The perspective and predispositions that you carry around in your head are very important in shaping what you see and what you don't see. That helps to explain why a lot of people missed the triple convergence. Their heads were completely somewhere else-even though it was happening right before their eyes. Three other things-another convergence– came together to create this smoke screen.
The first was the dot-com bust, which began in March 2001. As I said earlier, many people wrongly equated the dot-com boom with globalization. So when the dot-com boom went bust, and so many dot-coms (and the firms that supported them) imploded, these same people assumed that globalization was imploding as well. The sudden flameout of dogfood.com and ten other Web sites offering to deliver ten pounds of puppy chow to your door in thirty minutes was supposed to be proof that globalization and the IT revolution were all sizzle and no beef.
This was pure foolishness. Those who thought that globalization was the same thing as the dot-com boom and that the dot-com bust marked the end of globalization could not have been more wrong. To say it again, the dot-com bust actually drove globalization into hypermode by forcing companies to outsource and offshore more and more functions in order to save on scarce capital. This was a key factor in laying the groundwork for Globalization 3.0. Between the dot-com bust and today, Google went from processing roughly 150 million searches per day to roughly one billion searches per day, with only a third coming from inside the United States. As its auction model caught on worldwide, eBay went from twelve hundred employees in early 2000 to sixty-three hundred by 2004, all in the period when globalization was supposed to be “over.” Between 2000 and 2004, total global Internet usage grew 125 percent, including 186 percent in Africa, 209 percent in Latin America, 124 percent in Europe, and 105 percent in North America, according to Nielsen/ NetRatings. Yes, globalization sure ended, all right.
It was not just the dot-com bust and all the hot air surrounding it that obscured all this from view. There were two other big clouds that moved in. The biggest, of course, was 9/11, which was a profound shock to the American body politic. Given 9/11, and the Afghanistan and Iraq invasions that followed, it's not surprising that the triple convergence was lost in the fog of war and the chatter of cable television. Finally, there was the Enron corporate governance scandal, quickly followed by blowups at Tyco and WorldCom-which all sent CEOs and the Bush administration running for cover. CEOs, with some justification, became guilty until proven innocent of boardroom shenanigans, and even the slavishly probusiness, pro-CEO Bush administration was wary of appearing-in public-to be overly solicitous of the concerns of big business. In the spring of 2004,1 met with the head of one of America's biggest technology companies, who had come to Washington to lobby for more federal funding for the National Science Foundation to help nurture a stronger industrial base for American industry. I asked him why the administration wasn't convening a summit of CEOs to highlight this issue, and he just shook his head and said one word: “Enron.”
The result: At the precise moment when the world was being flattened, and the triple convergence was reshaping the whole global business environment-requiring some very important adjustments in our own society and that of many other Western developed nations-American politicians not only were not educating the American public, they were actively working to make it stupid. During the 2004 election campaign we saw the Democrats debating whether NAFTA was a good idea and the Bush White House putting duct tape over the mouth of N. Gregory Mankiw, the chairman of the White House Council of Economic Advisers, and stashing him away in Dick Cheney's basement, because Mankiw, author of a popular college economics textbook, had dared to speak approvingly of oursourcing as just the “latest manifestation of the gains from trade that economists have talked about at least since Adam Smith.”
Mankiw's statement triggered a competition for who could say the most ridiculous thing in response. The winner was Speaker of the House Dennis Hastert, who said that Mankiw's “theory fails a basic test of real economics.” And what test was that, Dennis? Poor Mankiw was barely heard from again.