The Lexus and the Olive Tree

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His argument can be summarized quite simply. Globalization is not just a phenomenon and not just a passing trend. It is the international system that replaced the Cold War system. Globalization is the integration of capital, technology, and information across national borders, in a way that is creating a single global market and, to some degree, a global village.
You cannot understand the morning news or know where to invest your money or think about where the world is going unless you understand this new system, which is influencing the domestic policies and international relations of virtually every country in the world today. And once you do understand the world as Friedman explains it, you'll never look at it quite the same way again.
With vivid stories and a set of original terms and concepts, Friedman shows us how to see this new system. He dramatizes the conflict of "the Lexus and the olive tree" -- the tension between the globalization system and ancient forces of culture, geography, tradition, and community. He also details the powerful backlash that globalization produces among those who feel brutalized by it, and he spells out what we all need to do to keep this system in balance.
Finding the proper balance between the Lexus and the olive tree is the great drama of the globalization era, and the ultimate theme of Friedman's challenging, provocative book -- essential reading for all who care about how the world really works.
It's possible to summarize what Friedman has to say fairly quickly, mainly because it's what you read in just about every issue of Business Week. Information technology, he tells us, has made the world a small place, in which ideas and money can move almost instantly across borders. This smaller world richly rewards countries and societies that meet its needs--which is to say places that have strong property rights, open minds, and a flexible attitude; but it inflicts devastating punishment on those who fail to live up to global standards. Old-fashioned power politics is becoming increasingly obsolete because it conflicts with the imperatives of global capitalism. We are heading for a world that is basically democratic, because you can't keep 'em down on the farm once they have Internet access, and basically peaceful, because George Soros will pull out his money if you rattle your saber.
A good place to start is with something that he almost certainly has wrong. If there is one single fact that transformed America's image of its place in the world, that made earlier vintage global visions look so foolish in retrospect, it is the contrast between our own unexpected prosperity and Japan's even more unexpected economic malaise. There isn't really any careful discussion of what went wrong with Japan in this book, but the clear implication of his various parables and metaphors is that Japan is in trouble because it is hidebound and inefficient, and that this makes it unfit for the global economy. Yet, as Friedman himself points out, Japan's export sector remains world-class (In fact, it's sort of bizarre that he names a symbol of Japanese manufacturing prowess, rather than some American specialty like software or entertainment, in the book's title.) What has faltered in Japan is production for the domestic market--and while this production is and always has been inefficient, the immediate problem is not inadequate supply but inadequate demand. Put in a nutshell, the Japanese simply save too much; that is, although Friedman's only reference to Keynes is a disparaging one (he's a "defining economist of the Cold War system"), Japan is in fact suffering the most classically Keynesian crisis since the 1930s. And the United States, for its part, is not doing well because it is spectacularly successful in global markets. Except for the entertainment industry, U.S. producers are still remarkably bad at exporting, and we seem certain to mark the millennium by running the biggest trade deficit ever measured. We have been buoyed by an astonishing surge of consumer spending, which for reasons that probably have only a bit to do with globalization has not led to a corresponding surge in inflation.
This is not a minor quibble. If the role-reversal between the United States and Japan has more to do with old-fashioned macro-economics than with the inexorable new logic of globalization, maybe the rules of the game haven't changed as much as Friedman thinks--and maybe, also, America's winning streak is not forever. Did somebody say "bubble economy"?
If Friedman misses the point about what went wrong in Japan, he is also on shaky ground when it comes to the world's other ...