The Golden Straitjacket

...But olive trees are important too...

...It has become the system because revolutions in technology, information and finance have shifted the balance of power between states and markets in an unprecedented way...

...They represent everything that roots us...

...Friedman's attempt to prove that globalization is the "One Big Thing" leads him astray in several ways...

...Read The Lexus and the Olive Tree...

...From what I could tell," Friedman says, "the human beings were there mostly for quality control...

...Yet they are the same countries that grew very rapidly in the 1980s and the early '90s by investing heavily in new export industries and tying their economies to the internal markets of multinational firms...

...It cannot do that, moreover, unless it dons the "Golden Straitjacket" designed by what he calls the Electronic Herd—the stock, bond, currency, and multinational investors linked by computer screens and networks...

...More important, the benefits of running with the Electronic Herd—of donning the Golden Straitjacket—are being called into question...

...in this world—whether it be belonging to a family, a community, a tribe, a nation, a religion or, most of all, a place called home...

...It takes a great deal of time to put on the Golden Straitjacket—to build the robust financial system, the reliable legal system, and the other infrastructure that is required for full participation in international financial markets...

...If there is any single lesson to be drawn from the experience of the 1990s it is the need for caution...

...But the issue isn't that simple...

...It reflects the effects of rapacity and poverty, and will not be ended by more enlightened policies on the part of a few multinational firms...

...Indeed, Friedman's thoughts on China are distressingly incomplete: "At some point," he says, "either China won't get richer or it won't be as authoritarian as it is now, but something will give, because what the Chinese government can get away with now is very different from what it will be able to get away with once it is fully integrated into the herd...

...You will enjoy it...

...On the same day he visited the plant, "the people with whom I had lived for so many years in Beirut and Jerusalem...

...This is not a book about the good and the bad...

...Globalization did not start with the end of the Cold War, and it will not continue to take the form it took in the 1990s...

...On one hand, "the Golden Straitjacket usually fosters more growth and higher average incomes—through more trade, foreign investment, privatization and more efficient use of resources...

...The Longhorns are multinational firms that build and operate factories, power plants and telecommunications networks...

...But production was localized, whereas now it is globalized...

...It is, in fact, the worldwide integration of production, made possible by trade and foreign direct investment, that is the remarkable feature of today's global economy...

...But it is not the whole story...

...it is about the smart and the sad— about those who get it and those who don't...

...On the other hand, it "narrows the political and economic policy choices of those in power," making any real difference between ruling and opposition parties increasingly difficult to discern...

...This is vividly put—and not utterly wrong...

...Sleep on that...

...He draws word pictures vividly and turns them into metaphors like the Lexus and olive tree of his title...

...The chapter on the backlash against globalization is flawed for a different reason...

...The robots were doing all the work...

...Those that decide the cost is too high will be left behind, clinging to their olive trees...

...Friedman is a remarkable reporter...

...China's transition is not going to be pretty...

...their rapid industrialization was adequately financed by remarkably high levels of domestic saving...

...In addition, he says too little about the most serious environmental problems tied directly to modernization—such as the impact of China's reliance on coal-burning electric-generating plants, or the risks posed by the race to open up the oil and gas fields of Central Asia...

...That is a peculiarly First World view...

...He says less about the role of the latter in the more important but less dramatic process that began much earlier—the liberalization of trade and the resulting restructuring of production in the emerging-market countries...

...Most of this book, though, is devoted to the building of the Lexus, not the cultivation of the olive tree, and to Friedman's conviction that a country cannot expect to build a Lexus unless it taps into the global capital market...

...Unlike the Cold War, however, which was chiefly concerned with managing relations among powerful states, globalization is mainly concerned with relations between individual states and international markets...

...It is linking, transforming and constraining nation states...

...Furthermore, the costs of the recent financial crisis in Southeast Asia have far outweighed the benefits of their foreign borrowing...

...Even by his "holistic" definition, for instance, the destruction of the Brazilian rain forest is only remotely related to globalization...

...Because he treats globalization as the successor to the Cold War system, Friedman tends to focus too heavily on the activities of the former, who were involved in the most striking development of the 1990s—the liberalization of financial markets and the huge flow of capital to emerging-market countries...

...Friedman is not a cheerleader for globalization—although you won't encounter many unattractive globalizers in his pages...

...To use Friedman's own language, it attaches too much importance to the Shorthorn cattle and too little to the Longhorn cattle...

...Friedman is a superb journalist...

...The Asian nations are being criticized for rejecting the Golden Straitjacket— for practicing crony capitalism and borrowing excessively to undertake grandiose projects...

...The system is threatened, he says, by the turtles—the countries that have fallen behind because they have not acquired the skills necessitated by modern technology and markets...

...Friedman himself points out that the countries of Southeast Asia did not need to borrow heavily abroad...

...The Shorthorns here are those who buy stocks and bonds and make shortterm loans to emerging-market countries...

...But the relevant measures of openness have more to do with trade than finance—with outward-looking industrialization and import liberalization than with selling stocks and bonds or borrowing from foreign banks...

...The gains from economic openness, cited by Friedman, are decisively clear...

...But in the end you may decide that globalization is not the One Big Thing...

...Capital flows were nearly as large, relatively speaking, in the late 19th century, and the number of countries receiving those flows was not much smaller then...

...were still fighting over who owned which olive tree...

...it is the new international system, replacing the Cold War...

...There are still military conflicts, local and civil wars, as well as threats from terrorists armed with weapons of mass destruction...

...Reviewed by Peter B. Kenen Walker Professor of Economics and International Finance, Princeton University For Thomas L. Friedman, the "Foreign Affairs" columnist of the New York Times, globalization is the "One Big Thing" to focus on...

...As your country puts on the Golden Straitjacket," he declares, "two things tend to happen: your economy grows and your politics shrinks...

...It did not cause —nor will it solve—most of the world's problems...

...In the emergingmarket countries, the big threat comes from those who have been left out entirely—not from the millions of Chinese workers who will lose their jobs as China reforms its state-owned industries, but from the hundreds of millions in Central and Western China who have yet to benefit in any way from the modernization of Eastern China...

...The Japanese luxury car is built in a plant staffed by 66 human beings and 310 robots...

...The Lexus, Friedman maintains, represents "the drive for sustenance, improvement, prosperity and modernization—as it is played out in today's globalization system...

...When 1.2 billion people going 80 miles an hour hit a speed bump the whole world will bounce...

...In short, it is impossible for most countries to build a Lexus without importing technology and capital...