Future

A Global Village? Flat World? The Internet Had Other Ideas

Information technology was supposed to usher in a new borderless utopia, but instead new walls are reappearing.

A great opening? — Photo: Worldcrunch
A great opening? — Photo: Worldcrunch
Jean-Marc Vittori

PARIS The world was supposed to become a village.

That was 10 years ago, an eternity in Internet time. New York Times journalist Thomas Friedman was writing his book The World Is Flat, destined to become an international bestseller. Men, merchandise, capital and information were going to move freely around the planet. The walls erected by communist countries had collapsed, as had shipping costs, thanks to the development of container transport.

The Internet and burgeoning information technologies played a central role in this great opening.

Among the 10 “flatteners” Friedman listed, five came directly from the world of the Internet (web browsing, downloading, search engines, etc.), and four were largely amplified by information technologies (outsourcing, elongation of value chains, etc.). The problem was that this vision of a flat world was wrong.

First, we rebuilt walls, and not just in poor regions — in the U.S., Israel and Italy too. Then, the deepest financial crisis in almost a century demanded national resources to save entire segments of industry. The American government saved General Motors by nationalizing it, while the French government rushed to the rescue of Renault and Peugeot by supporting their credit subsidiaries.

Freedom of trade was also breached. But most importantly, the Internet was transformed deeply. It was supposed to shape the framework for the global village. Instead, it is becoming the matrix of a new world, with its continents and empires. Last December, a Slovakian graphic arts student named Martin Vargic published a superb map illustrating this idea, and it was a huge success on social media.

History repeating itself

It is not the first transformation of the electronic network. In the 1960s, the Internet was a military project aimed to build a decentralized telecommunication system in the form of a web able to resist a nuclear attack. The tool was quickly taken over by university researchers so their works could move around the world. This is what led to the utopian dream of an open and free world, far from financial stringencies.

But with the tools that were developed in the early 1990s — hyperlinks, for example — the network became accessible to a much larger number of people. Various companies saw the potential, as did investors. Nothing gets them more excited than a new world.

In the 18th century, investors speculated on the future of America by fighting each other in the rue Quincampoix, in Paris, to buy shares of the Mississippi Company. At the end of the 20th century, they were fighting to buy the ships that would allow them to sail on the Internet — Netscape, Yahoo!, and eventually Google.

The dot-com bubble burst in 2000, and that represented the symbolic end of this era. That’s when the Google moment started. The search engine established itself as the essential gateway, and the company soared on the stock exchange. The specter of a mega-monopoly was in sight. But in reality, cracks were appearing. Companies built their own ecosystems that included everything that could be done — browsing, buying, communicating. And it became complicated to go to the competitor.

Yves Tirode, head of the French railway website voyages-sncf.com and former director of the Orange research center, talks about going from the Internet to a “Multinet.” Apple is currently the most advanced in creating its continent, but others are emerging. There is a Google world, an Android world. The Windows 8 world for Microsoft, with its Surface tablets. A Chinese world, including its search engine Baidu, the online video game and messaging service Tencent, and the marketplace Alibaba. Maybe an Amazon world tomorrow, with its Kindle tablets.

Each continent is building itself with the three classic layers of information technologies. Hardware first, in which IBM established itself more than half a century ago. Then software, in which Microsoft became the leader of operating systems 30 years ago, and where it still achieves unbelievable margins with a word and number-processing program. It is Android, IOS or Windows. Finally, there is the marketplace, because the IT giants are no longer settling for earning money in their sector only. They intend to earn some in the others, and if possible, across the whole economy. For that, each continent is protecting itself in order to keep its customers. People who stocked their music, photos and agenda in the Apple world have the most difficulties migrating elsewhere.

In other words, borders are reappearing!

With this burst of the Internet, all the companies offering their services online have to meet new requirements: invest on every continent, as one invested not long ago to be implanted in Africa or in Asia. For instance, Les Echos must have an offer that is adapted to computers, to the iPhone, to Samsung’s Galaxy that runs with Android.

The burst also reveals the absence of Europe. No Internet continent has any European layer. Startups from the Old Continent are likely to be snatched away so they can blossom in other places. Beyond this, the burst is leading to a world that is disconnected from physical and political geography. It is a radical innovation.

With all due respect to those who would despise a stateless form of capitalism, classic companies all have local roots — even in finance, which is often opposed to the “real” world. The first French bank has “Paris” in its name twice. The first German bank is called the “Deutsche Bank.” As for the Internet continents, they are shaping new worlds. And not just to avoid paying taxes.


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Society

Debt Trap: Why South Korean Economics Explains Squid Game

Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.

In the Netflix series, losers of the game face death

Yip Wing Sum

-Analysis-

SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.

The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.


It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.

Seoul housing prices top London and New York

In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.

According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.

Average home loans are equivalent to 270% of annual income.

One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.

According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.

Playing the stock market

At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.

A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."

In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.

42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s

Simon Shin/SOPA Images/ZUMA

Game of survival

In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.

But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.

This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.

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