Using Hart's text as a guide, provide one example of a digital "tool" that is frequently used in Global retail

Introduction

The purpose ofthis paper is to discuss critically arguments about how globalization is linked with digitalization. Globalization is "the increasing integration of input, factor and final product markets coupled with_the increasing salience of multinational enterprises' crossnational value-chain networks"r. Digitalization is the "integration of digital technology into everyday life"2. Both have been increasing in recent decades and so it is natural to argue that there may be a causal connection. Whiie the literature on globalization frequently mentions the connection between digitalization and globalization, it does not address directly the question ofhow much giobal economic activity was stimulated by the rapid diffusion of information and communication technologies (ICTs) and by the declining costs associated with them. It is much iess common to find in the literature on digitalization assertions that giobalization was a causal factor. However, the market for digital technology is parrially a function of the cost of producing and merchandizing digital products and sen'ices, and those costs could have been affected by globalization. One conceivable causal link could be through the reduced prices of digital equipment and services made possible by liberalization of trade and investment flows. Access to cell phones and personal computers, for example, increased at impressive rates, especially after the prices of equipment and services began to fall. How much of the decline in prices was due to giobaiization as opposed to other factors not directly connected with globalization? 2. Making the Link The author who is generally associated u'ith the argument that the diffusion of digital technologies has driven the current wave of globalization is Thomas L. Friedman, a journalist who besides writing popular books also pens an op-ed column in the ly'ew York Times. Friedman claims in The Lexus and the Olive Tree that he discovered.globalization while covering the Arab'Israeli conflict in the 1990s. The Cold War, which was a global system based on the division of the world into two camps, had been replaced by a global system of interconnection, according to Friedman, "syrnbolized by a single word: the Web"'. Later on, when asked about the book. he said. "elobalization is not a choice. Basicallv 80% of it is driven by technology"a. I Aseem Prakash and Jeffrey A. Hart, "Coping with Globalization: An Introduction", in Aseem Prakash and Jeffrey A. Hart, eds., Coping with Globalization Q{ew York: Routledge, 2000), p. ? http://rl'vnv.businessdictionar],.comldefinition/digitalization.html. ' Thomas L. Friedman, The Lexus and the Olive Tree: Understanding Globalizalion (l.lew York: Anchor Books. 2000). a Marshall Bricklin, "Tom Friedman's view of globalization", htto://wu,u'.brickl in.com/album s/fpawtt2000/firedman. him. InThe World is Flat, Friedman uses the term "flatness" instead of globalization but clarifies later in the book that the two are the same thing. He came to the realization that the world was flat from a discussion with Nandan Nilekani, the CEO of an Indian business process outsourcing firm called Infosys. He quotes Nilekani thusly: "Outsourcing is just one dimension of a much more fundamental thing happening today in the world...What happened over the last [few] years is that there was a massive investment in technoiogy, especiaily in the bubble era, when hundreds of millions of dollars were invested in putting broadband connectivity around the world, undersea cables, all those things... [that] created a piatform where intellectual work. intellecrual capital could be delivered from anyrvhere. It could be disaggregated, delivered. distributed, produced, and put back together again-and this gave a whole new degree of freedom to the way we do work. . . "' Friedman goes on to argue that thanks to ICTs the world is becoming flat in the sense of a more level playing field or platform for ail those who want to participate in the global economy. This means that barriers to entry have been reduced or even erased by the existence ofa new technologicai infrastructure. Talented people in poor countries like China and India are suddenly able to compete with people in rich countries. The consequences of a flat worid, in Friedman's view, are so deep and so extensive that wealthy countries like the United States must adjust their policies and institutions to deal with them, Elizabeth Hanson, in The Information Revolution and World Politics, takes a more cautious view. She argues that "the information revolution was a necessary but not sufficient condition for globalization"o. Instead, "...the extent ofglobalization and the form it has taken are the product of a conjuncture of tecbnological, political, economic and social forces interacting and reinforcing each other"'. What could these other forces be? One argument is that the progressive construction of liberal monetary, trade and investment regimes by the advanced industrialized nations, led by the United States, after World War II, was also (along rvith the spread of ICTs) a necessary cause of globalizationo. To put it more precisely, without the liberal regimes for intemational trade and investment flows embodied in the G-8, the IMF, the World Bank, the GATT and its successor, the WTO, it would have been impossible for the current form of globalization to exist. Firms would not have had the wide variety of internationalization strategies currentiy available to them; governments of nation-states would have been obligated, as they were in the period between the two World Wars, to enforce nationai laws that restricted international flows of capital, goods and services. Even a temporary and partial retum to rhe protectionist policies ofthe past, therefore, could put a stop to rhe trend toward globalization. 5 Thomas L. Friedman, The World is Flat: A Brief History of the 21" Century (New York: Picador. 2007). o Elizabeth C. Hanson, The Information Revolution and World Politics (Lanham, Md.: Rowman & Littlefield, 2008). 'Ibid. p. 154. t Joan -E. Spero and Jeffrey Hart, The Politics of International Economic Relations, T\h edition (Boston: Wadsworth, 2010). p,. Ft1- F:,r'r e:-. e. Friedman's view that globalization is primariiy the result of technological change is challenged by Hanson and others. It wiil be helpfu1, therefore, to review the available evidence on the role that both technological and non-technological factors have played in enabiing or facilitating globalization. We can start by looking at one area of economic globalization that is probably the most advanced: the integration offinancial markets. 3. Financial Globalization and Digital Technology Some scholars contend that progress toward economic globalization has been greatest in the area of financial markets. There is a good case to be made for the argument that technological change \ /as an imponant driver of financial globalization. However it is also important to acknowledge that changes in national and intemational regulatory regimes were also major contributors to the cunent crisis. The global diffusion of information technology made it possible for people around the world to trade foreign currencies, stocks, bonds and other securities at any time of the day. The Forex system, for exampie, allowed individuals or firms to trade in foreign currencies on a 24-hour basis. Similar systems were developed for equity markets, bond markets, commodity futures and derivatives. New regulations allowed the creation of electronic trading systems, which gave investors direct access to markets, thereby -eliminating or reducing the role of intermediaries iike the traditional stock brokerage houses', The neu' technology both forced and enabled banks and investment firms to create new financial services to replace revenues that had been lost as a result of reduced trading fees. Computing and communications systems aiso made it possible to create new, structured financial products such as securitization i.e. asset-backed securities created out of income streams from credit cards, auto loan pal,rnents and mofigage palments and various so-calied derivatives. A derivative is a contract, the value of u''hich depends on (is "derived" from) the price of some underlying asset (e.g. a raw material like petroleum or an equity share of a corporation) or a particular reference rate such as an interest rate or stock-market index like the Dou'Jones Index''. Similar changes occuned in other countries such as Japan, Great Britain and Mexico. As those countries replaced traditional trading floors with electronic trading systems, they realized reduced costs, increased speed of execution and improved efficiency. Another characteristic of financial globalization rvas the proliferation of securities markets. Many countries that had not previously had a stock market or other kinds of markets for trading in securities established such markets for the first time in the 1990s' Other.countries that already possessed such markets improved or enhanced them. Financial institutions increasingly became tru1y global in operations and ownership. A neu' wave ofmergers and acquisitions resuited in the creation oflarger banks in the United States, 'Terrence Hendershott, "Electronic Trading in Financial Markets", IT Pro (JulylAugust 2003): 10-14; and Dagfinn Rime. "New Electronic Trading Systems in Foreign Exchange Markets", in Derek C. Jones, ed,., New Economy Handbook o ew York: Elsevier, 2003), ch. 21 . r0 Derivatives contracts take rwo principle forms: futures and options. A futures confact obligates a buyer and a seiler to a transacrion at a predetermined time in the future at a price agreed upon today. An option gives a parf,v a right to buy or sell at a specified price for a stipulated period of time. Jan Aaart Scholte, "Global Trade and Finance," in John Baylis, Steve Smith, and Patricia Or.vens, eds., The Globalization of llorld Politics; An Introduction to International Relations, 4e edition (Ner',' York: Oxford Unir, ersiry Press. 2008). p. 461 . Europe, and Japan. About 400 bank mergers occurred each year in the United States. The number of banking organizations in the United States decreased from approximatelv 12.300 in 1980 to approximately 7,100 in 1998. The percentage of domestic deposits held bythe 100 iargest organizations increase d from 47 percent in 1 9 80 to nearly 69 percent in I 997 ' ' . ln the 1990s, the number and value of bank mergers and acquisitions in the major industrialized countries increased markedly. Many large banks merged to form even larger banks. As a result, conc^entration of ownership in the financial services industry rose substantially during this period''. It should be noted, however, that despite a global trend toward liberalization of financial flows. the financial sen'ices industries continue to be carefully regulated in most countries. Canada, for example, more carefully regulates its banks than the United States. France and Japan are wideiy acknowledged to have government agencies that intervene regularly in financial markets in pursuit of national aims. One area in which the regimes changed simultaneously with technoiogy \ /as in the broad and growing acceptance of the desirability of eliminating capital controls. Capital controls were used (mainiy in the past now) to^ reduce the rapid inflows and outflows of capital that could destabilize domestic economies''. Similarly, many advanced industrial countries deregulated their financial markets to take advantage of the growth and innovation in new financial instruments like derivatives and asset-backed securities that came with derezulation and to stave offlosses in business to overseas competitors. Despite efforts to assure that banks and other financial institutions had adequate reserves to cover possible losses (led primarily by the central banks of North American and Western Europe in the Bank for Intemational Settlements), innovation in deregulated financial markets resulted in just the opposite outcome (especially, for example, in the case of credit default srvaps). The deregulated financial markets also had come to depend too much on private credit ratings agencies like Moody's and Standard and Poor's to assess the risk of complex fi nancial instruments. In conclusion, changes in both technology and regimes and regulations played a key role in the evolution ofthe financial svstem in recent decades. 4. Cultural Globalization and Digital Technology Another area ofglobalization, cultural globalization, has been strongly affected by the spread of digital technoiogies. Because of the development of digital technologies, more and more cultural artifacts are being produced, stored and deiivered digitaliy. The increased speed of digital devices and innovations in computer networks and digital compression technologies make it both easier and less expensive to deliver words, music, s)..'rnbols and images (in fact, an)thing that can be digitized) to consumers around the rvorld. " Roger W. Ferguson. Jr., The Changing Banking Environment and EmerSging Questionsfor Public Policy, Federal Reserve Bank ofMinneapolis, June 1998. " Bank for Intemational Settlements, Group of Ten, Report on Consolidation in the Financial Sector (\asel: Bank for Intemational Settlements, january 2001). '' For an excellent summary of the literature on capital controls see Ceoffrey R.D. Underhill and Xiaoke Zhang, "Conclusion: Towards the Good Govemance of the International Financial System", in Geoffrey R.D. Underhill and Xiaoke Zhang, eds.. hlternational Financial Governance under Stress: Global Structures ve/sus National Imperatlves Q.lew York: Cambridge University Press,2003), p. 395. tzn This began before the age of digital devices. The building of global undersea cable and satellite TV netrvorks and the use of analog direct broadcast satellites made pay TV services like MTV and CNN available in many parts of the world, The movie industry and recording industries used LPs, audio cassettes and VHS video tapes along with foreign box office and concert receipts to intemationalize their sales, The first invention of digital playback devices like the compact disk player and the DVD player and corresponding digital recording media - CDs and DVDS - accelerated that trend. Audio content is norv increasingly distributed via the lnternet in the form of digital files (via both legal web businesses and illegal file-sharing sites) and video is headed in the same direction. In the last one decade or two, we have u,'itnessed a major upturn in globalization of pop culture, most but not all of it originating in Hoilywood. J-pop - anime, video games, graphic novels (Manga) etc. are becoming popuiar *'ith pre-teens and teens around the world. Some of this is due to pre-digital distribution forms, but more and more of it is beine distributed digitally. The regime changes that made this possible went beyond the liberalization of the trade and investment regimes to include the wider acceptance of intellectual properfy rights modeled after those in advance industrialized nations and particularly the United States. There are many remaining barriers to trade in the markets for cultural goods. many of v'hich are based in the costs oftranslating cuitural content across language and cultural barriers. Stiil it is quite likely that the combination of technological and regime changes contributed to cuitural giobalization as well as to a revival of some local cultures that had difhculry thriving in the age of analog communications neti.r'orks. 5. Global Production Networks One response by American and European firms to the increased competitiveness of East Asian firms has been the creation of global production networks. A production nerwork is "the nexus of interconnected functions and operations through which goods and senices are produced and distributed"'t. W\qt makes a production network global is the complexity and geographic extent ofthe network". The success of Japanese firms in innovating new production technologies in the 1980s. such as just-in-time production in the auto industry and advanced automation in the electronics industry, led to an effort elseu,here to harness information technology to go Japan one better. This occurred not just in the United States and Western Europe but also in lower-income East Asian countries like Korea and Taiwan wanting to compete effectively with iapan. U.S. and European firms partnered with East Asian firms to become more globally competitive. Later on, China and India entered the picture - China focusing on manufacturing by attracting global firms with iow-cost 1abor, through investments in advanced production technologies, and by offering access to large domestic markets; hrdia concentrating on selling the services '' "Global Production Networks", University of Manchester, School of Environment and Development, http ://wvw. sed. manchester.ac. uk/geography/researclv gpil. " See also Dieter Ernst, "The New Mobiliry of Knowledge: Digital hformation Systems and Global Flagship Networks", in Robert Latham and Saskia Sassen, eds, Digital Formations: IT and New Architectures in the Global Realm (Princeton, N.J.: Princeton University Press, 2005), pp. 89- l14. of inexpensive but skilled and semi-skilled workers to foreign firms via the "business process outsourcing" markets. The most dramatic example of the construction of global production networks was that of the semiconductor industry, A global division of labor emerged in the 1990s betu,een firms that designed and firms that manufactured circuits'o. In order for so-called "design houses" that specialized in circuit design to succeed, there had to be "foundries" - firms that specialized in circuit manufacturing on a contractual basis. Foundries arose first in Taiwan, as key firms in that country decided that their best strategy for becoming internationally competitive in the industry was to focus on perfecting the process technology and Iet others do the designs. These firms were founded or run by Taiwanese nationals who had been trained in the United States or who had worked for U.S. semiconductor firms previously. The Taiwanese firms that adopted this strategy did not do so until it was ciear that their earlier strategy of doing both design and manufacturing would not succeed. The Koreans, rvho entered the markets at about the same time, mostly avoided the foundry strategy' '. G1oba1 revenues in the industry were over $260 billion in 2006. Trn'o U.S. firms were among the top ten firms in terms of revenues in 2006: Intel and AMD. Intel was the top money earner, accounting for over 12 percent of world revenues, while Samsung of Korea was second. Intel's and AMD's U.S. operations, especiallv their R&D operations, were cruciai to the overall success of the two firms, but both had invested in foreign fabrication facilities in order to service foreign markets in Europe and Asia. In short, the rise of Japanese firms as competitors primarily to U.S. firms in semiconductors led to a response on the part of U.S. firms that effectively globalized the industry. While control over the most valuable underiying technologies remains closely held by U.S. and Japanese firms, Korean and Taiwanese firms have become key technological players in the industry, not just in production but also increasingly in product technology as we1l, and assembly and packaging operations in many lorver-wage countries are a necessary adjunct to the strategies adopted by the primary competitors. This vigorous global competition in semiconductors has been a key factor in reducing the prices of information technology equipment and senices worldwide, thus accelerating the globalization that depends on digitalization. Evidence of this can be seen in the way that ftrms in Asia. North America and Westem Europe manage their g1oba1 production networks. As in the past they continue to rely on snail mail, telephony, telegraphy, faxes and face-toface communications via frequent air travel of executives and engineers. But to reduce costs they increasingly rely on email, digital video teleconferencing and teiephony and a variety of 16 An earlier division oflabor had developed between companies that manufactrred chips and their contractors in lower-wage counfries who put the chips into chip housings or packages. See Jeffrey T. Macher" David C. Morvery, and Alberto di Minin, "Globaiization of lnnovation in the Semiconductor Industry", revised version ofa paper presented at a conference on The Globalization of lnnovation held at the National Academies, Washington, D.C., April 21, 2006. r- On the emergence of foundries, see Annalee Saxenian and Jinn-Yuh Hsu, "The Silicon Valley-Hsinchu Connection: Technical Communities and Industrial Upgrading", htdustrial and Corporate Change (10, 2001): 893-920; and Dieter Ernst "Compiexity and Internationalizarion of lnnovation: Why is Chip Design Moving to Asia?", International Jaurnal of Innovation Management /9, Ir4arch 2405): 4'7 -'1 3. \&'eb-based systems to manage the intense communications necessary for coordinating such far-fl ung business nefworks. One key question for research is whether and to what extent the globalizing practices of the semiconductor industry have influenced those of other industries. Much of the rest of the eiectronics complex seems to have been similarly globalized, but heavier manufacturing industries such as iron and steel, motor vehicles and heavy machinery are less iikely to adopt the far-flung approach because of the continuing importance of transportation costs. It does not make sense. for example, to create global foundries for autos as happened for semiconductors. Nevertheless, the division of labor within industries between component producers and fina1 assemblers and across countries has been changing rapidly and some of that change has been driven by the decreasing costs of communication made possible by the diftusion of lCTs. 6

. The Rise of Big-Box Retailers A big-box retailer is a large chain store that sells items in larger than normal quantities. Exampies include Wa1-Mart, Kmart, Target. Carrefour (France) and Big Bazaar (tndia). The revenue growth of these retail stores has been much faster in recent decades than that of smaller stores, arid there is some speculation that such growth has been both the result of globalization and an accelerator ofthe same. Digital technology contributed to it primarily through the deployrnent of systems thar track products tluough the entire chain from producers to final customers by scanning barcodes when the products come off the assembly line, are shipped to retailers and are purchased at registers. Ail big-box retailers employ sophisticated sofh.vare systems to keep track of customer demand for a large number and variety of products and to make sure that automated restocking orders accurately reflect saies at individual stores. Because big-box retailers focus on high-volume products and offer these products to consumers at low prices, they gain bargaining power with producers, who need orders from big-box retailers to remain profitable. The retailers use this bargaining power ro insist upon cost savings that they can pass along to consumers, and some, like Wal-Mart, push producers to relocate production to low-cost (generally lou'-wage) iocations as part oftheir overall costreduction efforts. Thus. the relationship between big-box retailers and producers ofconsumer goods may have accelerated the globalization of production of high-volume consumer goods via the relocation of labor-intensive activities to low-wage countries. Wal-Mart alone cunently accounts for 15 percent of total U.S. imports from China'o. One of the tlpes of goods carried by big-box retailers are consumer electronics products like TVs. video game consoles and MP3 players. The production of these goods was already extensively giobalized, but there is evidence that the big-box retailers exerted pressure on their suppliers to move to lor.r'er-cost iocations, especially to China, in assembling the items they carry'. 18 Emek Basker, "The Causes and Consequences of Wal-Mart's Growth", Journal of Economic Perspectives (21,2007):177-198; Emek Basker and Pham Hoang Van, "Wal-Mart as Catalyst to U.S.-China Trade", April 2008, unpublished paper, Universiry of Missouri; and Richard Vedder and Wendell Cox, The LItal-Mart Revolution; Ho*- Big Box Stores Benefit Consunters, Il/orkers and the Economy (lilashington,D.C.: AEIPress,2007). For acritical treatment,seeStacyMitchell, Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America's Independent Businesses (Boston: Beacon Press, 2007). It must be said that this strategy would not have been available to the big-box retaiiers if there had not been a liberal trade regimes in place and if the governments of countries with plentiful low-wage workers had not encouraged the relocation of labor-intensive processes inside their borders. The shift in development strategies, particularly in East Asia, to encourage export-oriented business investment is a major part of the explanation of the success ofthe big-box retailers. 7. E-Commerce Another way that digital technology has affected globalization is through the rise of electronic commerce (e-commerce). E-commerce is business conducted electronically and particularly via digital communications net\4'orks like the Intemet. E-commerce is often separated business-to-consumer (B2C) and business-to-business (B2B) forms, mainly because B2B advanced more rapidly initially than B2C. With the success of BZC merchants like Amazon, many so-calied bricks-and-mortar retailers supplemented their physical stores with virtuai ones. Among bookstores, this happened particularly quickly u'ith chains like Borders and Barnes and Nobie playing catch up with Amazon. Now all the big-box retailers, department stores, and many specialty stores offer $'eb sales alongside other retail channels, The mail-order business with its glossy printed catalogs has also migrated to the rveb. Auction sites like eBay have transformed the marketplace for small businesses and collectors. It is possible for individuals and small firms overhead to sell into global markets using these channels. Figure 1 shows that B2C e-commerce has grown more rapidly in the United States than the growth of the rest of retail sales. By the 3'd Quarter of 2008, e-cofi)merce accounted for roughly 4 percent of all retail saies. E-commerce in Western Europe has not advanced as rapidly as in the United States (see Table 1), even though some Westem European countries have higher rates ofaccess to both dial-up and broadband services. 234 Figure 1. Estimated Quarterly U.S. Retail E-commerce Sales as a Percent of Total lv Retail Sales: 4th Ouarter 1999- 3rd Ouarter 2008 tl t ,lo 1020 30 {o 1020 Jo {o lo 20 30.1o 1020 30 to 1020 30 t0 It)?o 30,10 1020 3Q {o lo20 30.10 1020 30 2000 2001 2002 2003 2004 2005 2000 2(t07 2008 Source: U.S. Census Bureau, Quarterly Retail E-Comnterce Sales: 3'" Quaner 2008, country ecommerce l as 70 of total:countrv '7o online irvindow I ,7o of interneti icountry :users buying, ' online Sweden Finland ,28 l-UK . i0:37 Netherlands 0.34 - ."- -"i..- ."- - - . ,G,ermany ,0,30 Netherlands;28 :UK Belgium :o:16 )0.14 : C-^:- toPsrl 16 ,France :Italy France i14 iFinland ;0.09 :Germany :14 ,!!"in.. - 0.0! iltaly tl4 Portugal :0.06 :UK l3 :Italy Source: E-Commerce Statistics: Europe, httn:/rwmv.ecommerce-digest.com/ecommerceWhile e-commerce can potentially move freely across national boundaries, barriers to international e-commerce are still formidable. Physical items purchased electronically from foreign vendors are subject to relatively expensive mailing costs and to the collection of import duties at ports of entry. There may be local sales or VAT taxes on the items. Not all the probiems of assessing and collecting these taxes internationally have been worked out yet. Some items that are offered for sale electronically in one country may be illegai in the country of the purchaser. The sale of Nazi paraphernalia on Yahoo's French web site, for example, was illegal under French laws and Yahoo was told to take down all such items from its web sites. Irr short, only modest gains in the giobaiization of retail trade have occurred via the rise of econlmerce, although slightly iess modest in the case of B2B as opposed to B2C e-commerce. Changes in technology, international regimes. and domestic policies may be required to move more retail trade into cyberspace. For the meantime, the big-box "bricks and mortar" stores continue to dominate the retail scene. 8. Bridging the Global Digital Divide One of the long-term issues association with globalization and digitalization is the degree to which digitalization helps or hinders efforts to reduce global economic inequality. There are those who argue that digitalization either preserves or accentuates pre-existing inequalities in ircome and wealth. Thomas Friedman, among others. argues that digitalization creates a more even plalng fieid and by doing so has at least the potential to reduce pre-existing inequalities. The same arguments occur regarding the impact of globalization on inequality. Can the two be unpacked? Is it possible that one has an equalizing effect, while the other does not? Global income is distributed quite unequally, and that inequality may be increasing. Absolute gaps in per capita income between the high-income countries and others increased z3) L markedly between 1980 and 2006, continuing the postwar trend''. During the five years from 2001 to 2006, average growth rates were 6,1 percent in the low-income countries, 5.6 percent in the middle-income countries and2.2 percent in the high-income countries. Average annual growth in nominal GDP between 1991 and 2000 was 4.6 percent in the low-income countries, 3.8 percent in the middle-income countries and 2.5 percent in the high-income countries. While economic grorth rates were higher on the average in the South than in the North during the past four decades, high population growth rates kept per capita income growth rates modest for most of the South's people. with the notable exception of a small number of very fast-growing developing countries. It is a hopeful sign, of course, that the two largest low-income countries-China and India-have experienced rapid growth in recent decades2o. There are a variety of ways to measure the amount of inequality within and across nations. One commonly used measure is the GINI coefficient of inequality. The GINI coefficient measures the degree of variance from perfect equality, by determining the area bet'*'een the Lorenz curv'e of distribution and the diagonal which represents perfect equaiity. The GINI coefficient ranges from zero (perfect equality) to one (perfect inequality). Economists have attempted to measure global income inequality over relatively long periods of time. These efforts have yielded consistent findings that in-equality increased steadily between 1820 and 1970, but began to decrease from 1970 on''. The GIi{l coefficient for global income inequality ranges between .5 and .65 for the period between 1820 and 1998 and recently has stabilized around .6, while the GINI coefficient for domestic income inequality tends to range befween .3 and .4 for most countries22. In short, the empirical evidence on income inequality fails to suppon the view of some critics that the intensification of globalization after 1 989 has resulted in increased global and domestic inequality. Rather it indicates that there has been in a major decline in the number^^of people living on less than a dollar a day and in other indicators of "absolute poverty"". Thus, the aggregate data on income inequality seems to indicate that digitalization has not accentuated pre-existing inequalities. To the extent that globalization has made it possible for China and India to grow faster in recent decades through outsourcing, one can even argue that globaiization has reduced both global inequality and the digital divide. In 2008, for example, CIA data indicated that China had more Interriet users than both the European Union and the United States. Although per capita use is still lower in developing countries than in developed countries, in some large developing countries like China that gap is growing smaller. Table 2. lntemet Users Cou Rank Ordered, 2005-2008 Rank Count Internet users Date of Information re The growing gap in incomes in the last 40 years is a continuation of the growrng inequality between North and South that began, according to Paul Bairoch, in the i700s. See Paul Bairoch, "International Industrialization Levels from 1 750 to 1 980", Journal of European Econontic History (2, 1982): 268-333. '" Branko Milanovic, Worlds Apart: Measuring International and Global Equality Qrrnceton, N.J.: Princeton University Press, 2005), see p. 2 especially. '' Frangois Bourguignon and Christian Morrison, "Inequaliry Among World Citizens: 1980- 1992", Anterican Economic Review (92, September 2002):727-744; and Xavier Sala-i-Martin, "The World Distribution of Income", NBER Working Paper 8933, May 2002. Milanovic offers a somewhat skeptical view ofthese findines. 22 l,l'o)ld Developmenr Report 2d0o i\l'astrington, D.C.:Worid Bank, 2006), p. 7. 23 The Millennium Development Goals Report 2002 (New York: United Nations, 2007), p. 4. 1 2 3 4 5 o 7 8 9 10 l1 12 13 l4 15 t6 World China European Union United States Japan hdia Braztl Germany United Kingdom South Korea Italy France Russia Canada Iran Mexico 1,018,057.389 2005 253,000,000 2008 247,000,000 2006 223,000,000 2008 88,1 10,000 2007 80,000,000 50,000,000 42,500,000 40,200,000 35,590,000 32,000,000 31,295,000 30,000,000 2001 2007 2007 2007 2007 2007 2007 2007 28,000,000 2001 23,000,000 2007 22,812,000 2007 Source: CA World Factbook 2008, https://wrvrv.cia.govilibrar],/publriiations,thiworldt21 9. Conclusions The available evidence indicates that globalization in some specific areas - especially finance - was faciiitated by the spread of ICTs. Similarly, in some industrial sectors, such as microelectronics, globalization ofproduction facilitated the spread ofICTs by reducing costs and prices of computer and telecommunications equipment. The spread of ICTs made the construction and management of far-flung global production networks cheaper and easier. Thus, the causation goes in both directions. The same can be said in the case of the rise of the big-box retailers. The evidence in al1 three areas suggests that technoiogical change alone cannot explain the acceleration of globalization in recent years. One has to include other factors such as change in intemational economic regimes and domestic economic strategies. Thus, Friedman is wrong and Hanson is right, but we cannot state with any degree of precision how much technological change mattered relative to other factors. One open question is the extent to which the increased volatiiity in global financial markets in recent years may result in a rebellion against liberal economic regimes and in support of more reguiated domestic markets. Another open question is whether the downward trajectory of ICT prices that the world has enjoyed in the past three decades will continue, especially if there is a turn av'ay from financial globaiization. Finaliy, some'industqies are less subject to the pressures for globaiization than others and govemments contlnue to create barriers to the free flow of factors of production, especially labor, so the world is still far from the "flat platform" of equal economic oppomrnity heralded by Friedman.