The Great Convergence Book Summary

? What spoke to us? What frustrated us? What excited us

When reading The Great Convergence, by Richard Baldwin, there were several
things that spoke to our book club group. First, the definition of the “Great Divergence”
was interesting. It provided a comprehensive view of how we have arrived at our current
state of global inequality, with the definition framed only around economic changes.
While there are many factors (cultural, political, geographical, ecological, etc.) that have
influenced the state of the modern global economy, the author’s specific focus on the
economic aspects helped some group members more strongly grasp what he was
.explaining and how this one lens can help us make sense of our current state

The second component of the book that stood out to us was the description of
how globalization has evolved, and how each of those evolutions have had specific
impacts on the world. One impact we found particularly interesting was the increasing
interconnectedness of commodity. The book emphasizes the ability (multinational) firms
have to move labor-intensive work to developing countries, and the changes that this
creates in wealthy nations. The movements described are shifting the commodity
landscape around the world, forcing nations, companies, and individuals to ask new
questions about how they produce value most efficiently. In this modern era we are
more readily able to bridge the gaps between high tech and low wages shifting the
.landscape for both developing and developed nations

Finally, we appreciated the data (graphs and tables) that accompanied the
historical context of globalization. In presenting dense and complex information, the
author was able to provide visuals and supporting information to enrich our learning
.experience

Although The Great Convergence spoke to us in some ways, there were also
elements of the book that frustrated us. Many of us felt that we were not presented with
a well-rounded view of globalization as Baldwin used primarily an economic lense to
explain the phenomenon. While we appreciated the directness with which the economic
lens described events and impacts, we found the writing style to be repetitive, dry,
cumbersome and primarily academic. We also felt that that middle of the book was
overly detailed and unnecessarily repetitive, the author having sufficiently made his
.points earlier in the text

We also felt that there were other forms of analysis that were missing from the
conversation, like cultural, environmental, political influences, etc. creating a less holistic
view. For instance, although he briefly touched on nationalism and anti-globalization
politics as a social movement, we wanted to know more. Additionally, there was no
mention of the environmental impact of globalization. In essence, there was no point in
the book where a well-rounded summary was presented of the components of
globalization, creating an analysis where we felt pieces were missing. It was hard for us
to think about globalization in a vacuum, focusing only on economic influences and
causes. While the final chapters touched on what comes next, we felt that those ideas
were a bit thin, given the significance of technology, culture, environment and politics in
.the future of globalization

Aside from those frustrations, there were components of the book that we found
exciting. One thing that stood out was the idea that national boundaries will matter less
and less as we increasingly become an interconnected, global community. As goods are
often not assembled entirely within one country or even one factory, it feeds cross
culture collaboration and advancements in our society. This is referred to as “Global
Value Chains”. It is exciting to consider what could be accomplished, and what might be
possible in a truly global world. Specifically, how globalization will increase the quality of
.innovation

Additionally, we are excited about the predictions around telerobotics being able
to ‘move’ the skills of people, such as a surgeon in France doing a knee repair in Peru.
We are intrigued by the idea of ‘Remote Intelligence’ or robots/activities being controlled
from remote locations, like the Philippines. With the rise of technology/the IT Revolution,
it has become easier to coordinate complex activities at a distance which has big
.implications for the future of work and services around the world

Finally, we are excited and curious about the call for governments of G7 nations
to protect workers not jobs. As a primarily U.S.-based cohort, we wonder what the future
will hold for the reskilling of American workers, and what it will truly mean to protect
.workers in this new era

? What are the primary and secondary messages in the book

The core message of the book is that globalization has occurred in three main
waves, which Baldwin refers to as “unbundlings”. He states that the first unbundling of
globalization created the economic divides we see between the Northern Hemisphere
and the Southern Hemisphere, known as “The Great Divergence”. Baldwin argues that
the second and third unbundlings are bringing about what will be known as “The Great
Convergence”, where the South modernizes and grows, catching up to the North and
minimizing the economic differences that dominated the 20th Century. This movement
to the Great Convergence will, and already is, changing the global economic landscape.
In the book, Baldwin offers not only a description of the three unbundlings, and rationale
for the Great Divergence and forthcoming Convergence, but also suggests that nations,
particularly those in the North should pay close attention to the changes occurring in
.order to continue to thrive in this third wave of globalization

Beginning in the 1800s, decreased transportation costs and relative global

peace, initiated the first wave of globalization. This transition made it easier for goods to
be moved around with the advent scalable, cost effective, and reliable transportation.
Prior to this wave, trade was limited because moving goods was extraordinarily
expensive and risky. Goods were mostly produced and consumed locally. It was the
evolution of the steam engine, efficient shipping containers, and flight that continued to
advance the movement of goods around the world and solidified this wave of
globalization. A transportation revolution unbundled the consumption of goods from the
.locality of production

However, the ability to sell to world markets shifted the advantage to firms
operating using large-scale manufacturing techniques. These manufacturing operations
increased in complexity as they grew in scale, making communication increasingly
important and expensive. Because of this, managing the new industrial complexity was
easier, cheaper, and more effective when all stages of production were close together. It
was the Northern nations, known as the G7 (originally, France, West Germany, Italy,
Japan, the United Kingdom, the United States, and Canada) that specialized in this kind
of manufacturing. The industrial agglomeration that occurred in these countries fostered
innovation, which boosted competitiveness, which in turn promoted further industrial
agglomeration in G7 nations. This resulted in bigger markets, which led to more
agglomeration, innovation, and competitiveness. The crowding together of large-scale
manufacturing during this first phase of globalization, ignited the bonfire of cumulative
innovation, and this in turn lit the fuse on modern economic growth. But since it was still
expensive to move ideas and people, the accumulation of know-how in the world
.economy remained in the North and the Great Divergence emerged

The second wave of globalization occurred when it became easier for ideas to be
moved around with communications technology and the internet. This created the global
supply chain effect, thus unbundling the consumption of ideas from the locality of their
production. Prior to ideas being easy to move, if one wanted to take advantage of low-
cost labor, one had to move all manufacturing to the low-cost labor nation - this was
risky and expensive, because the low-cost labor nation might lack the knowledge and
skill to do the whole process. With ideas being easy to move and communicate,
manufacturing could be divided into smaller stages and moved with less risk. High-
knowledge stages could be kept in high-knowledge/high-cost nations (like R&D or
engineering), and low-knowledge, low-cost nations could take on the more routine
stages (like basic manufacturing or assembly). This reduced cost and risk for firms.
What also happened is that low-cost nations eventually developed increasing skill and
could take on increasingly more complex stages of production. This meant that the
entire manufacturing process became optimized based on where each stage was most
optimally produced, for the lowest cost. Thus the supply chain became global, and was
coordinated by telecommunications. Notable events that facilitated this transition include
the invention and expansion of the internet, adoption of email, and the breaking up
manufacturing in stages. This second wave, or unbundling as Baldwin refers to it, had
the impact of spreading more wealth around the world, increasing wages in the South
where the routine manufacturing jobs often went. In this period roughly one billion
people were lifted out of poverty in China alone, and similar impacts of rising income
levels were seen in other developing nations. However, global wealth is still largely
.concentrated in the North, and the Great Divergence, though changing, still remains

The third wave of globalization rests on the movement of people. While the first
two waves, or unbundlings, has made it easier to move goods and ideas, the constraint
of moving people remains. The communication technology revolution that sparked the
second unbundling helped us to communicate, but sending hundreds of messages
seems to have led to more in-person meetings, not fewer. It is much easier to deal with
issues by email when the message sender and receiver have met in person at least
once. Since we are messaging with far more people than we used to, we have an
incentive to meet more people. Essentially, the communication revolution relaxed the
second constraint, of moving ideas, but left the third constraint, of moving people, in
place. This constraint is still unfolding, changing every day with the advances of
telecommunication and robotics, but only time will tell just how the changes in
technology will transform the way we interact with each other and overcome the third
constraint of globalization. For this reason, the third unbundling is in progress and this
.wave of globalization is yet to see its full potential

In addition to these central messages of the book, Baldwin also had some
secondary messages communicated throughout the text. He ended on a note that
conveyed the importance of how organizations need to plan and think for the future, for
this new phase of globalization that makes it easier for people to be moved. He
emphasizes the importance of politics and policy in shaping the future for nations. He
also warns against nationalism and protectionist policies, asserting that in a more
interconnected world, closing off to others will close nations off to valuable supply and
value chains, negatively impacting their industrial and economic growth potential. He
insisted that to maintain a healthy workforce, G7 nations need to pay attention to the
low and middle wage earners who are likely to be displaced by changes brought by
globalization. While he does offer some suggestions for how to do these things, Baldwin
also speaks with a tone of inevitability. He believes in globalization, and while the core
of the book is about how it came to be, it also feels that he is suggesting it could not
have been another way. It feels that he sees these changes as already shaping our
future, and despite his suggestions there might actually be little we can do to shape the
outcomes of globalization. For Balwin, it all feels like a wave coming down, that can't be
.stemmed or diverted

Reading this book brings to mind questions of what we can really do to shape the
powerful force of globalization. How much impact can we have to proactively shape how
this phenomenon transpires? There is an opportunity to start thinking through what
these changes might look like, but it takes a proactive approach to do that. Are countries
doing it well? Who will thrive as we move out of this third unbundling? Is China
?prepared? Is America prepared

? In what ways do you expect to see these issues manifest during the session

Being that the globalized industrialization of China is still relatively new, providing
for an immense amount of growth during the past decade, we will be looking to see the
side-effects of this growth both culturally and organizationally. Traditionally, as new
wealth is generated in a developing economy, the emerging middle class provides a
strong foundation for which the economy can be built. Because of this, our curiosity will
be weighted on the strength of the middle class, and how that shows up during an
.environmental scan, as well as our work with our clients

Another focus we will be looking for is how China’s newfound wealth and
opportunity shows up in everyday life. If this book is any indicator of how China will look
once we arrive, it is likely that the growth and advancement of the country will have a
sense of inevitability attached to it, much like an unstoppable wave, or a freight train at
.top speed

A common theme throughout this book is the cost of moving “ideas, goods, and
people.” Each time these three pillars are more easily connected, the more globalized
our world can become. While we have a strong sense that China has become quite
efficient at transporting goods, we are still quite curious about the people piece. How
accepting of Westerners are the Chinese when it comes to running their businesses?
How do the importance of state show up when people try to move there to do business?
How homogenized will their organizational culture be? These are all things that we
.invite everyone to take a look at while we are doing our work this May

? How would your author react to the 2 videos you watched

The common theme among the first videos that directly relates to this book was
how great work can come from necessity, not necessarily the glamorized Silicon Valley
think-tank style innovation that Western civilization has grown so fond of. In Guerilla
Gardener, Ron Finley explains that there is a sense of “joy, pride, and honor in making
your own food”. He sees meaning in beautifying lawns and soils out of necessity and
even states that gardening has become a tool leading to better education in the
community. In Mike Rowe’s Ted Talk about one of his most memorable experiences
while filming the show Dirty Jobs, he rightly makes the point that some of the best, most
rewarding work comes out of necessity. His challenge was one of suspending his own
judgement on what is considered “dirty work”. This needs-based style of innovation
dates back to the agricultural revolution, which was developed out of a need to create
more food largely to sustain population growth. Because of this, we believe that Finley,
Rowe and Baldwin would get along quite well at the dinner table. The range of topics
discussed from gardening to sheep castration to global economics, might even make for
.an interesting evening together

Individual participation was executed both via our dialogue (as seen below) and our *
:document above that was jointly created by the group
Grace Amos
Isabelle Hertz
Bethany Jones
Hannah Jones
Taylor Pile