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.