richard Cobden, 1857
“In an average day, we sell 140,000 to 150,000 computers,” explained Dick Hunter, one of Dell's three global production managers. “Those orders come in over Dell.com or over the telephone. As soon these orders come in, our suppliers know about it. They get a signal based on every component in the machine you ordered, so the supplier knows just what he has to deliver. If you are supplying power cords for desktops, you can see minute by minute how many power cords you are going to have to deliver.” Every two hours, the Dell factory in Penang sends an e-mail to the various SLCs nearby, telling each one what parts and what quantities of those parts it wants delivered within the next ninety minutes-and not one minute later. Within ninety minutes, trucks from the various SLCs around Penang pull up to the Dell manufacturing plant and unload the parts needed for all those notebooks ordered in the last two hours. This goes on all day, every two hours. As soon as those parts arrive at the factory, it takes thirty minutes for Dell employees to unload the parts, register their bar codes, and put them into the bins for assembly. “We know where every part in every SLC is in the Dell system at all times,” said Hunter.
So where did the parts for my notebook come from? I asked Hunter. To begin with, he said, the notebook was codesigned in Austin, Texas, and in Taiwan by a team of Dell engineers and a team of Taiwanese notebook designers. “The customer's needs, required technologies, and Dell's design innovations were all determined by Dell through our direct relationship with customers,” he explained. “The basic design of the motherboard and case-the basic functionality of your machine-was designed to those specifications by an ODM [original design manufacturer] in Taiwan. We put our engineers in their facilities and they come to Austin and we actually codesign these systems. This global teamwork brings an added benefit-a globally distributed virtually twenty-four-hour-per-day development cycle. Our partners do the basic electronics and we help them design customer and reliability features that we know our customers want. We know the customers better than our suppliers and our competition, because we are dealing directly with them every day.” Dell notebooks are completely redesigned roughly every twelve months, but new features are constantly added during the year— through the supply chain-as the hardware and software components advance.
It happened that when my notebook order hit the Dell factory in Penang, one part was not available-the wireless card-due to a quality control issue, so the assembly of the notebook was delayed for a few days. Then the truck full of good wireless cards arrived. On April 13, at 10:15 a.m., a Dell Malaysia worker pulled the order slip that automatically popped up once all my parts had arrived from the SLCs to the Penang factory. Another Dell Malaysia employee then took out a “traveler”-a special carrying tote designed to hold and protect parts-and started plucking all the parts that went into my notebook.
Where did those parts come from? Dell uses multiple suppliers for most of the thirty key components that go into its notebooks. That way if one supplier breaks down or cannot meet a surge in demand, Dell is not left in the lurch. So here are the key suppliers for my Inspiron 600m notebook: The Intel microprocessor came from an Intel factory either in the Philippines, Costa Rica, Malaysia, or China. The memory came from a Korean-owned factory in Korea (Samsung), a Taiwanese-owned factory in Taiwan (Nanya), a German-owned factory in Germany (Infineon), or a Japanese-owned factory in Japan (Elpida). My graphics card was shipped from either a Taiwanese-owned factory in China (MSI) or a Chinese-run factory in China (Foxconn). The cooling fan came from a Taiwanese-owned factory in Taiwan (CCI or Auras). The motherboard came from either a Korean-owned factory in Shanghai (Samsung), a Taiwanese-owned factory in Shanghai (Quanta), or a Taiwanese-owned factory in Taiwan (Compal or Wistron). The keyboard came from either a Japanese-owned company in Tianjin, China (Alps), a Taiwanese-owned factory in Shenzen, China (Sunrex), or a Taiwanese-owned factory in Suzhou, China (Darfon). The LCD display was made in either South Korea (Samsung or LG.Philips LCD), Japan (Toshiba or Sharp), or Taiwan (Chi Mei Optoelectronics, Hannstar Display, or AU Optronics). The wireless card came from either an American-owned factory in China (Agere) or Malaysia (Arrow), or a Taiwanese-owned factory in Taiwan (Askey or Gemtek) or China (USI). The modem was made by either a Taiwanese-owned company in China (Asustek or Liteon) or a Chinese-run company in China (Foxconn). The battery came from an American-owned factory in Malaysia (Motorola), a Japanese-owned factory in Mexico or Malaysia or China (Sanyo), or a South Korean or Taiwanese factory in either of those two countries (SDI or Simplo). The hard disk drive was made by an American-owned factory in Singapore (Seagate), a Japanese-owned company in Thailand (Hitachi or Fujitsu), or a Japanese-owned factory in the Philippines (Toshiba). The CD/DVD drive came from a South Korean-owned company with factories in Indonesia and the Philippines (Samsung); a Japanese-owned factory in China or Malaysia (NEC); a Japanese-owned factory in Indonesia, China, or Malaysia (Teac); or a Japanese-owned factory in China (Sony). The notebook carrying bag was made by either an Irish-owned company in China (Tenba) or an American-owned company in China (Targus, Samsonite, or Pacific Design). The power adapter was made by either a Thai-owned factory in Thailand (Delta) or a Taiwanese, Korean, or American-owned factory in China (Liteon, Samsung, or Mobility). The power cord was made by a British-owned company with factories in China, Malaysia, and India (Volex). The removable memory stick was made by either an Israeli-owned company in Israel (M-System) or an American-owned company with a factory in Malaysia (Smart Modular).
This supply chain symphony-from my order over the phone to production to delivery to my house-is one of the wonders of the flat world.
“We have to do a lot of collaborating,” said Hunter. “Michael [Dell] personally knows the CEOs of these companies, and we are constantly working with them on process improvements and real-time demand/supply balancing.” Demand shaping goes on constantly, said Hunter. What is “demand shaping”? It works like this: At 10 a.m. Austin time, Dell discovers that so many customers have ordered notebooks with 40-gigabyte hard drives since the morning that its supply chain will run short in two hours. That signal is automatically relayed to Dell's marketing department and to Dell.com and to all the Dell phone operators taking orders. If you happen to call to place your Dell order at 10:30 a.m., the Dell representative will say to you, “Tom, it's your lucky day! For the next hour we are offering 60-gigabyte hard drives with the notebook you want-for only $10 more than the 40-gig drive. And if you act now, Dell will throw in a carrying case along with your purchase, because we so value you as a customer.” In an hour or two, using such promotions, Dell can reshape the demand for any part of any notebook or desktop to correspond with the projected supply in its global supply chain. Today memory might be on sale, tomorrow it might be CD-ROMs.
Picking up the story of my notebook, on April 13, at 11:29 a.m., all the parts had been plucked from the just-in-time inventory bins in Penang, and the computer was assembled there by A. Sathini, a team member “who manually screwed together all of the parts from kitting as well as the labels needed for Tom's system,” said Dell in their production report to me. “The system was then sent down the conveyor to go to burn, where Tom's specified software was downloaded.” Dell has huge server banks stocked with the latest in Microsoft, Norton Utilities, and other popular software applications, which are downloaded into each new computer according to the specific tastes of the customer.
“By 2:45 p.m., Tom's software had been successfully downloaded, and [was] manually moved to the boxing line. By 4:05 p.m., Tom's system [was] placed in protective foam and a shuttle box, with a label, which contains his order number, tracking code, system type, and shipping code. By 6:04 p.m., Tom's system had been loaded on a pallet with a specified manifest, which gives the Merge facility visibility to when the system will arrive, what pallet it will be on (out of 75+ pallets with 152 systems per pallet), and to what address Tom's system will ship. By 6:26 p.m., Tom's system left [the Dell factory] to head to the Penang, Malaysia, airport.”
Six days a week Dell charters a China Airlines 747 out of Taiwan and flies it from Penang to Nashville via Taipei. Each 747 leaves with twenty-five thousand Dell notebooks that weigh altogether 110,000 kilograms, or 50,000 pounds. It is the only 747 that ever lands in Nashville, except Air Force One, when the president visits. “By April 15, 2004, at 7:41 a.m., Tom's system arrived at [Nashville] with other Dell systems from Penang and Limerick. By 11:58 a.m., Tom's system [was] inserted into a larger box, which went down the boxing line to the specific external parts that Tom had ordered.”
That was thirteen days after I'd ordered it. Had there not been a parts delay in Malaysia when my order first arrived, the time between when I phoned in my purchase, when the notebook was assembled in Penang, and its arrival in Nashville would have been only four days. Hunter said the total supply chain for my computer, including suppliers of suppliers, involved about four hundred companies in North America, Europe, and primarily Asia, but with thirty key players. Somehow, though, it all came together. As Dell reported: On April 15, 2004, at 12:59 p.m., “Tom's system had been shipped from [Nashville] and was tenured by UPS shipping LTL (3-5-day ground, specified by Tom), with UPS tracking number 1Z13WA374253514697. By April 19, 2004, at 6:41 p.m., Tom's system arrived in Bethesda, MD, and was signed for.”
I am telling you the story of my notebook to tell a larger story of geopolitics in the flat world. To all the forces mentioned in the previous chapter that are still holding back the flattening of the world, or could actually reverse the process, one has to add a more traditional threat, and that is an outbreak of a good, old-fashioned, world-shaking, economy-destroying war. It could be China deciding once and for all to eliminate Taiwan as an independent state; or North Korea, out of fear or insanity, using one of its nuclear weapons against South Korea or Japan; or Israel and a soon-to-be-nuclear Iran going at each other; or India and Pakistan finally nuking it out. These and other classic geopolitical conflicts could erupt at any time and either slow the flattening of the world or seriously unflatten it.