• 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?
 
 
by James Heskett

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?