The Lexus and the Olive Tree

Globalution, introduced in Chapter 9, is the process by which globalization (via the electronic herd) builds democracy in non-democratic states. To Friedman, this process is significant because it is another example of how globalization is a win-win process for those who choose prosperity. The herd does not care directly about democracy, but it does care about predictability, transparency, and the rule of law because those things indicate stability, and as a profit-seeking entity, the herd cares about nothing more than stability. These traits happen to be the building blocks of democracy, and the herd, in its amoral search for profits, has done a moral good by forcing non-democratic countries to build democracy to join the globalization system. 

The Golden Arches Theory of Conflict Prevention is a variant of the capitalist peace theory that predicts that two countries will prefer not to fight in a war against each other if they both have McDonald’s franchises. This theory is introduced in Chapter 12, with Friedman observing that no two countries that have a McDonald’s have fought a war against each other since their McDonald’s was in place. Friedman argues that there are two reasons for this. The first is that, when a country reaches a level of economic development where it has a large enough middle class to support a McDonald’s franchise, its people no longer like to fight in wars and would prefer to wait in line for burgers. The second is that, because McDonald’s is a global brand with global supply chains, its presence indicates that a country is fully integrated into the global economy and would pay a very high economic price if a war cut off its links to the global economy. Friedman does not argue that war is impossible, because globalization will not end geopolitics, only that because of these two factors, the cost of war between two states with McDonald’s will be so high that each side will prefer a peaceful solution. 

The Golden Straitjacket, as Friedman argues, is the defining political economic garment of the globalization era, and putting it on is a pre-condition for receiving investment from the electronic herd. Broadly speaking, the golden straitjacket is a set of political-economic policies that ensures the following: that the private sector drives economic growth, that the state bureaucracy is shrunk, that tariffs and restrictions on foreign investment are eliminated, that state-owned industries and utilities are privatized, that balanced budgets are run and that the economy is de-regulated. It is a straitjacket because it puts constant pressure on societies to become ever more free-market, and is not always comfortable, as it forces sometimes-painful economic reforms and hurts certain groups more than others. At the same time, it is “golden” because only by putting on the golden straitjacket can countries choose prosperity and grow their economies. This growth can then ameliorate some of the negative effects of the straitjacket.

To Friedman, the Lexus is one of the two defining symbols of the globalization era. The Lexus represents the human drive for sustenance, improvement, prosperity, and modernization that has been the basic driver of globalization. Global markets, financial institutions, and technologies represent these desires, through which we pursue higher living standards. The desire to “build a better Lexus” is evidenced by societies that modernize, privatize, streamline, and reform their economies in order to choose prosperity by joining the globalization system. At the same time, these Lexus pressures create dislocations and disruptions because reforming is a difficult and long-term process. 

The Olive Tree is the second defining symbol of the globalization era, along with the Lexus. To Friedman, the significance of these two symbols came to him when he was returning from visiting a hyper-modern Lexus factory outside of Tokyo while reading about tribal conflict in the Middle East. The olive tree represents all that roots us and gives us a sense of identity and belonging, such as family, community, tribe, and nation.

The nation-state is the ultimate olive tree because it expresses who we belong to linguistically, geographically, and historically. At the same time, excess attachment to olive trees can prevent societies from pursing their Lexus desires by reforming their economies. There exists a constant tension between the Lexus and the Olive Tree because the disruptions associated with economic reforms also create a backlash against globalization that causes people to cling more tightly to their olive trees. However, this can cause a destructive cycle if people cling so tightly to their olive trees that they fail to choose prosperity by reforming their economy, and the economic slump causes people to cling even tighter. Friedman argues that finding the appropriate balance between the Lexus and the Olive Tree is one of the defining struggles of the globalization era, as societies reform and grow while still maintaining those things which give them a stable sense of identity and belonging.

To Friedman, there are only two types of countries and companies, shapers and adaptors, and knowing which type you are is essential to success. Shapers are those countries or companies that define the rules that govern a certain activity, while adaptors are those who adapt themselves to these rules and carve out their own niches. Great power accrues to the great shapers, but shapers need to attract many adaptors to their platforms by allowing adaptors to create value for themselves. 

Friedman argues that globalization has caused a change in the way that academics, journalists, politicians, diplomats, and analysts need to see the world. He argues that there are six different perspectives, or lenses, one can use to view the world: politics, culture, technology, security, finance, and ecology. In the Cold War era, one could understand the world using only one of these lenses, such as a political realist who believes that only geopolitics matters, an environmentalist who believes that only the environment matters, an essentialist who believes that all behavior can be explained by culture, an economist who believes that only markets matter, and so on. However, Friedman argues that globalization means that the world is now more complicated than it ever was before, and so the only way to understand it is by looking through all six of these lenses, assigning different weights to different perspectives depending on the context, and then combine them to get a full picture of the world.