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BOOK REVIEW "The Lexus and the Olive Tree" by Thomas Friedman By STEPHEN PALMER 10.03.03 12:19AM CST In a narrative ranging from the pithy to the profound, Thomas Friedman lays out the history of and principles behind the frequently misunderstood and oft maligned process of globalization. Although not academically trained in economics or globalization, as foreign affairs correspondent for the New York Times, Friedman has traveled a great deal and been a close observer of many critical elements of recent history. Perhaps his actual presence at a number of historical events and conversations with the famous figures involved can allow us to forgive his occasionally gratuitous name-dropping. In Friedman's conception, globalization represents the economic integration of the entire world through the enabling democratizations of technology, finance, and information. Individuals, companies, and countries at all levels of sophistication and development are increasingly able to access the information and technology necessary to invest in each other through channels that until recently did not allow the international flow of capital. Banks, pension funds, and even individuals can now own not only stocks issued by domestic, international, and foreign corporations, they can also own bonds issued by foreign governments, multinational corporations, and even individuals. Additionally, through advances in the computer, internet, and telecom industries, even individuals now have access to virtually real-time financial data from all over the world. Suddenly, the number of people and groups with a vested interest in the financial health of the Mexican or Indonesian economies is multiplied significantly and this "electronic herd," as Friedman dubs it, will be quick to reward (or punish) a country with a rapid influx (or withdrawal) of capital. In order to become successful in the globalized economy, a country must first opt to don the "golden straitjacket," as Friedman dubs it, embracing free market principles for better or worse. An important corollary to this, and one noted well by Friedman, is that free market principles and practices are insufficient if the legal and regulatory framework behind them cannot enforce the rule of law and ensure competitive markets. Many of the rapidly growing new economies of Eastern Europe in the 1990s have since collapsed due in part to the absence of strong institutions to ensure the viability of the free markets in those countries. Although Friedman at times comes across as a cheerleader for globalization, he does concede some of its negative aspects. In fact, the strange pairing of old and new worlds suggested in the title illustrates the continuing tension that Friedman sees in the process of globalization. "Olive trees... represent everything that roots us, anchors us, identifies us and locates us in this world. .... The Lexus represents all the burgeoning global markets, financial institution and computer technologies with which we pursue higher living standards today." The book offers little practical advice on how to keep the olive tree from being run over by the Lexus and, in fact, seems to suggest that whatever violence is done to a region's culture is more than justified by the increased standard of living that comes along with global integration. Friedman portrays the United States as the pinnacle of the Lexus mindset with its liberalized capital markets, pervasive technology, and internet culture. One weakness of the book may be its over-reliance on the model of America as the poster child for globalization, a perspective that does not play very well in Europe and elsewhere in the developed and developing world. Although much progress has been made in the United States over the last decade leading the world in both free market principles and the underlying governance structures necessary to sustain them, the United States still operates at the mercy of the international forces of globalization: consumers can choose non-American goods, the "electronic herd" can punish American capital markets, and non-market forces arising from developing countries can pose a physical threat to Americans and American interests. In fact, several significant policy decisions by the Bush administration have exposed the United States to vulnerability in the globalized world. Specifically, once their results are fully felt, the continuing budget and trade deficits, the 2002 steel tariffs, and the 2002 farm bill will all have caused damage to the American economy that could have been avoided by more actively embracing Friedman's "golden straitjacket." Friedman would have much to complain about regarding the current administration's lack of adherence to its declared free market principles. The bottom line, however, as Friedman repeatedly mentions, is that the main people hurt by governmental impediments to free trade are the people of the country: American tariffs on foreign goods hurt American consumers, the American economy, and global trade; subsidies to American industries hurt American consumers, the American economy, and developing countries; refusal or inability to adopt free market principles and the necessary governance structures in developing countries hurts the people of those countries and those countries' economies. In the post cold-war world, capitalism has emerged as the only viable economic paradigm with America as its champion but particularly under the current administration, we could certainly learn something from Friedman. |
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