The Lexus and the Olive Tree: Understanding Globalization by Thomas L. Friedman

From the Publisher

As the Foreign Affairs columnist for The New York Times, Thomas L. Friedman has traveled to the four corners of the globe, interviewing people from all walks of contemporary life — Brazilian peasants in the Amazon rain forest, new entrepreneurs in Indonesia, Islamic students in Teheran, and the financial wizards on Wall Street and in Silicon Valley.

Now Friedman has drawn on his years on the road to produce an engrossing and original look at the new international system that, more than anything else, is shaping world affairs today: globalization.

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.

Thomas L. Friedman is one of America's leading interpreters of world affairs. Born in Minneapolis in 1953, he was educated at Brandeis University and St. Antony's College, Oxford. His first book, From Beirut to Jerusalem,won the National Book Award in 1988. Mr. Friedman has also won two Pulitzer Prizes for his reporting for The New York Times as bureau chief in Beirut and in Jerusalem. He lives in Bethesda, Maryland, with his wife, Ann, and their daughters, Orly and Natalie.
 
 

Finance&Developement - Ian S. McDonald

In Lexus and the Olive Tree, Friedman's analysis provides a superb introduction to his topic the equivalent of a Globalization 101 for the general reader. His writing is vivid and topical but it is never dull and Friedman's insights are often penetrating.

Salon - Scott Whitney

This is an important book; not since Nicholas Negroponte's Being Digital has a volume come along that so well explains the technical and financial ether we are all swimming through. Like fish oblivious to the surrounding water, we need a Negroponte or a Thomas Friedman to give us some instruction in basic hydrology — or, in the case of The Lexus and the Olive Tree, in globalization. Friedman sees globalization as the one big thing, the defining theory of the post-Cold War era. He cites the Lexus as the pinnacle of the high-quality production that the forces of globalization make possible, the olive tree as the symbol of wealth in pre-modern, "slow" economies.

By "globalization" Friedman means the cluster of trends and technologies — the Internet, fiber optics, digitalization, satellite communications — that have increased productivity and cranked up the speed of international business since the fall of the Berlin Wall in 1989. During this period, the declining cost of communications has led to the "democratization" of finance, information and technology. If your company has replaced the switchboard operator with an automated phone menu, if you have ever received a FedEx package or sent an e-mail, you have felt the effects of globalization.

There is hardly a page in the book without an underlineable passage. (For example: "In the Cold War, the most frequently asked question was: 'How big is your missile?' In globalization, the most frequently asked question is: 'How fast is your modem?'") Globalization has created what Friedman calls the "Electronic Herd" — investors and speculators whose roving hot money "turns the whole world into a parliamentary system, in which every government lives under the fear of a no-confidence vote." Brazil knows the effects of such a vote all too well; so do Thailand and Indonesia.

Sometimes Friedman can be a rather grandiose name-dropper: "As I was traveling with Secretary of State Baker"; "when I interviewed former Indian Prime Minister I.K. Gujral"; "I ran this by James Cantalup, president of McDonald's International." But as foreign-affairs columnist for the New York Times, he really has talked to all these people. And he has used his remarkable vantage point to provide a readable overview that no academic or narrow-beat reporter could have given us. Occasionally, the habits he has developed as a columnist get in the way. His imaginary arguments between such people as Warren Christopher and Syrian President Hafez el-Assad are a little too cutesy-chatty, and his overly clever chapter titles ("DOScapital 6.0," "Microchip Immune Deficiency," "Globalution") can be annoying. Still, these are quibbles about a genuinely important book.

I have one reservation, though, that isn't a quibble: I would be embarrassed to lend this book to friends overseas. Friedman gets very rah-rah as an American apologist, and he poses no serious objections to the worldview that regards globalization as an international extension of Manifest Destiny. In the gushy tribute to American values he offers on his final pages, you can almost hear the Boston Pops swelling under the patriotic fireworks.

His message, though, can't be easily ignored. According to Friedman, there is no longer a first, a second and a third world; there are just the Fast World and the Slow World. And his message to the Slow World is simple and a bit chilling: Speed up or become road kill.

The New York Times Book Review - Josef Joffe

A brilliant guide for the here and now....Friedman knows how to cut through the arcana of high tech and high finance with vivid images and compelling analogies...A delightfully readable book.

WQ: The Wilson Quarterly - Robert Wright

Friedman...doesn't love globalization; he just thinks it's largely a good thing and, in any event, a fact of life....If this book becomes a basic guide to globalization for American opinion makers, as it well may, that will be a good thing.

Brill's Content - Michael Freedman

An American reading Thomas L. Friedman's The Lexus and the Olive Tree would be hard pressed to feel anything less than exuberant about this nation's prospects.

Richard Eder

...[A] breathtaking tour, one that possesses the exhilarating qualities of flight and the stomach-hollowing ones of free fall....He can be eloquently outraged about the growing gap between rich and poor and the threat to the environment....For the most part...Mr. Friedman accepts the current version of the invisible hand: globalize, or the economic forces that be will condemn you to be left behind. —The New York Times

Gail Jaitlin

Thomas L. Friedman is scaring me. I am reading his new book, The Lexus and the Olive Tree , and suddenly I imagine I am in the middle of an IBM commercial, the kind with brightly colored images of Tibetan monks and African villagers tap-tapping away at laptops. I know that, in fact, Tibetan monks usually live meditative, ascetic lives, and that African villagers sometimes go hungry during times of drought. Yet I am swept up in these images, just as I am in Friedman's cheerful, optimistic book about the new global economy and how it will enrich all our lives.

Don't get me wrong — it's a terrific book. As in his columns for The New York Times, Friedman's writing is illustrative and clear. He uses catchphrases and stories to make clear otherwise complex ideas. For instance, the "Golden Straitjacket" is his term for what a country dons when it accepts the rules of a free-market economy — it accepts the promise of a rising standard of living (the gold) by tossing out old-fashioned ideologies like communism and socialism and accepting the rules (the straitjacket) of capitalism. A country can refuse to put on the Golden Straitjacket, and retain its old systems and values, and try to protect itself from the outside world. But the outside world gets in somehow, through the Internet and cable TV, and more and more citizens find themselves clamoring for the straitjacket. Eventually, the country must put it on, or risk having its citizens fall far behind the rest of the world (or worse, revolt, as happened recently in Indonesia).

Friedman's travel stories (he calls himself a "tourist with an attitude") are wonderful — they leave the reader hungering for a whole bookful — and his optimism about the new global economy is infectious. The central metaphor of the book, which gives the book its title, is the "Lexus and the Olive Tree." The Lexus, the luxury car, represents globalization. The olive tree stands for local concerns, cultural pride, and nationalism. With that pairing, Friedman has done a very neat job of explaining world politics as they now exist. The Cold War determined world politics until very recently; globalization determines them now. The relaxation of trade barriers and taxes, the accessibility of international markets through the Internet and Federal Express, the global stock market — all of these have made it possible for people to become more prosperous than ever before, no matter where they live. What this has done, however, is to make some people very nervous about losing their national or cultural identity. There is a tension now between people's desire for world culture and increased profits, and their desire to remain unique beings in localized cultures and traditions. Friedman illustrates his point by mentioning a few recent news events and telling us whether the Lexus or the olive tree was the winner. (The current war in Yugoslavia would certainly be an example of the olive tree winning out — despite all pressures from the U.S. and the world economy, the Serbs insist on fighting for Kosovo, their olive tree.) The pressures of the global economy seem to demand peace (you can't very well do business with India, for example, if your country is at war with it); Friedman is excited about globalization because he believes it will eventually bring world peace, as soon as the Lexus and the olive tree can be brought into co-existence.

It all sounds rosy, but... And now I come to my one big problem with Friedman's enthusiasm for this faster, barrier-free world. While I think his theories are sound, I am worried (as he does not seem to be) for those who get left behind. Not everyone in the Brazilian rain forest can afford a laptop computer; not everyone in East Lansing, Michigan, is young and supple enough to go through hours and hours of retraining to learn how to use the Net to their advantage. Friedman, who calls these people "turtles" because of their inability or unwillingness to move apace of the quickening world, seems to be saying, "So what? Too bad." The safety nets, such as welfare and unemployment insurance, are falling away, and to them Friedman says good riddance. He uses a jungle metaphor to illustrate the new world order: Everyone is either a lion or a gazelle. The lion wakes up every morning hoping he can catch the slowest gazelle; the gazelle wakes up every morning hoping that she can outrun the fastest lion. In other words, kill or be killed is the rule of the new global economy.

But do we really want our civilization to be run according to the law of the jungle? Friedman thinks so. "[T]he centrally planned, nondemocratic alternatives...communism, socialism, and fascism — helped to abort the first era of globalization [the industrial revolution]...[and] they didn't work." But Friedman is forgetting some of the other responses to dehumanizing industrialization — stunt journalism and labor unions, which banded together in the early 1900s to fight for shorter workdays, higher wages, less life-threatening working conditions, and an end to child labor. Friedman has a very short memory if he believes that pure, unfettered capitalism is necessarily a good thing.

Gail Jaitin is a writer living in Jersey City.

New Republic - David S. Landes

...Friedman believes in, approves of, and enthuses for globalization....A purely material account of economics is hardly the whole story....We can and must find sweeter, more winning ways.

Publishers Weekly

"In the Cold War, the most frequently asked question was 'How big is your missile?' In globalization, the most frequently asked question is 'How fast is your modem?' " So writes New York Times Foreign Affairs columnist Friedman (author of the NBA-winning From Beirut to Jerusalem), who here looks at geopolitics through the lens of the international economy and boils the complexities of globalization down to pithy essentials. Sometimes, his pithiness slips into simplicity. There's a jaunty innocence in the way he observes that "no two countries that both had a McDonald's had fought a war against each other, since each got its McDonald's." For the most part, however, Friedman is a terrific explainer. He presents a clear picture of how the investment decisions of what he calls the "Electronic Herd" — a combination of institutions, such as mutual funds, and individuals, whether George Soros or your uncle Max trading on his PC — affect the fortunes of nations. The book's title, in its reference to both the global economy (the Lexus) and specific national aspirations and cultural identity (the olive tree), echoes Benjamin Barber's Jihad vs. McWorld. Like Barber, Friedman takes note of what may be lost, as well as gained, in the brave new world: "globalization enriches the consumer in us, but it can also shrink the citizen and the space for individual cultural and political expression." The animating spirit of his book, however, is one of excitement rather than fear. Some of the excitement is the joy a good lecturer feels in making the complex digestible. Writing with great clarity and broad understanding, Friedman has set the standard for books purporting to teach Globalization 101.

Patrick J. Brunet, Western Wisconsin Technical College Library, La Crosse - Library Journal

A two-time Pulitzer Prizewinning reporter and current New York Times columnist, Friedman believes that with the end of the Cold War we are now in the era of the international globalization system. He defines globalization as the integration of finance, stock markets, nations, and technology and explains its dependence on computers, the Internet, transaction speed, and innovation. Friedman catalogs the benefits and pitfalls of globalization in a text so clearly written and with so many examples that one easily forgets that this is a book about economics. He makes a compelling case that international economics is changing and that globalization is inevitable and calls for both the United States and global business to pursue responsible capitalism that would make globalization more effective and fair. He ends with a call for businesses to understand that U.S. military and economic strength provide essential stability. Readers of Friedmans column will recognize many of these concepts. Well written, cogently argued, thought-provoking, and very highly recommended.

The New Republic - David S. Landes

...Friedman believes in, approves of, and enthuses for globalization....A purely material account of economics is hardly the whole story....We can and must find sweeter, more winning ways.

The Washington Monthly - Paul Krugman

Every few years a book comes along that perfectly expresses the moment's conventional wisdom — that says pretty much what everybody else in the chattering classes is saying, but does it in a way that manages to sound fresh and profound.....[This is] the latest in the series.

The Christian Science Monitor - Stephen Humphries

...Friedman deftly accomplishes the impressive task of encapsulating the complex economic, cultural, and environmental challenges of globalization with the sort of hindsight that future historians will bring to bear upon the subject.

The New Yorker - Nicholas Lemann

...Friedman has escaped the most serious occupational hazard for a writer on world affairs: the studiously airy, condescending, patrician tone. He may by hanging out with Them these days, but he's still on Our side. He has a born reporter's inextinguishble interest in everyhting, and a great sense of the telling details. His experience of the world's societies may be broad and thin, yet he quite often finds a fresh, memorable nugget inservice of his view that globalization is the "One Big Thing" in the world today.

Kirkus Reviews

A brilliant guidebook to the new world of "globalization" by Pulitzer-winning New York Times columnist Friedman (From Beirut to Jerusalem, 1988). Like El Niño, globalization is blamed for anything and everything, but few understand just what it really is. In simplest terms, Friedman defines globalization as the world integration of finance markets, nation states, and technologies within a free-market capitalism on a scale never before experienced. Driving it all is what he calls the "Electronic Herd," the faceless buyers and sellers of stocks, bonds, and currencies, and multinational corporations investing wherever and whenever the best opportunity presents itself. It is a pitiless system—richly rewarding winners, harshly punishing losers—but contradictory as well. For nations and individuals willing to take the risk, globalization offers untold opportunity, yet in the process, as the "Electronic Herd" scavenges the world like locusts in the search for profit, globalization threatens to destroy both cultural heterogeneity and environmental diversity. The human drive for enrichment (the Lexus) confronts the human need for identity and community (the olive tree). The success of globalization, Friedman contends, depends on how well these goals can be satisfied at one and the same time. He believes they can be, but dangers abound. If nation states sacrifice too much of their identity to the dictates of the "Electronic Herd," a backlash, a nihilistic rejection of globalization, can occur. If nation states ignore these dictates, they face impoverishment; there simply is no other game in town. Friedman's discussion is wonderfully accessible, clarifying the complex withenlightening stories that simplify but are never simplistic. There are flaws, to be sure. He is perhaps overly optimistic on the ability of the market forces of globalization to correct their own excesses, such as environmental degradation. Overall, though, he avoids the Panglossian overtones that mar so much of the literature on globalization. Artful and opinionated, complex and cantankerous; simply the best book yet written on globalization. (First printing 100,000) (Author tour)

What People Are Saying

Patricia Pomerleau
How do you move forward and build a worldwide operating system that respects people's homes and still empowers individuals, countries, and organizations? The book doesn't give all the answers, but it brings up the issues (Patricia Pomerleau is President and CEO, CEOExpress.com).

Product Details

• Interviews & Essays
• Read an Excerpt
• Read a Sample Chapter

Interviews & Essays

Thomas L. Friedman: I'm great!

Thomas L. Friedman: I visited the Lexus factory in Japan in 1992, and at that time, it was the most cutting-edge car factory in the world. They built the Lexus with 66 human beings and 310 robots. I was blown away. At the end of the day, I went to the train station to take the bullet train back to Tokyo, and I bought my sushi dinner, and a copy of that day's International Herald Tribune. There was a story in the Herald Tribune about a big argument the Arabs and Israeli's were having over some 1948 UN resolution, and the thought occurred to me, which was the origin of this book, that the people whose factory I had just visited, whose sushi I was eating, were building the greatest luxury car in the world with robots, and the people in the Herald Tribune whom I knew so well, whom I had lived with so long, were still fighting over who owns which olive tree, and ain't that the post-cold war world? Half of us are struggling to build a better Lexus, and half of us are fighting over who owns which olive tree.

Thomas L. Friedman: There's no question that a company like Microsoft or Intel has more weight and more income than a lot of countries in the world. I call them in my book the Super Markets, which today are like Super Powers, and we who live in democracies have to make sure that these Super Markets remain under the discipline and authority of governments, and don't become some kind of extra-territorial force that can affect our lives but we can't affect them.

Thomas L. Friedman: It's a very thoughtful question, but I do think we do have our olive trees. I grew up in Minnesota, I feel very close to Minnesota -- it's my community, it's the place I call home. And I don't identify myself as Tom Friedman from The New York Times -- I identify myself as Tom Friedman from Minnesota. So I think olive trees are still important. They are what root us and anchor us in the world, and a tree without roots will never be stable. But a tree that's only roots will never grow into the world, bear fruit, and provide shade. The trick is to keep your Lexus and olive tree in balance.

Thomas L. Friedman: Well, I think you have to distinguish between what's likely to happen in America, and what's likely to happen in some developing countries. In America, I expect there will be some disruption, but it will be over in a month. As for other countries, I don't intend to be on a Russian Aeroflot plane that takes off from New York on December 31, 1999, and lands in Russia on Y2K day. That is, it's clear that a lot of countries still don't have the resources, the wherewithal, and the technical skills to really confront this problem, and for them I'm deeply concerned. I do deal with this issue to some extent in the book.

Thomas L. Friedman: Well, those are all good questions. I believe that globalization is driven at root by a very old and deep human desire for economic betterment and for more choices. It begins there. At the same time, though, so much of what we think about as globalization is really driven by technologies. The fact that we all can be communicating right now across billions of miles, probably seven different continents for the cost of a phone call from barnesandnoble.com in New York to me in Washington, D.C., is pretty amazing, and that's also something that is driving globalization, that is only present today and wasn't available just a decade ago.

Thomas L. Friedman: I don't really think so. I think that you've got technology now that is available for companies to work around the clock. You can start an email project in Washington and bounce it to your West Coast operation and designers work on it there, and they bounce it to Tokyo, and the new team in Tokyo works on it and then bounces it to Bangalore, India, and they bounce it up to Paris and over to Washington. They call it "Java Around the Clock." So why would anyone want to confine themselves just to the Pacific when you can now dribble around the whole world and have access to the best minds on seven continents all in 24 hours?

Thomas L. Friedman: As long as you promise me you've bought my book, I'd recommend you read a book called COMMANDING HEIGHTS by Daniel Yergin. I'd read ONE WORLD, READY OR NOT by Bill Greider. And for a more academic twist on this, I'd look at the work of Danny Rodrick.

Thomas L. Friedman: Well, I don't think for the moment, if you are talking about the United States, that we have a single overarching mortal threat to our existence as we did with the Soviet Union. There are some rogues out there like Iraq or Serbia, but they don't threaten our way of life. I think the enemy is our own inability to address the social problems that could divide our own country and hold us back. It's the enemy of inner cities and underfunded schools, and that's the enemy I'd like to fight right now.

Thomas L. Friedman: Another good question, and absolutely. It's the Y2K problem. One thing about today's system is we're all connected, and nobody's in charge. It reminds me of ancient Rome. All roads led to Rome. And they were great roads, and when the barbarians wanted to sack Rome, they came right up the roads.

Thomas L. Friedman: Both will happen at the same time. That's why the book is called THE LEXUS AND THE OLIVE TREE. Globalization won't end geopolitics. Countries will still want to go to war with each other at times. But this new system will increase the costs of such adventures. That's why I have my McDonald's theory in which I pointed out that -- the current exception of Yugoslavia aside -- no two countries that both have McDonald's have ever gone to war against each other since they each got their McDonald's. I call it the Golden Arches Theory of Conflict Prevention.

Thomas L. Friedman: Well, I like to get my news as tartar as possible. I like my news tartar. I like it raw. So I either get it by calling people directly or by reading the wire services every day, AP and Reuters all day, to get sort of the raw wire news. And I travel an enormous amount. But I try to read every day The New York Times, The Washington Post, and The Financial Times. I never miss The Economist, and every night before I go to bed, I read the Israeli newspaper Haaretz, the online version. It's kind of neat -- I can read it in my home in Washington before it hits the streets in Tel-Aviv. That's pretty tartar.

Thomas L. Friedman: I've been thinking about the book for three years, basically, and have been working on it steadily for two years. And I can't say anything else really inspired me. This book really grew out of my own travels around the world and my own attempt to kind of connect the dots across seven continents.

Thomas L. Friedman: I believe that the Internet is going to change everything. It's going to change how we shop, how we work, how we communicate, and how we learn. I own one Internet stock, a bank stock, and I believe it is a fundamentally transforming medium and that e-commerce is going to be the wave of the future. There are basically going to be two kinds of businesses: Internet businesses and anti-Internet businesses. Internet businesses will either be those which you conduct fully over the internet, like online brokerage, or those that will be fundamentally enhanced by the Internet, like management consulting. Anti-Internet businesses will also fall into two categories: those that you can't possibly do over the Internet, like giving a haircut, and those which the more you're home alone -- like we all are right now, in our basements, with our Internets -- the more we're going to want to get out and touch something, smell something, feel something, rub something. The more we're going to want to pick up a book at Barnes and Noble on Union Square and curl up with a latte from Starbucks. There will be a big future for anti-Internet businesses.

Thomas L. Friedman: Well, I think capitalism is the worst, most brutal, and probably unfair system for generating income and raising living standards -- except for all the rest. So while I'm not arguing it's a somehow perfect system, it's the best we've got, it works a heck of a lot better than communism and socialism, and we have to learn how to get the most out of it while cushioning the worst.

Thomas L. Friedman: I guess I went to northeastern China last year to monitor village elections, and I secretly went because I wanted to get outside the frontiers of globalizations, get to some remote place; I wanted to get outside the bubble of "The Truman Show," and I discovered you couldn't get outside the bubble. All politics is now global. Even some guy running for village chief in northeastern China is now affected by this system and feels its effects on him.

Thomas L. Friedman: The Old Testament, a book of jokes -- because if you can't take a joke you shouldn't have come -- and a copy of FROM BEIRUT TO JERUSALEM, because if the world goes down, I want to make sure I still have a copy.

Thomas L. Friedman: Well, that's a really good, thoughtful question. And really my answer is, one is that I'm good at arbitrage; I'm good at connecting seemingly unconnected events and manifestations, basically. And then I try to encapsulate them, even though they're often very complex, and this encapsulation wasn't perfect, in catchy terms and stories that can convey the complexity but without being dense. This book is "Globalization for Dummies," with me as the Chief Dummy. I wrote this book to explain to myself what I was seeing out there and then to explain it to my 80-year-old mother living in Minneapolis in a way that she could understand -- and would even be fun. The biggest thrill I get is not when corporate executives tell me they're reading it, although I'm very happy they are, but when the tie guy at a department store in San Francisco tells me he's reading it. Because I'm really trying to explain this system to people who want to understand it, but no one has ever explained it to them in a language they can understand. Some reviewers have criticized me for using too many anecdotes and metaphors. I can only laugh at such criticism, because no normal reader of the book has ever complained about either. There is a sense out there that if you're not boring you're not serious. Well, I'm not boring, and I think I'm serious.

Thomas L. Friedman: Playing golf from morning until dusk.

Thomas L. Friedman: Well, ten years ago, after BEIRUT TO JERUSALEM came out, my publisher asked me what my next book would be, and I told them I wanted to do a book about golf, to which he said, the Persian Gulf? I said, No, golf golf. Well, instead I ended up doing this book about gardening and auto mechanics, but seriously, I would like to do something totally different again. This book is totally different from my first book, although it's written in the same style, and whatever I do next will be totally different from this. I like stretching myself and immersing myself in things I don't know anything about.

Q1: You mention the desire for all things "American" in many of the countries you visited (particularly the desire for fast food establishments), yet we are bombarded with images and messages about people's negative feelings about America (we're a bully, arrogant, etc.). How do you explain this dichotomy, and where do you see globalization either helping or hurting world perceptions of the US?

Q2: What do you think of Mr. Barak in Israel, and do you see any real opportunities for movement in regard to Syria and the Golan?

Q3: Don't you find the notion of a Los Angeles "Laker" simply preposterous? No Angelino would know a Nokomis, Calhoun, Harriet, et al.!

Thomas L. Friedman: Q1: Well, the world has a love/hate relationship with us. The world has roughly the same relationship with us that the rest of the NBA had with Michael Jordan. They want to be like us, and they want to beat us. They think the referees always cut us slack, and they resent us. But they don't want us to go away, because otherwise, there's no league.

Q2: I think Barak is a serious and honest statesman, and I think there are going to be real opportunities for progress, but I think they will be slow.

Q3: Yeah, it would be like calling the Minnesota basketball team the Minnesota Beaches, or the Minnesota Freeways. I'm sure there are ten people in Los Angeles that know the name Lakers comes from the land of 10,000 lakes.

Thomas L. Friedman: Just to say that, as someone who writes about foreign policy, it gives me real pleasure to see so many serious and thoughtful questions from all over the country. God bless barnesandnoble.com and the Internet!

Read an Excerpt

When I speak of the "the Cold War system" and "the globalization system," what do I mean?

I mean that, as an international system, the Cold War had its own structure of power: the balance between the United States and the U.S.S.R. The Cold War had its own rules: in foreign affairs, neither superpower would encroach on the other's sphere of influence; in economics, less developed countries would focus on nurturing their own national industries, developing countries on export-led growth, communist countries on autarky, and Western economies on regulated trade. The Cold War had its own dominant ideas: the clash between communism and capitalism, as well as detente, nonalignment, and perestroika. The Cold War had its own demographic trends: the movement of peoples from east to west was largely frozen by the Iron Curtain, but the movement from south to north was a more steady flow. The Cold War had its own perspective on the globe: the world was a space divided into the communist camp, the Western camp, and the neutral camp, and everyone's country was in one of them. The Cold War had its own defining technologies: nuclear weapons and the second Industrial Revolution were dominant, but for many people in developing countries the hammer and sickle were still relevant tools. The Cold War had its own defining measurement: the throw weight of nuclear missiles. And lastly, the Cold War had its own defining anxiety: nuclear annihilation. When taken all together the elements of this Cold War system influenced the domestic politics and foreign relations of virtually every country in the world. The Cold War system didn't shape everything, but it shaped many things.

Today's era of globalization, which replaced the Cold War, is a similar international system, with its own unique attributes.

To begin with, the globalization system, unlike the Cold War system, is not static, but a dynamic ongoing process: globalization involves the inexorable integration of markets, nation-states, and technologies to a degree never witnessed before--in a way that is enabling individuals, corporations, and nation-states to reach around the world farther, faster, deeper, and cheaper than ever before, and in a way that is also producing a powerful backlash from those brutalized or left behind by this new system.

The driving idea behind globalization is free-market capitalism--the more you let market forces rule and the more you open your economy to free trade and competition, the more efficient and flourishing your economy will be. Globalization means the spread of free-market capitalism to virtually every country in the world. Globalization also has its own set of economic rules--rules that revolve around opening, deregulating and privatizing your economy.

Unlike the Cold War system, globalization has its own dominant culture, which is why it tends to be homogenizing. In previous eras this sort of cultural homogenization happened on a regional scale--the Hellenization of the Near East and the Mediterranean world under the Greeks, the Turkification of Central Asia, North Africa, Europe and the Middle East by the Ottomans, or the Russification of Eastern and Central Europe and parts of Eurasia under the Soviets. Culturally speaking, globalization is largely, though not entirely, the spread of Americanization--from Big Macs to imacs to Mickey Mouse--on a global scale.

Globalization has its own defining technologies: computerization, miniaturization, digitization, satellite communications, fiber optics and the Internet. And these technologies helped to create the defining perspective of globalization. If the defining perspective of the Cold War world was "division," the defining perspective of globalization is "integration." The symbol of the Cold War system was a wall, which divided everyone. The symbol of the globalization system is a World Wide Web, which unites everyone. The defining document of the Cold War system was "The Treaty." The defining document of the globalization system is "The Deal."

Once a country makes the leap into the system of globalization, its elites begin to internalize this perspective of integration, and always try to locate themselves in a global context. I was visiting Amman, Jordan, in the summer of 1998 and having coffee at the Inter-Continental Hotel with my friend Rami Khouri, the leading political columnist in Jordan. We sat down and I asked him what was new. The first thing he said to me was: "Jordan was just added to CNN's worldwide weather highlights." What Rami was saying was that it is important for Jordan to know that those institutions which think globally believe it is now worth knowing what the weather is like in Amman. It makes Jordanians feel more important and holds out the hope that they will be enriched by having more tourists or global investors visiting. The day after seeing Rami I happen to go to Israel and meet with Jacob Frenkel, then governor of Israel's Central Bank and a University of Chicago-trained economist. Frenkel remarked that he too was going through a perspective change: "Before, when one talked about macroeconomics, we started by looking at the local markets, local financial system and the interrelationship between them, and then, as an afterthought, we looked at the international economy. There was a feeling that what we do is primarily our own business and then there are some outlets where we will sell abroad. Now we reverse the perspective. Let's not ask what markets we should export to, after having decided what to produce; rather let's first study the global framework within which we operate and then decide what to produce. It changes your whole perspective."

While the defining measurement of the Cold War was weight--particularly the throw weight of missiles--the defining measurement of the globalization system is speed--speed of commerce, travel, communication and innovation. The Cold War was about Einstein's mass-energy equation, e = mc². Globalization is about Moore's Law, which states that the computing power of silicon chips will double every eighteen to twenty-four months. In the Cold War, the most frequently asked question was: "How big is your missile?" In globalization, the most frequently asked question is: "How fast is your modem?"

If the defining economists of the Cold War system were Karl Marx and John Maynard Keynes, who each in his own way wanted to tame capitalism, the defining economists of the globalization system are Joseph Schumpeter and former Intel CEO Andy Grove, who prefer to unleash capitalism. Schumpeter, a former Austrian Minister of Finance and Harvard Business School professor, expressed the view in his classic work, Capitalism, Socialism and Democracy, that the essence of capitalism is the process of "creative destruction"--the perpetual cycle of destroying the old and less efficient product or service and replacing it with new, more efficient ones. Andy Grove took Schumpeter's insight that "only the paranoid survive" for the title of his book on life in Silicon Valley, and made it in many ways the business model of globalization capitalism. Grove helped to popularize the view that dramatic, industry-transforming innovations are taking place today faster and faster. Thanks to these technological breakthroughs, the speed by which your latest invention can be made obsolete or turned into a commodity is now lightning quick. Therefore, only the paranoid, only those who are constantly looking over their shoulders to see who is creating something new that will destroy them and then staying just one step ahead of them, will survive. Those countries that are most willing to let capitalism quickly destroy inefficient companies, so that money can be freed up and directed to more innovative ones, will thrive in the era of globalization. Those which rely on their governments to protect them from such creative destruction will fall behind in this era.

James Surowiecki, the business columnist for Slate magazine, reviewing Grove's book, neatly summarized what Schumpeter and Grove have in common, which is the essence of globalization economics. It is the notion that: "Innovation replaces tradition. The present--or perhaps the future--replaces the past. Nothing matters so much as what will come next, and what will come next can only arrive if what is here now gets overturned. While this makes the system a terrific place for innovation, it makes it a difficult place to live, since most people prefer some measure of security about the future to a life lived in almost constant uncertainty ... We are not forced to re-create our relationships with those closest to us on a regular basis. And yet that's precisely what Schumpeter, and Grove after him, suggest is necessary to prosper [today]."

Indeed, if the Cold War were a sport, it would be sumo wrestling, says Johns Hopkins University foreign affairs professor Michael Mandelbaum. "It would be two big fat guys in a ring, with all sorts of posturing and rituals and stomping of feet, but actually very little contact, until the end of the match, when there is a brief moment of shoving and the loser gets pushed out of the ring, but nobody gets killed."

By contrast, if globalization were a sport, it would be the 100-meter dash, over and over and over. And no matter how many times you win, you have to race again the next day. And if you lose by just one-hundredth of a second it can be as if you lost by an hour. (Just ask French multinationals. In 1999, French labor laws were changed, requiring--requiring--every employer to implement a four-hour reduction in the legal workweek, from 39 hours to 35 hours, with no cut in pay. Many French firms were fighting the move because of the impact it would have on their productivity in a global market. Henri Thierry, human resources director for Thomson-CSF Communications, a high-tech firm in the suburbs of Paris, told The Washington Post: "We are in a worldwide competition. If we lose one point of productivity, we lose orders. If we're obliged to go to 35 hours it would be like requiring French athletes to run the 100 meters wearing flippers. They wouldn't have much of a chance winning a medal.")

To paraphrase German political theorist Carl Schmitt, the Cold War was a world of "friends" and "enemies." The globalization world, by contrast, tends to turn all friends and enemies into "competitors."

If the defining anxiety of the Cold War was fear of annihilation from an enemy you knew all too well in a world struggle that was fixed and stable, the defining anxiety in globalization is fear of rapid change from an enemy you can't see, touch or feel--a sense that your job, community or workplace can be changed at any moment by anonymous economic and technological forces that are anything but stable.

In the Cold War we reached for the hot line between the White House and the Kremlin--a symbol that we were all divided but at least someone, the two superpowers, were in charge. In the era of globalization we reach for the Internet--a symbol that we are all connected but nobody is totally in charge. The defining defense system of the Cold War was radar--to expose the threats coming from the other side of the wall. The defining defense system of the globalization era is the X-ray machine-to expose the threats coming from within.

Globalization also has its own demographic pattern--a rapid acceleration of the movement of people from rural areas and agricultural lifestyles to urban areas and urban lifestyles more intimately linked with global fashion, food, markets, and entertainment trends.

Last, and most important, globalization has its own defining structure of power, which is much more complex than the Cold War structure. The Cold War system was built exclusively around nation-states, and it was balanced at the center by two superpowers: the United States and the Soviet Union.

The globalization system, by contrast, is built around three balances, which overlap and affect one another. The first is the traditional balance between nation-states. In the globalization system, the United States is now the sole and dominant superpower and all other nations are subordinate to it to one degree or another. The balance of power between the United States and the other states still matters for the stability of this system. And it can still explain a lot of the news you read on the front page of the papers, whether it is the containment of Iraq in the Middle East or the expansion of NATO against Russia in Central Europe.

The second balance in the globalization system is between nation-states and global markets. These global markets are made up of millions of investors moving money around the world with the click of a mouse. I call them "the Electronic Herd" and this herd gathers in key global financial centers, such as Wall Street, Hong Kong, London and Frankfurt, which I call "the Supermarkets." The attitudes and actions of the Electronic Herd and the Supermarkets can have a huge impact on nation-states today, even to the point of triggering the downfall of governments. You will not understand the front page of newspapers today, whether it is the story of the toppling of Suharto in Indonesia, the internal collapse in Russia or the monetary policy of the United States unless you bring the Supermarkets into your analysis.

The United States can destroy you by dropping bombs and the Supermarkets can destroy you by downgrading your bonds. The United States is the dominant player in maintaining the globalization gameboard, but it is not alone in influencing the moves on that gameboard. This globalization gameboard today is a lot like a Ouija board--sometimes pieces are moved around by the obvious hand of the superpower, and sometimes they are moved around by hidden hands of the Supermarkets.

The third balance that you have to pay attention to in the globalization system--the one that is really the newest of all is the balance between individuals and nation-states. Because globalization has brought down many of the walls that limited the movement and reach of people, and because it has simultaneously wired the world into networks, it gives more power to individuals to influence both markets and nation-states than at any time in history. So you have today not only a superpower, not only Supermarkets, but, as I will also demonstrate later in the book, you have Super-empowered individuals. Some of these Super-empowered individuals are quite angry, some of them quite wonderful--but all of them are now able to act directly on the world stage without the traditional mediation of governments, corporations or any other public or private institutions.

Without the knowledge of the U.S. government, Long-Term Capital Management--a few guys in Greenwich, Connecticut--amassed more financial bets around the world than all the foreign reserves of China. Osama bin Laden, a Saudi millionaire with his own global network, declared war on the United States in the late 1990s, and the U.S. Air Force had to launch a cruise missile attack on him as though he were another nation-state. We fired cruise missiles at an individual! Jodie Williams won the Nobel Peace Prize in 1997 for her contribution to the International Ban on Landmines. She achieved that ban not only without much government help, but in the face of opposition from the Big Five major powers. And what did she say was her secret weapon for organizing 1,000 different human rights and arms control groups on six continents? "E-mail."

Nation-states, and the American superpower in particular, are still hugely important today, but so too now are Supermarkets and Super-empowered individuals. You will never understand the globalization system, or the front page of the morning paper, unless you see it as a complex interaction between all three of these actors: states bumping up against states, states bumping up against Supermarkets, and Supermarkets and states bumping up against Super-empowered individuals.

Copyright © 1999 Thomas Friedman

Read a Sample Chapter

Tourist with an Attitude

At the wonderful science museum in Barcelona, I saw an exhibit that beautifully illustrated "chaos." A nonlinear version of a pendulum was set up so that the visitor could hold the bob and start out in a chosen position and with a chosen velocity. One could then watch the subsequent motion, which was also recorded with a pen on a sheet of paper. The visitor was then invited to seize the bob again and try to imitate exactly the previous initial position and velocity. No matter how carefully that was done, the subsequent motion was quite different from what it was the first time ... I asked the museum director what the two men were doing who were standing in a corner watching us. He replied, "Oh, those are two Dutchmen waiting to take away the `chaos.'" Apparently, the exhibit was about to be dismantled and taken to Amsterdam. But I have wondered ever since whether the services of those two Dutchmen would not be in great demand across the globe, by organizations that wanted their chaos taken away.

— Murray Gell-Mann, author of The Quark and the Jaguar

What was it that Forrest Gump's mama liked to say? Life is like a box of chocolates: you never know what you’re going to get inside. For me, an inveterate traveler and foreign correspondent, life is like room service — you never know what you're going to find outside your door.

    Take for instance the evening of December 31, 1994, when I began my assignment as the foreign affairs columnist for The New York Times. I started the column by writing from Tokyo, and when I arrived at the Okura Hotel after a long transpacific flight, I called room service with one simple request: "Could you please send me up four oranges." I am addicted to citrus and I needed a fix. It seemed to me a simple enough order when I telephoned it in, and the person on the other end seemed to understand. About twenty minutes later there was a knock at my door. A room service waiter was standing there in his perfectly creased uniform. In front of him was a cart covered by a starched white tablecloth. On the tablecloth were four tall glasses of fresh-squeezed orange juice, each glass set regally in a small silver bowl of ice.

    "No, no," I said to the waiter, "I want oranges, oranges — not orange juice." I then pretended to bite into something like an orange.

    "Ahhhh," the waiter said, nodding his head. "O-ranges, o-ranges."

    I retreated into my room and went back to work. Twenty minutes later there was another knock at my door. Same waiter. Same linen-covered room service trolley. But this time, on it were four plates and on each plate was an orange that had been peeled and diced into perfect little sections that were fanned out on a plate like sushi, as only the Japanese can do.

    "No, no," I said, shaking my head again. "I want the whole orange." I made a ball shape with my hands. "I want to keep them in my room and eat them for snacks. I can't eat four oranges all cut up like that. I can't store them in my mini-bar. I want the whole orange."

    Again, I did my best exaggerated imitation of someone eating an orange.

    "Ahhhh," the water said, nodding his head. "O-range, o-range. You want whole o-range."

    Another twenty minutes went by. Again there was a knock on my door. Same waiter. Same trolley, only this time he had four bright oranges, each one on its own dinner plate, with a fork, knife and linen napkin next to it. That was progress.

    "That's right," I said, signing the bill. "That's just what I wanted."

    As he left the room, I looked down at the room service bill. The four oranges were $22. How am I going to explain that to my publisher?

    But my citrus adventures were not over. Two weeks later I was in Hanoi, having dinner by myself in the dining room of the Metropole Hotel. It was the tangerine season in Vietnam, and vendors were selling pyramids of the most delicious, bright orange tangerines on every street corner. Each morning I had a few tangerines for breakfast. When the waiter came to get my dessert order I told him all I wanted was a tangerine.

    He went away and came back a few minutes later.

    "Sorry," he said, "no tangerines."

    "But how can that be?" I asked in exasperation. "You have a table full of them at breakfast every morning! Surely there must be a tangerine somewhere back in the kitchen?"

    "Sorry." He shook his head. "Maybe you like watermelon?"

    "O.K.," I said, "bring me some watermelon."

    Five minutes later the waiter returned with a plate bearing three peeled tangerines on it.

    "I found the tangerines," he said. "No watermelon."

    Had I known then what I know now I would have taken it all as a harbinger. For I too would find a lot of things on my plate and outside my door that I wasn't planning to find as I traveled the globe for the Times.

Being the foreign affairs columnist for The New York Times is actually the best job in the world. I mean, someone has to have the best job, right? Well, I've got it. The reason it is such a great job is that I get to be a tourist with an attitude. I get to go anywhere, anytime, and have attitudes about what I see and hear. But the question for me as I embarked on this odyssey was: Which attitudes? What would be the lens, the perspective, the organizing system — the superstory — through which I would look at the world, make sense of events, prioritize them, opine upon them and help readers understand them?

    In some ways my predecessors had it a little easier. They each had a very obvious superstory and international system in place when they were writing. I am the fifth foreign affairs columnist in the history of the Times. "Foreign Affairs" is actually the paper's oldest column. It was begun in 1937 by a remarkable woman, Anne O'Hare McCormick, and was originally called "In Europe," because in those days, "in Europe" was foreign affairs for most Americans, and it seemed perfectly natural that the paper's one overseas columnist would be located on the European continent. Mrs. McCormick's 1954 obituary in the Times said she got her start in foreign reporting "as the wife of Mr. McCormick, a Dayton engineer whom she accompanied on frequent buying trips to Europe." (New York Times obits have become considerably more politically correct since then.) The international system which she covered was the disintegration of balance-of-power Versailles Europe and the beginnings of World War II.

    As America emerged from World War II, standing astride the world as the preeminent superpower, with global responsibilities and engaged in a global power struggle with the Soviet Union, the title of the column changed in 1954 to "Foreign Affairs." Suddenly the whole world was America's playing field and the whole world mattered, because every corner was being contested with the Soviet Union. The Cold War international system, with its competition for influence and supremacy between the capitalist West and the communist East, between Washington, Moscow and Beijing, became the superstory within which the next three foreign affairs columnists organized their opinions.

    By the time I started the column at the beginning of 1995, though, the Cold War was over. The Berlin Wall had crumbled and the Soviet Union was history. I had the good fortune to witness, in the Kremlin, one of the last gasps of the Soviet Union. The day was December 16, 1991. Secretary of State James A. Baker III was visiting Moscow, just as Boris Yeltsin was easing Mikhail Gorbachev out of power. Whenever Baker had met Gorbachev previously, they had held their talks in the Kremlin's gold-gilded St. Catherine Hall. There was always a very orchestrated entry scene for the press. Mr. Baker and his entourage would wait behind two huge wooden double doors on one end of the long Kremlin hall, with Gorbachev and his team behind the doors on the other end. And then, by some signal, the doors would simultaneously open and each man would stride out and they would shake hands in front of the cameras in the middle of the room. Well, on this day Baker arrived for his meeting at the appointed hour, the doors swung open and Boris Yeltsin walked out, instead of Gorbachev. Guess who's coming to dinner! "Welcome to Russian soil and this Russian building," Yeltsin said to Baker. Baker did meet Gorbachev later in the day, but it was clear that power had shifted. We State Department reporters who were there to chronicle the event ended up spending that whole day in the Kremlin. It snowed heavily while we were inside, and when we finally walked out after sunset we found the Kremlin grounds covered in a white snow blanket. As we trudged to the Kremlin's Spassky Gate, our shoes crunching fresh tracks in the snow, I noticed that the red Soviet hammer and sickle was still flying atop the Kremlin flagpole, illuminated by a spotlight as it had been for some seventy years. I said to myself, "That is probably the last time I'll ever see that flag flying there." And, indeed, in a few weeks it was gone, and with it went the Cold War system and superstory.

    But what wasn't clear to me as I embarked upon my column assignment a few years later was what had replaced the Cold War system as the dominant organizing framework for international affairs. So I actually began my column as a tourist without an attitude — just an open mind. For several years, I, like everyone else, just referred to "the post-Cold War world." We knew some new system was aborning that constituted a different framework for international relations, but we couldn't define what it was, so we defined it by what it wasn't. It wasn't the Cold War. So we called it the post-Cold War world.

    The more I traveled, though, the more it became apparent to me that this system had its own logic and deserved its own name: "globalization." Globalization is not a phenomenon. It is not just some passing trend. Today it is the overarching international system shaping the domestic politics and foreign relations of virtually every country, and we need to understand it as such.

When I speak of the "the Cold War system" and "the globalization system," what do I mean?

    I mean that, as an international system, the Cold War had its own structure of power: the balance between the United States and the U.S.S.R. The Cold War had its own rules: in foreign affairs, neither superpower would encroach on the other's sphere of influence; in economics, less developed countries would focus on nurturing their own national industries, developing countries on export-led growth, communist countries on autarky and Western economies on regulated trade. The Cold War had its own dominant ideas: the clash between communism and capitalism, as well as detente, nonalignment and perestroika. The Cold War had its own demographic trends: the movement of peoples from east to west was largely frozen by the Iron Curtain, but the movement from south to north was a more steady flow. The Cold War had its own perspective on the globe: the world was a space divided into the communist camp, the Western camp, and the neutral camp, and everyone's country was in one of them. The Cold War had its own defining technologies: nuclear weapons and the second Industrial Revolution were dominant, but for many people in developing countries the hammer and sickle were still relevant tools. The Cold War had its own defining measurement: the throw weight of nuclear missiles. And lastly, the Cold War had its own defining anxiety: nuclear annihilation. When taken all together the elements of this Cold War system influenced the domestic politics and foreign relations of virtually every country in the world. The Cold War system didn't shape everything, but it shaped many things.

    Today's era of globalization, which replaced the Cold War, is a similar international system, with its own unique attributes.

    To begin with, the globalization system, unlike the Cold War system, is not static, but a dynamic ongoing process: globalization involves the inexorable integration of markets, nation-states and technologies to a degree never witnessed before — in a way that is enabling individuals, corporations and nation-states to reach around the world farther, faster, deeper and cheaper than ever before, and in a way that is also producing a powerful backlash from those brutalized or left behind by this new system.

    The driving idea behind globalization is free-market capitalism — the more you let market forces rule and the more you open your economy to free trade and competition, the more efficient and flourishing your economy will be. Globalization means the spread of free-market capitalism to virtually every country in the world. Globalization also has its own set of economic rules — rules that revolve around opening, deregulating and privatizing your economy.

    Unlike the Cold War system, globalization has its own dominant culture, which is why it tends to be homogenizing. In previous eras this sort of cultural homogenization happened on a regional scale — the Hellenization of the Near East and the Mediterranean world under the Greeks, the Turkification of Central Asia, North Africa, Europe and the Middle East by the Ottomans, or the Russification of Eastern and Central Europe and parts of Eurasia under the Soviets. Culturally speaking, globalization is largely, though not entirely, the spread of Americanization — from Big Macs to iMacs to Mickey Mouse — on a global scale.

    Globalization has its own defining technologies: computerization, miniaturization, digitization, satellite communications, fiber optics and the Internet. And these technologies helped to create the defining perspective of globalization. If the defining perspective of the Cold War world was "division," the defining perspective of globalization is "integration." The symbol of the Cold War system was a wall, which divided everyone. The symbol of the globalization system is a World Wide Web, which unites everyone. The defining document of the Cold War system was "The Treaty." The defining document of the globalization system is "The Deal."

    Once a country makes the leap into the system of globalization, its elites begin to internalize this perspective of integration, and always try to locate themselves in a global context. I was visiting Amman, Jordan, in the summer of 1998 and having coffee at the Inter-Continental Hotel with my friend Rami Khouri, the leading political columnist in Jordan. We sat down and I asked him what was new. The first thing he said to me was: "Jordan was just added to CNN's worldwide weather highlights." What Rami was saying was that it is important for Jordan to know that those institutions which think globally believe it is now worth knowing what the weather is like in Amman. It makes Jordanians feel more important and holds out the hope that they will be enriched by having more tourists or global investors visiting. The day after seeing Rami I happened to go to Israel and meet with Jacob Frenkel, governor of Israel's Central Bank and a University of Chicago-trained economist. Frenkel remarked that he too was going through a perspective change: "Before, when we talked about macroeconomics, we started by looking at the local markets, local financial system and the interrelationship between them, and then, as an afterthought, we looked at the international economy. There was a feeling that what we do is primarily our own business and then there are some outlets where we will sell abroad. Now we reverse the perspective. Let's not ask what markets we should export to, after having decided what to produce; rather let's first study the global framework within which we operate and then decide what to produce. It changes your whole perspective."

    While the defining measurement of the Cold War was weight — particularly the throw weight of missiles — the defining measurement of the globalization system is speed — speed of commerce, travel, communication and innovation. The Cold War was about Einstein's mass-energy equation, e = mc². Globalization is about Moore's law, which states that the computing power of silicon chips will double every eighteen to twenty-four months. In the Cold War, the most frequently asked question was: "How big is your missile?" In globalization, the most frequently asked question is: "How fast is your modem?"

    If the defining economists of the Cold War system were Karl Marx and John Maynard Keynes, who each in his own way wanted to tame capitalism, the defining economists of the globalization system are Joseph Schumpeter and former Intel CEO Andy Grove, who prefer to unleash capitalism. Schumpeter, a former Austrian Minister of Finance and Harvard Business School professor, expressed the view in his classic work Capitalism, Socialism and Democracy that the essence of capitalism is the process of "creative destruction" — the perpetual cycle of destroying the old and less efficient product or service and replacing it with new, more efficient ones. Andy Grove took Schumpeter's insight that "only the paranoid survive" for the title of his book on life in Silicon Valley, and made it in many ways the business model of globalization capitalism. Grove helped to popularize the view that dramatic, industry-transforming innovations are taking place today faster and faster. Thanks to these technological breakthroughs, the speed by which your latest invention can be made obsolete or turned into a commodity is now lightning quick. Therefore, only the paranoid, only those who are constantly looking over their shoulders to see who is creating something new that will destroy them and then staying just one step ahead of them, will survive. Those countries that are most willing to let capitalism quickly destroy inefficient companies, so that money can be freed up and directed to more innovative ones, will thrive in the era of globalization. Those which rely on their governments to protect them from such creative destruction will fall behind in this era.

    James Surowiecki, the business columnist for Slate magazine, reviewing Grove's book, neatly summarized what Schumpeter and Grove have in common, which is the essence of globalization economics. It is the notion that: "Innovation replaces tradition. The present — or perhaps the future — replaces the past. Nothing matters so much as what will come next, and what will come next can only arrive if what is here now gets overturned. While this makes the system a terrific place for innovation, it makes it a difficult place to live, since most people prefer some measure of security about the future to a life lived in almost constant uncertainty ... We are not forced to re-create our relationships with those closest to us on a regular basis. And yet that's precisely what Schumpeter, and Grove after him, suggest is necessary to prosper [today]."

    Indeed, if the Cold War were a sport, I would be sumo wrestling, says Johns Hopkins University foreign affairs professor Michael Mandelbaum. "It would be two big fat guys in a ring, with all sorts of posturing and rituals and stomping of feet, but actually very little contact, until the end of the match, when there is a brief moment of shoving and the loser gets pushed out of the ring, but nobody gets killed."

    By contrast, if globalization were a sport, it would be the 100-meter dash, over and over and over. And no matter how many times you win, you have to race again the next day. And if you lose by just one-hundredth of a second it can be as if you lost by an hour. (Just ask French multinationals. In 1999, French labor laws were changed, requiring — requiring — -every employer to implement a four-hour reduction in the legal workweek, from 39 hours to 35 hours, with no cut in pay. Many French firms were fighting the move because of the impact it would have on their productivity in a global market. Henri Thierry, human resources director for Thomson-CSF Communications, a high-tech firm in the suburbs of Paris, told The Washington Post: "We are in a worldwide competition. If we lose one point of productivity, we lose orders. If we're obliged to go to 35 hours it would be like requiring French athletes to run the 100 meters wearing flippers. They wouldn't have much of a chance winning a medal.")

    To paraphrase German political theorist Carl Schmitt, the Cold War was a world of "friends" and "enemies." The globalization world, by contrast, tends to turn all friends and enemies into "competitors."

    If the defining anxiety of the Cold War was fear of annihilation from an enemy you knew all too well in a world struggle that was fixed and stable, the defining anxiety in globalization is fear of rapid change from an enemy you can't see, touch or feel — a sense that your job, community or workplace can be changed at any moment by anonymous economic and technological forces that are anything but stable.

    In the Cold War we reached for the hot line between the White House and the Kremlin — a symbol that we were all divided but at least someone, the two superpowers, was in charge. In the era of globalization we reach for the Internet — a symbol that we are all connected but nobody is in charge. The defining defense system of the Cold War was radar — to expose the threats coming from the other side of the wall. The defining defense system of the globalization era is the X-ray machine — to expose the threats coming from within.

    Globalization also has its own demographic pattern — a rapid acceleration of the movement of people from rural areas and agricultural lifestyles to urban areas and urban lifestyles more intimately linked with global fashion, food, markets and entertainment trends.

    Last, and most important, globalization has its own defining structure of power, which is much more complex than the Cold War structure. The Gold War system was built exclusively around nation-states, and it was balanced at the center by two superpowers: the United States and the Soviet Union.

    The globalization system, by contrast, is built around three balances, which overlap and affect one another. The first is the traditional balance between nation-states. In the globalization system, the United States is now the sole and dominant superpower and all other nations are subordinate to it to one degree or another. The balance of power between the United States and the other states still matters for the stability of this system. And it can still explain a lot of the news you read on the front page of the papers, whether it is the containment of Iraq in the Middle East or the expansion of NATO against Russia in Central Europe.

    The second balance in the globalization system is between nation-states and global markets. These global markets are made up of millions of investors moving money around the world with the click of a mouse. I call them "the Electronic Herd," and this herd gathers in key global financial centers, such as Wall Street, Hong Kong, London and Frankfurt, which I call "the Supermarkets." The attitudes and actions of the Electronic Herd and the Supermarkets can have a huge impact on nation-states today, even to the point of triggering the downfall of governments. You will not understand the front page of newspapers today — whether it is the story of the toppling of Suharto in Indonesia, the internal collapse in Russia or the monetary policy of the United States — unless you bring the Supermarkets into your analysis.

    The United States can destroy you by dropping bombs and the Supermarkets can destroy you by downgrading your bonds. The United States is the dominant player in maintaining the globalization gameboard, but it is not alone in influencing the moves on that gameboard. This globalization gameboard today is a lot like a Ouija board — sometimes pieces are moved around by the obvious hand of the superpower, and sometimes they are moved around by hidden hands of the Supermarkets.

    The third balance that you have to pay attention to in the globalization system — the one that is really the newest of all — is the balance between individuals and nation-states. Because globalization has brought down many of the walls that limited the movement and reach of people, and because it has simultaneously wired the world into networks, it gives more power to individuals to influence both markets and nation-states than at any time in history. So you have today not only a superpower, not only Supermarkets, but, as I will also demonstrate later in the book, you have Super-empowered individuals. Some of these Super-empowered individuals are quite angry, some of them quite wonderful — but all of them are now able to act directly on the world stage without the traditional mediation of governments, corporations or any other public or private institutions.

    Without the knowledge of the U.S. government, Long-Term Capital Management — a few guys in Greenwich, Connecticut — amassed more financial bets around the world than all the foreign reserves of China. Osama bin Laden, a Saudi millionaire with his own global network, declared war on the United States in the late 1990s, and the U.S. Air Force had to launch a cruise missile attack on him as though he were another nation-state. We fired cruise missiles at an individual! Jody Williams won the Nobel Peace Prize in 1997 for her contribution to the international ban on landmines. She achieved that ban not only without much government help, but in the face of opposition from the Big Five major powers. And what did she say was her secret weapon for organizing 1,000 different human rights and arms control groups on six continents? "E-mail."

    Nation-states, and the American superpower in particular, are still hugely important today, but so too now are Supermarkets and Super-empowered individuals. You will never understand the globalization system, or the front page of the morning paper, unless you see it as a complex interaction between all three of these actors: states bumping up against states, states bumping up against Supermarkets, and Supermarkets and states bumping up against Super-empowered individuals.

(Continues...)