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The Lexus and the Olive Tree

by Thomas L. Friedman

 

Review by the Hon. David Kilgour, M.P (Edmonton Southeast)

 for the Administrator's Colloquium 2000-2001

 on Tuesday March 27, 2001 in Ottawa, Ontario.


The author is foreign affairs columnist for the New York Times, where he has won two Pulitzer Prizes for reporting.  The title refers to the conflict between such forces as community, tradition, language, religion and culture and, on the other hand, globalization.  Economic nationalists everywhere, however, will curse much of its contents.

 

Friedman's thesis is that globalization is the new international system that has replaced the Cold War.  It has its own dynamics that impact on the economics, geopolitics and environment of virtually every nation on earth.  Round II of Globalization is in Lexus essentially a continuation of the phenomenon which began in the mid-1800s and continued until the outbreak of World War I, when a 75-year hiatus lasted until 1989 when the Berlin Wall was torn down.

 

The defining largely unstoppable technologies of the author's globalization are computerization, miniaturization, digitization, satellite communications, fibre optics and the Internet.  With more than lightening speed, they are bringing down national borders and empowering those individuals who can avail themselves of democratizing new tools such as the genuinely revolutionary e-mail.

 

Among the walls that globalization has removed are financial ones.  The former monopoly of banks and insurance companies to finance home mortgages and foreign government debt alike is being replaced by issuing, say, $1000 bonds available to anybody with some savings.  The same phenomenon has struck information with the Internet, which no one owns or can turn off or contain, and now adds 300,000 new users each week to the world’s instantaneous and free postal system.

Most governments are increasingly feeling pressure to adapt to the democratization of technology, finance and information, which lie at the heart of Friedman's globalization system.  No longer can any head of state or business leader or media conglomerate expect to be the only ones to talk to mass audiences.  As he notes, every country with a per capita income above $22,000 is a liberal democracy now except Singapore.

 

"Golden Strait Jacket"

 

For economies everywhere, crony capitalism was an early target of globalization.  Communism and fascism had their opportunities on world stages between 1917 and 1989; they simply didn't work.  To prosper today, says the author, economies must make the private sector the primary engine of growth; maintain price stability; shrink the size of government bureaucracy; maintain a balanced or surplus budget; eliminate tariffs on imports and increase exports, remove restrictions on foreign investment; get rid of quotas and domestic monopolies; privatize government-owned industries; deregulate so as to promote as much domestic competition as feasible;  eliminate government corruption, subsidies and kickbacks; open banking and telecommunications to competition and allow citizens to choose among competing pension options and foreign and domestic run pension and mutual funds.

 

Friedman argues that in an age of globalization the quality and transparency of one's government matters more than ever, especially if one can build a lean, efficient, honest public service.  Chile, Taiwan, Hong Kong and Singapore all withstood the crises of the '90s much better than their neighbours precisely because they had small high-quality governments.  James Wolfenson of the World Bank wants nations to be graded on their governance mechanisms:  judicial systems, procedures for settling disputes, social safety nets, rule of law and economic operating systems.  What developing countries need most are free markets, political institutions and a popular consensus that protects property and innovation, and minimum safety nets.

 

"Globalution"

 

In a chapter on "globalution," or revolution from beyond, Friedman argues that investors can now force governments to be more transparent and democratic.  They seek stability, predictability and the ability to protect their property, but one can't achieve these without building democracy and good labour and competition standards.  In the case of Italy, for example, since 1999 the European Central Bank has been forcing Rome to clean up its deficit and inflation.  Friedman even argues that China will have a free media because without it Taiwan will continue to do better economically.

 

Friedman thinks the demand for E-government is rising:  why should anyone wait in line for "six hours at the county license bureau to get a license renewed, when one can buy the whole bloody car online?  …the more people expect the government to become as quick and efficient as Amazon.com, the more government has to operate like Amazon.com."  Peoples around the world are learning that political stability, prudent fiscal policies and business-friendly reforms can work wonders.  Mozambique and Botswana have overcome disadvantages to be among the fastest growing economies on earth in recent years.

 

"Evernet"

 

Today the trend worldwide to connectivity is the linking of companies and school intranets into the Internet and the World Wide Web through the maximum amount of bandwidth.  Bandwidth megabites per capita is increasingly as important for commerce as railroads were in the 1890s as many move to a world in which the Internet defines commerce, education and communications.  Costa Rica, for example, is implementing a plan to give every high school student an e-mail address.  Universal connectivity, moreover, will soon near "Evernet" in which one can be online continuously through a PC, pager, television or other information appliance.

 

Prosperity can be shared in many lands, according to Lexus, if networks of NGOs, individuals, companies, consumer activists and like-minded governments shape effective human value chains.  On the important matter of workers' rights and sweatshops in the developing world, for example, the Fair Labour Association (FLA) was born in 1999; companies meeting its working conditions standards can attach a special "FLA" label on their garments.  More than a hundred universities in the U.S. have joined the coalition and insist that their stores sell only FLA-labelled products.  The war on poverty can be effectively fought by micro loans to the 1.3 billion or so persons who live on a dollar a day; a French banker for one is using his website to extend such loans to many.

 

Harvesting Knowledge

Harvesting knowledge efficiently is today more important than having the best farmlands or coalfields.  Finland is near the top of lists which indicate which countries produce the highest percentages of high school graduates and are spending the maximum percentage of their national income on teacher salaries.

 

Harming the physical environment is another charge frequently thrown at globalization's door.  Friedman notes the use of an ecopark built in north-eastern Brazil.  Another route is demonstrating to businesses that their profits and share prices will increase if they adopt environmentally sound product rules.  "Super-empowered environmentalists" can now fight back effectively through the Internet.

 

On what he calls "the liveability issue," Friedman calls for coherent politics to help individual communities enjoy intelligent growth which protects their physical environment and local culture.  He cites a meeting with Mayan elders in Guatemala in which they expressed most interest in preserving their 3000-year-old education system.  The World Bank today loans some money to nurture artists, artisans and poets so local cultures can survive.

 

The backlash to globalization is examined carefully.  The 1998 melt down in Russia did more damage to Western financial institutions in a month than 70 years of Russian Communism.  American labour unions, for example, participated in the WTO demonstrations at Seattle primarily because they wanted, in the author’s view, protection from foreign products.  Many others want its benefits:  according to the UN, world poverty has fallen more in the past fifty years than in the previous 500;  developing nations have progressed as much in thirty years as in the previous century.  How many critics know that foreign firms tend to pay more, create jobs faster, and export more than domestic ones?

 

The United States' role in contemporary globalization receives about 100 pages of specific treatment in Lexus.  The author says the reasons its economy has done so well as a globalizer have to do with geography, a multicultural population and high percentage of immigrants, efficient capital markets, an honest transparent legal environment, the most flexible labour markets in the world – especially relative to Europe and Japan, a free flow of information.  Its weaknesses include crime-ridden inner cities, an insane lack of gun control, widening income gaps, under-funded public schools, a culture of litigation, too much money, consumers living beyond their means, and global arrogance.  Many Canadians, including this reviewer, would reply that our own country has even more strengths and fewer weaknesses for a globalized world than our neighbours:  one-third of our jobs and 41% of our economic output already depend on exports of products and services.

 

For Friedman, the good side of globalization is that it pushes down to local communities and unempowered peoples numerous opportunities and resources; the bad is that power keeps moving up to more abstract levels and the concept asks developing countries to do in twenty years what it took the US and others 200 years to achieve.  Many people in developing countries still support it because they believe producing for world markets is the only way to attain reasonably fulfilled lives.  Most protests in Seattle about employee and environmental stands were really adopting a politically-correct way to oppose trade with countries which have lower wages.  In fact, governments in the developed nations have to remove barriers to trade which presently still impede growth in the rest of the world.

 

 
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