06 Jun 2005  What Do YOU Think?

Is a “Level Playing Field” a Good Thing?

There is a lot of talk these days about a level playing field, sparked in part by Thomas L. Friedman's bestseller, The World is Flat. But what is a level playing field in the world today, and does everyone play by the same rules?

 

Summing Up

This month's column seems to have struck a sore spot with many respondents who question whether the term, "level playing field" even serves a useful purpose.

John Forsyth asks, "Is the playing field ever level in business?" Barbara Maidment comments that "The very notion of a level playing field is a myth. There never has been a level field and there never will be. . . . Let the market decide for itself and it will work out." Radhika Unni adds, "I don't think that there will ever be a level playing field. . . . That doesn't mean I feel that governments should stop the natural market dynamics, but . . . countries should (not) use the term 'level playing field' as an excuse for exploitation." Paul Jackson points out that "In this country [the United States], let alone in other countries, small businesses are not and never will be on a level playing field with big business that can spend millions, perhaps billions, to launch a new product or service."

Others set forth reasons for inequities in international competition and how they might be rectified. Andy Forbis comments that "We [the United States] are not looking at China and India as competition but as profit centers to improve our short term return on investment. We need to reexamine that paradigm. . . . Sometimes the kids in the global community don't play fair. We don't have to take our ball home. We do need to use our leverage while we still have it to make sure that everyone plays by the same standards." In commenting on "playing fields" from the viewpoint of developing economies, Ashutosh Tiwari suggests that there are two types. The first is technical. He writes, "What is common to all is access to information. But what is not common is how one's use of that information leads to prosperity. This is where the second kind of level playing field comes into play. This would include mechanisms such as ease of starting, running, and folding a business; enforcement of contracts; political stability; and access to basic infrastructure. . . ."

Yali Wei is more succinct: "The world is becoming flat only to Americans. How it will play out for America is completely up to Americans." In this regard, Nari Kannan offers a suggestion: "College costs need to be subsidized and college education encouraged, especially in math and science, so graduates will be able to compete effectively with government-subsidized colleges in India and China."

So let's assume that there is no such thing as a level playing field. Does it follow that efforts to make it more level are primarily enlightened social gestures on the part of the advantaged of the world? Or are they in the long-term best interest of those who have benefited the most from irregularities in the "field"? And just what can leaders of disadvantaged economies do on their own to improve their countries' competitive positions in the world, thereby tipping the field in their favor, without incurring the wrath of their competitors and customers? What do you think?

Original Article

There is a lot of talk these days about "a level playing field." There is a sense that it is about fairness in any kind of competition, from college admissions to world trade. Its most current form has arisen in connection with moves by the United States to take actions to stem the influx of Chinese-produced goods. Some would claim the influx is the result of an absence of a level playing field created by the combination of low labor costs in China and a Yuan pegged by the Chinese government at an unrealistically low value in relation to the dollar and other currencies.

The talk will be stimulated by the recent publication of the book, The World is Flat (as in a level playing field), by Thomas L. Friedman. In it, Friedman suggests that such things as rapid and ubiquitous technological advances, enlightened education systems, and the over-building of the world's communication capacity during the "bubble" of the last century will shape the twenty-first century by producing a more level playing field between the world's haves and have nots. Economists point to the rapid increases in economic growth and productivity in China and India in relation to more developed economies as evidence that a more level playing field is resulting in huge advances in the standard of living for more and more of the world's residents.

But is a level playing field a good thing? Take the immediate arguments surrounding U.S. trade with China, for example. Floyd Norris, writing recently in the The New York Times, suggests that steps to encourage China to increase the value of the Yuan (thereby creating a more level playing field?) could have significant consequences. It could lead to more expensive goods for everyone (except the Chinese) as well as reductions in Chinese investments in the United States, particularly the purchase of dollars. That, in turn, could fuel more significant interest rate increases and reduced economic activity in the United States. As Norris puts it, "the largest vendor financing program ever has stimulated both the Chinese and American economies." Is it wise to "level" this playing field?

Just what is a level playing field? Does the game played on it have the same rules for everyone, even if such rules work to the continued disadvantage of the already-disadvantaged? Is it a global economy in which governments refrain from any efforts to gain economic advantage over their neighbors? Should there be exceptions for certain currently disadvantaged countries that are desperately, and in many cases unsuccessfully, trying to just get to the sidelines of the playing field? How do we draw the line on such exceptions? And who administers them?

Who benefits most from a level playing field? A developing economy achieving productivity gains with volume increases achieved through low factor costs of production? Or a developed economy realizing productivity gains in totally different ways, for example, by leveraging already high factor costs through technology and the education and communication required to use the technology more effectively? Are these two types of economies even competing on the same playing field? What do you think?

To read more:

Thomas L. Friedman, The World Is Flat: A Brief History of the Twenty-First Century (New York: Farrar, Straus, and Giroux, 2005).

Floyd Norris, "Who's in Charge of Determining U.S. Interest Rates? It May Be Beijing," The New York Times, May 13, 2005, p. C1.

Comments

    • Ashutosh Tiwari
    • Consultant, International Finance Corporation

    I see two kinds of level playing fields.

    The first one is technical. The Internet, for instance, has given anyone with Web access the same starting line to sell goods and services. What is common to all is access to information. But what is not common is how one's use of that information leads to prosperity.

    This is where the second kind of level playing field comes into play. This would include mechanisms such as ease of starting, running, and folding a business; enforcement of contracts; political stability; and access to basic infrastructure such as educated manpower, power, water, and the like.

    As long as developing countries fail to invest in making the second kind of level playing field, the potential benefits that are to be reaped from the first level playing field will be severely limited.

     
     
     
    • Yali Wei

    The world is becoming flat only to Americans. How it will play out for America is completely up to Americans. The reality of China rising is that Americans are making a rising China that can compete financially or technologically with everyone else. I guess the bottom line is not about whether a "level playing field" is good or bad. It's about how America reacts. It's up to America to make it a good or bad thing for Americans, people in other countries, or for everyone on earth.

     
     
     
    • Radhika Unni

    I don't think there will ever be a level playing field. I think it is time we realized that there will always be inequalities: There will always be the powerful and the less powerful. This is the case in every facet of life.

    In fact, I would go so far as to say that the immediate benefactors of today's economic situation may be propagating the concept of a level playing field.

    That doesn't mean I feel that governments should stop the natural market dynamics, but at the same time it doesn't mean that countries should use the term "level playing field" as an excuse for exploitation.

     
     
     
    • John Booth
    • Writer and amateur sportsman

    Let's retire the use of the phrase "level playing field." Why? Because it means nothing to players of most competitive games. The issue that matters in soccer, rugby, hockey, lacrosse, and tennis is not whether the playing surface is level, rather it's whether the teams swap ends on a regular basis—half-time or quarter-time—so both teams have to cope with whatever irregularities the playing surface or weather conditions present.

     
     
     
    • Nari Kannan
    • CEO, Ajira Technologies, Inc.

    With computing, imaging, and telecommunications today, leveling the playing field means being able to do information work halfway around the world and get it done cheaper.

    However, leveling the playing field also means that developed economies must take a long, hard look at what has worked before and why it will not work anymore in order to hold on to the prosperity that comes with doing higher-value-added work. This means looking at certain danger signs and fixing them before it is too late.

    College costs need to be subsidized and college education encouraged, especially in math and science, so graduates will be able to compete effectively with government-subsidized colleges in India and China. Failure to do this will not level the playing field but tilt it in favor of China and India.

     
     
     
    • Keith Hamm
    • Human Resources Coordinator, Minnesota Valley Action Council

    The question of a level playing field is one of ethics. I work for a nonprofit. We have, among other programs, a thrift store that takes in donations. The money helps low-income people in our community. This is not a win/lose situation. Staff get paid, administration gets done, consumers receive better deals, waste is reduced in the community, and (above all) low-income people who need the playing field leveled a little get help. While we don't make a profit, we provide a service where no one loses. This may be as close to a level playing field as it gets.

     
     
     
    • Paul T. Jackson
    • Owner/Consultant, Trescott Research

    In this country, let alone in other countries, small businesses are not and never will be on a level playing field with big businesses that can spend millions, perhaps billions, to launch a new product or service.

    Certainly there are moral and ethical questions that we might want to deal with to make things better or fairer, but by what standards—by those who have the most money?

    Back in the 1950’s, Susanne K. Langer suggested in her book Philosophy in a New Key: A Study in the Symbolism of Reason, Rite, and Art that the way in which we ask a question may limit the kinds of answers we get. I don't think the right questions are being asked.

     
     
     
    • Satish Shah
    • Senior Partner, Bhaidas Cursondas & Co.

    While it may hurt some countries, a level playing field will benefit free trade and will allow the world to get cheaper goods. At the same time, the poorer countries will be able to raise their standard of living.

     
     
     
    • John Forsyth
    • Partner, Zibenza Consultants Incorporated

    Is the playing field ever level in business? I suggest not, as governments of every stripe interfere for whatever reason in the process. Britain and Europe boomed as they robbed Africa of its resources, Germany boomed with the Marshall Plan help, and the playing field seems to change as Canada becomes successful in competing with American companies and begins to take market share. The ongoing softwood lumber dispute is one example that comes to mind.

    Developing a level playing field will probably require international standards, but there are countries now that are balking at abiding by the international laws that are presently in place.

     
     
     
    • Mridula Dwivedi
    • Independent Researcher, India

    I wonder if it is more meaningful to address the question "What is a Level Playing Field?" to:

    A person who doesn't have roof over his or her head.

    A person who has to force his or her children into child labor to make ends meet.

    A person who has gone hungry tonight or does not know where his or her next meal is going to come from.

    Someone in a village where there is no electricity, roads, or even a school.

    And then, probably, we should wonder what we are doing to create a level playing field for them or even if it is a priority.

     
     
     
    • Barbara Maidment
    • Manager, Margaret River Business Development Centre

    The notion of a level playing field is a myth. There never has been a level field and there never will be. Governments attempting to make the field more level through subsidies and various forms of price supports and tariffs are only mucking up the free market economy and creating more problems for themselves later on. Let the market decide for itself and it will work out.

     
     
     
    • B. V. Krishnamurthy
    • Director and Executive Vice-President, Alliance Business Academy, Bangalore, India

    Whether a level playing field is a "good thing" depends on one's perspective. If we look at the question from the perspective of the "developed part" of the world, it may not be such a good thing after all. Otherwise, how does one explain the convulsions being caused by issues like outsourcing? On the other hand, if we look at the question from the prism of the have-nots, it may be the only answer to bridging social inequities across the world.

    In my view the question is only of academic interest. With technology driving markets and inflection points being reached at ever-increasing speed, turning the clock back might well be impossible. In many cases, one cannot even say where a product was manufactured. The raw material might have come from one country, the processes might have been carried out in another, the testing in yet another, and the packaging and so on in a fourth or fifth country. This is already a reality in several sectors like automobiles, electronics, and of course, software.

    It is a reality that is hard to digest, particularly for countries that have enjoyed economic prosperity without question. The sooner they understand the inevitability of it all and adapt to it, the sooner we may yet see a just and equitable world order.

     
     
     
    • Andy Forbis

    A level playing field is not defined solely by access to financing, information, and markets. To have a level playing field all competitors need to play the same game with roughly the same rules. We aren't there yet. American companies aren't currently structured to compete with China and are not thinking about competing with India.

    Our corporate leaders and the investment community are focused on short-term results. America's companies are working for Wall Street (including institutional investors), which is working on behalf of individual investors primarily to support retirement accounts. We are not looking at China and India as competition, but as profit centers to improve our short-term return on investment. We need to reexamine that paradigm.

    While America chases its tail each quarter, economically speaking, China and India are taking over both our industrial and service economies. If we work to ensure that we develop and make more of our products domestically, then export and protect them internationally, the jobs and economic growth will come. (Our current retirement investment model and rate of savings or our ROI expectations also need realignment, but that is another topic.)

    When your trading partners don't believe in human rights for their own citizens, they certainly won't look out for foreign companies. As long as countries like China are able to pirate our products on a large scale, there won't be a level playing field.

    We do need to keep the playing field level by holding our international partners accountable to higher standards now that they have tasted American capitalism.

    Sometimes the kids in the global community don't play fair. We don't have to take our ball home. But we do need to use our leverage while we still have it to make sure that everyone plays by the same standards.

     
     
     
    • Tom Patterson (HBS MBA '96)
    • SVP of Tech Dev and Operations, Markettools

    First of all, the phrase "the world is flat" is somewhat annoying used in this context as its common elicitation is a reference to the fact that the earth's horizon would eventually end. Not as positive a title as it could be and somewhat confusing.

    But on the topic of creating fair opportunities for all in the world by the removal of geography or proximity as a restraint to someone's well being, I think this can be very positive for the sheer fact that:

    • Economic well being leads to fairer individual representation.
    • Improved understanding of others as a function of education and wealth may lead to improved relations between different cultures/religions and may help to unite rather than divide.
    • Value creation/innovation for the world may expand due to different groups looking at business problems with a new entrepreneurial spirit and in completely different ways.

    People's affiliations will start to change too, and I think that while there will be new patriotism, people will continue to build new affiliations and allegiances in ways we've never seen before with people and organizations that are not geography-specific.

    What concerns me is the state of our governing and regulating commerce. It has not evolved fast enough nor do we have the right agencies or systems in place to deal with the equilibration. There will be some hiccups that will hurt old organizations/states/entities, their market competitors, and the causes that are fueled by their economic sponsorship.

     
     
     
    • Anindya Ghosh
    • CEO, Kubi Wireless

    Before answering that question, which could be yes, I think the world first needs to strive to reduce the gap between the haves and the have-nots. We humans seem to care more about what others can take away from us rather than what we can give. I believe the haves of the world have a similar attitude and take the developments of some of the have-nots like China and India as a big threat. Of course, there is no denying that they could be threats, but is it the most important concern for the haves? Maybe the most important concern of the haves should be maintaining their living standards and not just expecting and aiming for the linear increase in worldly comforts as has been the case till now. There will be no level playing field if the obsession of the haves is to maintain the distance they have with the have-nots.

     
     
     
    • Illysa Izenberg
    • Managing Principal, Strategy and Training Partners, LLC

    Perhaps we have taken the metaphor of a playing field too far. I'm not sure it's possible to have a worldwide, industry-wide playing field.

    A soccer field hosts only two teams at a time. When my children play, my five-year-old plays with the four- to six-year-olds and my seven-year-old plays with the seven- to eleven-year-olds. Boys and girls are together in these groups, but by high school they play on separate teams.

    Why not play all ages and genders together? Because it isn't possible to create a set of rules whereby all children can compete, learn, grow, and find it worthwhile to play the game.

    It's time for a new look at international and cross-industry competition and our definition of "fair" and "equitable."