On The Lexus and the Olive Tree

I recently finished reading The Lexus and the Olive Tree by Thomas L. Friedman.

Below are key excerpts from the book that I found particularly insightful:

1- “While there are a lot of similarities in kind between the previous era of globalization and the one we are now in, what is new today is the degree and intensity with which the world is being tied together into a single globalized marketplace and village. What is also new is the sheer number of people and countries able to partake of today’s globalized economy and information networks, and to be affected by them.”

2- “As you will see from the book, I am keenly aware of them. I believe the best way for us to deal with the brutalities of globalization is by first understanding the logic of the system and its moving parts, and them figuring out how this system can benefit the most people. While inflicting the least amount of pain. That is the spirit that motivated this book.”

3- “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. Therefore, globalization also has its own set of economic rules—rules that revolve around opening, deregulating and privatizing your economy, in order to make it more competitive and attractive to foreign investment.”

4- “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.”

5- “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…The second balance in the globalization system is between nation-states and global markets…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.”

6- “So what to do? How to understand and explain this incredibly complex system of globalization? The short answer is that I learned you need to do two things at once— look at the world through a multilens perspective and, at the same time, convey that complexity to readers through simple stories, not grand theories. I use two techniques: I “do information arbitrage” in order to understand the world, and I “tell stories” in order to explain it.”

7- “The challenge in this era of globalization—for countries and Individuals—is to find a healthy balance between preserving a sense of identity, home and community and doing what it takes to survive within the globalization system. Any society that wants to thrive economically today must constantly be trying to build a better Lexus and driving it out into the world.But no one should have any illusions that merely participating in this global economy will make a society healthy. If that participation comes at the price of a country’s identity, if individuals feel their olive tree roots crushed, or washed out, by this global system, those olive tree roots will rebel. They will rise up and strangle the process. Therefore the survival of globalization as a system will depend, in part, on how well all of us strike this balance.”

8- “To fit into the Golden Straitjacket a country must either adopt, or be seen as moving toward, the following golden rules: making the private sector the primary engine of its economic growth, maintaining a low rate of inflation and price stability, shrinking the size of its state bureaucracy. maintaining as close to a balanced budget as possible, if not a surplus, eliminating and lowering tariffs on imported goods, removing restrictions on foreign investment, getting rid of quotas and domestic monopolies, increasing exports, privatizing state-owned industries and utilities. deregulating capital markets, making its currency convertible, opening its industries, stock and bond markets to direct foreign ownership and investment, deregulating its economy to promote as much domestic competition as possible, eliminating government corruption, subsidies d kickbacks as much as possible, opening its banking and telecommunications systems to private ownership and competition and allowing its citizens to choose from an array of competing pension options and foreign-run pension and mutual funds. When you stitch all of these pieces together you have the Golden Straitjacket. Unfortunately, this Golden Straitjacket is pretty much “one size fits all.” So it pinches certain groups, squeezes others and keeps a society under pressure to constantly streamline its economic institutions and upgrade its performance. It leaves people behind quicker than ever if they shuck it off, and it helps them catch up quicker than ever if they wear it right. It is not always pretty or gentle or comfortable. But it’s here and it’s the only model on the rack this historical season.”

9- “While we are on the subject of the diversity of the Electronic Herd, there is one other critically important thing we should always keep in mind about it—this herd is not simply an exogenous force. It is lot just made up of stateless offshore money funds, Internet investors from abroad and distant Supermarkets. It is also made up of locals in every country that has opened itself to the herd. What gives the herd its power is not only the fact that when capital controls in a country are lifted foreigners can easily come in and buy and sell currency, stocks and bonds. It is the fact that the locals can easily go out!”

10- “In the globalization system your state matters more, not less. Because the quality of your state really means the quality of the software and operating system you have to deal with the Electronic Herd. The ability of an economy to withstand the inevitable ups and downs of the herd depends in large part on the quality of its legal system, financial system and economic management—all matters still under the control of governments and bureaucrats.”

11- “To be an effective shaper you have to be able to attract a lot of adapters. But the key to having a lot of adapters to your standard is that it be able to create a lot of value for other people too—whether it is a product, a human value or a set of geopolitical rules. If people become reluctant members of your value network, eventually they will rebel against it by seeking a different standard. So one thing a shaper always has to be aware of is whether he is leaving room in his value chain—some food on the table—so that others will have an incentive to adapt to his standards.”

12- “The best countries and companies will mirror one another’s habits. So, after asking the two most basic questions—how wired is your country or company and is it a shaper or adapter—here are the other nine questions I ask to measure its economic power and potential. 1) How Fast Is Your Country or Company? 2) Is Your Country or Company Harvesting Its Knowledge? 3) How Much Does Your Country or Company Weigh? 4) Does Your Country or Company Dare to Be Open on the Outside? 5) Does Your Country or Company Dare to Be Open on the Inside? 6) Does Your Country’s or Company’s Management Get It and Can You Change Management If They Don’t? 7) Is Your Country or Company Willing to Shoot Its Wounded and Suckle the Survivors? 8) How Good Is Your Country or Company at Making Friends?”

13- “The Golden Arches Theory highlights one way in which globalization affects geopolitics—by greatly raising the cost of warfare through economic integration. But globalization influences geopolitics in many other ways. For instance, it creates new sources of power, beyond the classic military measures of tanks, planes and missiles, and it creates new sources of pressure on countries to change how they organize themselves, pressures that come not from classic military incursions of one state into another, but rather by more invisible invasion lie invasions of Supermarkets and Super-empowered individuals.”

14- “The other method for greening globalization is to demonstrate to corporations and their shareholders that their profits and share prices will  increase if they adopt environmentally sound production methods.”

15- “If the intellectual critics of globalization would spend more time thinking about how to use the system, and less time thinking about how to tear it down, they might realize what a lot of these little folks have already realized—that globalization can create as many solutions and opportunities as it can problems.”

16- “How we learn to strike the right balance between globalization’s inherently empowering and humanizing aspects and its inherently disempowering and dehumanizing aspects will determine whether it is reversible or irreversible, a passing phase or a fundamental revolution in he evolution of human society.”

17- “America does have a shared national interest to pursue in today’s globalization system—one that constitutes both a big opportunity and a big responsibility. Put simply: As the country that benefits most from today’s global integration—as the country whose people, products, values, technologies and ideas are being most globalized—it is our job to make sure that globalization is sustainable. And the way we do that is by ensuring that the international system remains stable and that advances lead declines for as many people as possible, in as many countries as possible, on as many days as possible.”

18- “First, we want as open, and growing, a free-market-oriented economy as possible, in which people are encouraged to swing free and take crazy leaps. Without risk takers and venture capitalists, there is no entrepreneurship and without entrepreneurship there is no growth. Therefore, at the heart of every healthy economy are the free-swinging trapeze of free markets. Because there is no better safety net than a healthy economy with low unemployment.”

19- “Democratizing globalization—it’s not only the most effective way to make it sustainable, it’s the most self-interested and moral policy that any government can pursue.”


Omar Halabieh

The Lexus and the Olive Tree


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