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Lexus and the Olive Tree Summary

As the foreign affairs columnist for The New York Times during the 1990’s, Thomas L. Friedman was among the most perceptive, intelligent commentators on the world scene at the end of the twentieth century. His frequent appearances on television news programs added to his reputation as a persuasive and often puckish analyst of foreign affairs. Winner of two Pulitzer Prizes for his reporting for The New York Times and a National Book Award in 1989 for his first book From Beirut to Jerusalem (1989), Friedman examines the process of economic change that is reshaping the modern world in The Lexus and the Olive Tree. Many other observers have discussed the subtleties of globalization that are sweeping economies of nations large and small, but Friedman does so with verve and insight. While some parts of the book celebrate the positive results that globalization is bringing, there are sobering passages as well in which Friedman warns of the potential dangers to humanity from unbridled change. This volume provides a superb introduction to the ways in which technology and economic modernization are transforming the human condition.

Friedman’s title for the book comes from a May, 1992, visit to Japan where he observed a Lexus car factory that was almost fully automated. Even the smallest final details of completing the vehicle were done with robots. After watching the precision and technological complexity of the process of making these luxury cars, Friedman was returning to Tokyo on a bullet train when he read a news story about the ongoing dispute in the Middle East between Arabs and Israelis. In that controversy, individuals “were still fighting over who owned which olive tree.” He saw that a good part of the world was involved in the process of globalization that the Lexus represented. On the other hand, another substantial portion of humanity was still committed to bickering over land, property, and ancient animosities. The conflict symbolized the theme he was trying to develop in his own mind. “What we are looking at and for,” Friedman concluded, “is how the age-old quests for material betterment and for individual and community identity—which go all the way back to Genesis—play themselves out in today’s dominant international system of globalization.”

Much of the book is devoted to describing how globalization is transforming people’s lives. In that endeavor, Friedman is a fascinating

guide to the rapid change of the modern era. His role as a New York Times columnist gives him access to business and political leaders in every country. He also brings to his work a wide-ranging curiosity and an ability to make perceptive connections based on what he has seen. Time after time, Friedman describes a conversation with a businessman or entrepreneur in which the person details how the information revolution is changing the context of daily life. For example, U.S. Treasury secretary Larry Summers was impressed in 1988, while working for the Michael Dukakis Democratic presidential campaign, to have a car phone for his use. Nine years later, on a trip to the Ivory Coast, Summers was in a dugout canoe on a remote river when an official “handed him a cell phone and said, Washington has a question for you.’”

Some of Friedman’s descriptions of how globalization works are likely to pass into the language as ways of thinking about this all-encompassing process of change. One of these is the Golden Straitjacket, which he calls “the defining political-economic garment of this globalization era.” By this term, Friedman means that in order to survive in the highly competitive world economy, a nation must emphasize the private sector, keep inflation down, balance its budget, and reduce the size of its governmental sector. Other aspects include free trade, a stable currency, and an honest marketplace. A blend of the policies of U.S. presidents Ronald Reagan and Bill Clinton is the preferred mix for economic vitality, and moving too far to right or left is a recipe for defeat in the globalized economy.

Friedman recognizes that this economic model “is not always pretty or gentle or comfortable. But it’s here and it’s the only model on the rack this historical season.” Alternative economic philosophies such as Marxism or fascism simply cannot endure in the global marketplace because of their rigidities and inefficiencies, Friedman says. He argues that the Straitjacket necessarily reduces the ideological component of a nation’s politics while it encourages the expansion of the economy. In Friedman’s terms, politics becomes a more marginal activity of adjusting the terms under which economic growth will be pursued. This may be true in matters of economic policy, but whether it will affect cultural and moral issues remains to be seen. Nonetheless, Friedman’s formulation does explain developments in the politics of the United States and Great

Britain in the 1990’s, from Bill Clinton as a New Democrat to British prime minister Tony Blair and “New Labour.”

Even more interesting is Friedman’s concept of the Electronic Herd. The label is the way Friedman describes the workings of the global marketplace where “often anonymous stock, bond, currency and multinational investors, connected by screens and networks,” pursue the maximum economic return. The herd decides whether a country is following the policies mandated by the Golden Straitjacket. If it is not, then money and capital are moved with dizzying speed to more profitable venues. The result is that when a nation implements programs that threaten the bottom line of investors or multinational corporations, an immediate decision occurs to send resources elsewhere. For a country such as Malaysia or Thailand, the stampede of the herd can bring economic disaster.

The herd is composed of two kinds of “cattle,” the short-term investors (“short-horns”) and the multinational companies (“long-horns”) that make commitments into a country that give the firms a large voice in how economic policies are made. The main task of political leaders, Friedman says, is to attract these companies, and policies that frighten them are counterproductive.

The key to all this dramatic change for Friedman is the Internet, which is pushing forward the pace of globalization. Because the Internet provides instantaneous linkages with anyone in the world, it compels businesses, individuals, and countries to act in global terms. The Internet is the means by which Friedman’s Golden Straitjacket and Electronic Herd will operate with increasing efficiency around the world; it will function in ways “that will only make the world smaller and smaller and faster and faster with each passing day.”

The existence of these forces is promoting the growth of free markets, democracy, and rapid access to information everywhere. Friedman contends that nations will have to move more and more toward the ways in which the United States and other industrialized countries conduct their business affairs. An emphasis on honest disclosure of economic information, a reduction in corruption, and a reliance on more democratic procedures will become imperative in order to ensure that potential investors believe that their money will be safe and their

investment profitable. The achievements of twentieth century reform in the United States turn out to have been the crucial ingredients for long- term success in the world.

Friedman rates countries on how well they are accomplishing these goals at the end of the twentieth century. A nation such as France that bans encryption technology will, in Friedman’s view, inevitably fall behind countries that allow for open access to the Internet. “If France were a stock, I’d sell it,” Friedman concludes. Other more innovative cultures such as Taiwan gain his endorsement. The larger principle is that to survive, nations must adapt to the new demands of information technology or consign themselves to a permanent status of dependency and intellectual backwardness.

While Friedman believes that the trends set in motion by the revolution in information and globalization are beneficial and irreversible, the latter portion of his book examines the resistance to this process and the ways in which the trends toward world integration might be disrupted. Friedman had developed what he called the Golden Arches Theory of Conflict Prevention, the claim that “no two countries that both had McDonald’s had fought a war against each other since each got its McDonald’s.” The Serbian war of early 1999 invalidated that insight, and the conflict illustrated that ethnic and religious animosities can outweigh the need for peace and economic development.

Other possible sources of difficulty are the differences in wealth and income that globalization produces. These disparities could be a source of grievance and discontent among those left behind. Similarly, the desire to preserve local cultures and patterns of life will be strong. If what Friedman calls economic backlash becomes joined to cultural backlash, a powerful force working against globalization could develop. As he notes, the technology on which globalization depends is fragile and could be interrupted by terrorist activity.

On the whole, however, Friedman’s assessment of the future is positive. Globalization offers the promise of a better life for billions of the earth’s inhabitants if humanity can manage the transition from one economic system to another. He warns, however, that it is not automatic and must be pursued diligently. Throughout the book, he sees the United States as well positioned to lead the benevolent side of globalization into the

twenty-first century. With a continental free market system, legal mechanisms in place to keep capitalism from becoming unbridled, and a receptivity to innovation, the United States should be able to avoid the pitfalls that other cultures face in responding to change, Friedman says. America, Friedman concludes, is “a spiritual value and role model.”

The policy implications for the United States are profound, however. Friedman has little patience for those who would adopt protectionist positions toward world competition or seek to move the United States out of an active involvement with the world. His argument would be that there is no going back to a time when the United States could survive on its own. Politicians need to make it clear what is at stake in globalization and follow programs that will advance the long-term interests of the United States. These programs include making the flow of capital more democratic and ensuring that the political systems of developing countries follow a democratic model. In a way, Friedman is a modern- day exponent of U.S. president Woodrow Wilson and making the world safe for democracy, suitably updated for the age of globalization.

Friedman’s book is in a distinguished tradition of works that provide guideposts for the future of American society. Like Herbert Croly’s The Promise of American Life (1909), which set the stage for the debate about the future of progressive reform in 1912, and Michael Harrington’s The Other America (1962), which alerted the nation to the problem of poverty, Friedman’s valuable study will be seen as a work that both summarizes where the nation is and offers important prescriptions for where the United States ought to go in the twenty-first century.

The Lexus and the Olive Tree is a well-written, engaging guide to the dynamic change that is rushing ahead into the twenty-first century. Friedman blends analysis and anecdote with a sure hand, and he is able to convey complex concepts in an accessible, understandable fashion. While he is often critical of the policies of the leaders and countries he describes, he depicts them all with sympathy and insight so that their common humanity shines through. The book compresses a great deal of relevant information into usable form and will be an indispensable guide to the rapid pace of change.

Sources for Further Study

Booklist 95 (March 1, 1999): 1100.

Business Week, April 26, 1999, p. 17.

Commentary 108 (October, 1999): 68.

Foreign Affairs 78 (May, 1999): 118.

Library Journal 124 (April 15, 1999): 112.

The New Republic 220 (June 14, 1999): 39.

The New York Review of Books 46 (July 15, 1999): 40.

The New York Times, April 26, 1999, p. B7.

The New York Times Book Review 104 (April 25, 1999): 14.

Progressive 63 (July, 1999): 7.

Publishers Weekly 246 (March 1, 1999): 48.