BUSINESSWEEK ONLINE : APRIL 26, 1999 ISSUE
BOOKS

The Growing Pains of Globalization


THE LEXUS AND THE OLIVE TREE
Understanding Globalization
By Thomas L. Friedman
Farrar, Straus & Giroux 394pp $27.50

Just what is globalization--that abstruse, abstract set of developments now on the minds of everyone from politicians to executives to plant-floor leaders? Many of these people see global economic integration as a malignant force that is crushing millions of workers' aspirations while exacerbating inequality, unemployment, insecurity, and instability. Others argue that today's global economy is on the way to delivering profound worldwide prosperity. The proponents say that the information revolution is creating strong links between nations, peoples, and companies, even as the embrace of freer markets is fueling enormous increases in international commerce and encouraging democracy.

Both the pessimistic and optimistic visions of the New World Order seem to attract fierce advocates who all too easily dismiss the other group's concerns. That's not the case with the author of The Lexus and the Olive Tree. Yes, Thomas Friedman, the peripatetic foreign-affairs columnist of The New York Times since 1995, loudly applauds the triumph of global capitalism and the unprecedented wealth it has produced in the past decade. But he also recognizes the growing pains and human costs that globalization creates. And at times, he's ambivalent about what may be lost during this era of creative destruction.

Friedman is a card-carrying global optimist, and he excels when analyzing how a new international system is replacing the old cold-war system. His book contains a stinging rebuke to protectionists, isolationists, and others who want to stop the process of globalization for their own benefit--and to the detriment of most of the populace. But like most other observers, Friedman has difficulty knitting together all of globalization's complex economic, political, cultural, and technological strands. For example, his gloomy chapter on rising income inequality doesn't mesh with his earlier upbeat musings on the link between free-market capitalism and improving living standards. But so what? The global economy is still evolving, and Friedman's work in progress is a timely read.

His position at The New York Times gives Friedman a wonderful perch from which to observe the global economy's evolution. (He has also been the newspaper's Middle East correspondent and its diplomatic correspondent.) He has interviewed numerous government and business leaders and traveled far and wide, from tiny Chinese hamlets to the rain forest in Brazil's northeastern state of Bahia. The Lexus and the Olive Tree contains a few too many observations drawn from interviews with all-powerful, all-knowing sources or from what the author has seen out of a taxi window. But one must admire his effort to provide the anecdote or metaphor that will make an abstract concept concrete.

For instance, the brilliant social philosopher Jane Jacobs has called the battle between the new and the old--between the future and the past--the fundamental divide in any economy. Here's how Friedman captures the clash between the human drive for prosperity and modernization vs. the pull of relationships and community. In 1992, he visited the Lexus luxury-car factory outside Toyota City in Japan. Back then, 66 humans and 310 robots were making 300 sedans a day. Then, while Friedman was riding on the bullet train back to Tokyo, he read an article about the latest furor between the Arabs and Israelis. ''It struck me then that the Lexus and the olive tree were actually pretty good symbols of this post-cold-war era: Half the world seemed to be emerging from the cold war intent on building a better Lexus, dedicated to modernizing, streamlining, and privatizing their economies in order to thrive in the system of globalization. And half the world--sometimes half the same country, sometimes half the same person--was still caught up in the fight over who owns which olive tree.''

Much of Friedman's analysis covers familiar territory but covers it well--somewhat reminiscent of the accounts of well-educated, 19th century European travelers who toured the New World. The book explores how globalization is built on three fundamental changes: the spread of technology, the rise of the individual investor, and the democratization of information. Each factor informs and reinforces the turbocharged capitalism of today. Any nation, company, or people desiring to grow needs to embrace the rules of free-market capitalism. Opt out? Go ahead, says Friedman, but you'll end up with the living standards of a North Korea.

Like many other commentators, Friedman has been struck by how today's global economy has picked up where the 19th century global economy left off, just before a series of gross political miscalculations led to two world wars and the Great Depression. Friedman makes a convincing case that this time around, the forces of integration are more powerful than they were back then. True, globalization does not end geopolitics or prevent savage conflicts such as the war in Kosovo and tribal genocide in Rwanda. Nevertheless, the spread of global commerce is a powerful constraint. ''It increases the incentives for not making war and increases the costs of going to war in more ways than in any previous era in modern history,'' he writes.

On the eve of the 21st century, the signs of a great transformation in world history are all around us. Chinese capitalists. Russian entrepreneurs. Internet pioneers. Democracy in Latin America. All of us are groping to understand what's going on. For a useful first pass on history, consult Thomas Friedman.

BY CHRISTOPHER FARRELL

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PHOTO: Cover, ``The Lexus and the Olive Tree''



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