The Lexus and the Olive Tree
by Thomas L. Friedman
Farrar, Straus & Giroux. 394 pp. $27.50

Turbo-Capitalism: Winners and Losers in the Global Economy
by Edward Luttwak
HarperCollins. 290pp. $26.00

False Dawn: The Delusions of Global Capitalism
by John Gray
New Press. 262 pp. $25.00

From seminars in business schools to arguments in union halls (if there still are arguments in union halls), the term “global economy” is hard to avoid. But it is even harder to define, if for no other reason than that the current world economic system is a mix of different factors. Among these has been the unleashing of capitalism from punitive taxation and over-regulation; the technological advances (computers and telecommunications) that have permitted increased knowledge about markets and a speeding-up of transactions; new financial instruments, from junk bonds to derivatives, and the increasing role played by finance capital; and the spread of American culture, whether due to conscious efforts of the United States to impose its ways or to the understandable desire of other societies to imitate American prosperity.

Just when these elements began to interact powerfully enough to create the changed world we know today is another question that does not admit of easy answers. With the breakout of the corporate bond market in the 1960’s? The birth of the Eurodollar in the 1970’s? Reaganomics and Thatcherism in the 1980’s? Gains in productivity from information technology, visible in economic statistics only since the 1990’s? Still unclear, too, is whether the distinctive economic problems associated with our time—supposedly widening inequality in America, rampant unemployment in continental Europe, hyperinflation in Russia, anemic demand in Japan and now in much of Asia—merely coincide with the global economy or actually arise from it. Most difficult of all to determine is whether this new economy is a semi-permanent regime or an unstable transition to something else.

But even as the global economy remains undefined, opinion has increasingly begun to line up on one side or another of a different question entirely: whether “globalization” is a good thing or a bad thing. These three books show that our future politics hinges on which side prevails.

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At one end of the spectrum is the New York Times columnist Thomas L. Friedman, who unreservedly hails the new economy as a giant if occasionally painful step forward on the march of human progress. Basically, The Lexus and the Olive Tree is a collection of anecdotes and observations culled from Friedman’s interviews all over the world with various key actors on the global economic stage. Wondering about the effect of the Internet, he consults John Chambers, CEO of Cisco Systems. Wondering about international trade, he consults then-Deputy Treasury Secretary Lawrence Summers. And figuring prominently throughout is Thomas Friedman himself: his investments; his favorite five-star hotels; his vacations in Colorado, where he and other nabobs of globalism whip out their cell phones on the ski lifts.

To be sure, his story is not only about the biggest winners. To illustrate that the global economy has potential benefits for all, Friedman dwells on cultures that have benefited from it at the margins: the Kayapo Indians of Brazil, for instance, who watch the gold quotations from the Brazilian futures market to make sure they are not being ripped off by the miners they have allowed to dig on their land. And Friedman also understands that all is not wine and roses. The very title of his book is meant to capture an essential conflict of our time: while riding on a 180-m.p.h. train engineered by the Japanese company Lexus, he finds himself marveling that “the people with whom I had lived for so many years in Beirut and Jerusalem [as the Times’s Middle East correspondent in the 1980’s], whom I knew so well, were still fighting over who owned which olive tree.”

In other words, the global economy (the Lexus) and traditional cultures (olive trees) are not always compatible. Fast economic change can wreak havoc in traditional societies; worse, tradition can block the healthy advance of globalization. Yet, Friedman insists, properly managed, globalism can not only create unheard-of affluence, it can actually enhance rather than destroy community.

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Before getting to Friedman’s idea of proper management, it is useful to have a look at his opposite numbers in the globalization debate. Known (including to COMMENTARY readers) for his writings on military strategy, Edward Luttwak has increasingly turned his attention of late to economic affairs; what he has seen, to judge by his broadside Turbo-Capitalism, has mightily displeased him.

If, for Friedman, the global economy is to be welcomed as the wave of a better future, for Luttwak it is little more than a new form of barbarism, planned out consciously—and irresponsibly—by individuals united only by their worship of “free” markets and their indifference to the social disruption those markets cause. Although he grants that free-trade/low-regulation/low-tax regimes are economically efficient in the sense that they improve GNP, Luttwak maintains that they are not worth the price they exact in social chaos, a chaos that “exceeds the adaptive limits of individuals, families, and communities.”

Luttwak waxes journalistic in explaining the dislocations visited on those who have had their jobs wrested from them by “turbo-capitalism,” his term for the system that replaced the beneficent, post-World War II “managed capitalism” that once offered Americans remunerative and, above all, reliable jobs:

The 50-55-year-old male, white, college-educated, ex-corporate employee and former exemplar of the American dream, still perhaps living in his lavishly equipped suburban house, with two cars in the driveway, one or two children in $20,000 per-annum universities . . . who now exists on savings, second and third mortgages, and scant earnings as a self-described “consultant,” has become a familiar figure in the contemporary United States.

The problem, Luttwak writes, is that the “New Titans” of information technology, whose success is emblematic of the whole global economy, do not create many jobs. In 1995, the twenty largest high-tech companies combined to employ (by Luttwak’s accounting) fewer than a fifth as many people as did General Motors. There is today an oversupply of software engineers, and only 19 percent of computer-science graduates work in the field twenty years after graduation. Although spinoffs may employ many more, the heart of the information-technology sector, Luttwak insists, is no job-creating dynamo.

For Luttwak, this simple economic fact—rather than “wounded national pride”—is what accounts for the resistance to marketization of many European societies. “Free markets have a natural tendency to become unfree,” he writes, by which he means to make both an economic and a social point. Economically, capitalism tends toward monopoly, and this tendency is hard to stop without damaging the economy itself. But the social fallout is much worse.

It is not just that marketization—i.e., Americanization—spreads a great deal of lowest-common-denominator garbage in the form of chain stores and fast-food emporia. It is that the model of social relations entailed by an American-style economy offers, in Luttwak’s judgment, significantly less freedom to ordinary people. As evidence, he adduces the widespread use of surveillance in the United States; our laws against smoking, drinking, drugs, and pornography; and our unrivaled rate of incarceration.

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False Dawn, by the English political philosopher John Gray, brings even more skepticism to the new economy than does Luttwak. Gray, too, places America at the heart of globalism. But whereas Luttwak views the U.S. as the source of reasonable economic doctrines misand over-applied, Gray, who in the 1980’s worked for Margaret Thatcher before seeing the light, views it as a dogmatic and totalizing imperialist menace. “The [capitalist] thinking that inspired market reform in Russia,” he writes bitterly, “differs from Leninism in the economic system that it aimed to install. But its consequences in human suffering and economic devastation have been in some ways strikingly alike.”

Those consequences are visible, according to Gray, wherever the neoliberal experiment has been tried out. In Britain, the introduction of free-market policies in the 1980’s was accompanied by a dramatic growth in crime, inequality, and homelessness. In the third world, market policies have widened the gap between haves and have-nots, and spread corruption and crime. In Mexico, before market reforms, “the poorest half of the population received 20.7 percent of national income; by 1992, that had fallen to 18.4 percent.” In the meantime, Mexico has more billionaires per capita than any other place on the earth.

The worst of it, in Gray’s judgment, is that there is no way out. The interdependence of economies and the untrammeled and growing power of multinational corporations mean that any attempt to dissent from the global market gets “quashed by the threat of capital flight.” An excellent measure of the resulting depredations, writes Gray, is the “intensity of the fundamentalist movements which [globalism] is evoking” by way of reaction, from angry Islamic mullahs to Timothy McVeigh.

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Between Friedman’s optimism and the pessimism of Gray and Luttwak, we can see the outlines of a new bipolar politics. As an eager ideologist for the optimists of globalization, Thomas Friedman makes the case for an explicit shift of political power to a global elite that will make the thing run. He quotes approvingly the California physicist Murray Gell-Mann, who holds that society in its current state needs a class of generalist thinkers to set its goals. Friedman considers himself eminently qualified for the job, preeningly describing how he taught himself to “do information arbitrage” (whatever that means) “in six dimensions” (whatever that means).

In this respect the dichotomy Friedman sets up between the Lexus and the olive tree is really no contest. Though he pays lip service to olive trees, any clash between them and the Lexus has been decided by him in advance—in favor of the Lexus. Or, to put it differently, in favor of people like Thomas Friedman’s image of Thomas Friedman. “The most open-minded, tolerant, creative, and diverse societies,” he writes, “will have the easiest time with globalization, while the most closed, rigid, uptight, self-absorbed, and traditional companies and countries, which are just not comfortable with openness, will struggle.” If that is so, Lord help most societies on earth.

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Ultimately, then, it is not the Lexus and the olive tree that are in conflict but rather the various local olive trees of the old economy and the claims of the new global elite—Friedman’s own olive tree, which he is too smug to recognize as such. But the nostalgia of the skeptics is no alternative.

Both Luttwak and Gray rosily misrepresent the more regulated economies that preceded the market radicalism they now complain about. Yes, growth rates in the United States in the 1950’s and 1960’s exceeded those in the 1980’s; but the old economy also had its ups and downs. Moreover, by the 1970’s—i.e., the eve of the “turbo-capitalist” years—the downs, particularly in the U.S. and Britain, were almost uninterrupted.

Similarly, increasing inequality in the United States, as best we can measure it, began in the decidedly unglobalized 1970’s, and is today more social than economic. Elsewhere, Gray’s attempt to prove third-world inequality by counting Mexican billionaires is simply ludicrous. These plutocrats are better thought of as vestiges of a decades-old oligopoly only now in the process of being broken—largely by globalization. As for America’s problem with underclass violence—to which the mass incarceration both Luttwak and Gray decry is a response—it, too, is of several decades’ duration. Nor are Gray’s warnings about “fundamentalism” convincing. Wherever one looks, the big period of growth in this particular commodity appears again to have been the 1970’s, well before the market-enthroning regimes of Reagan and Thatcher.

On shaky evidence like this, both authors have erected a bilious ideology. Take Gray’s statement that the interdependence of economies means that any attempt to dissent from the global market gets “quashed by the threat of capital flight.” In fact, it works the other way around as well: capital flight is the only disciplinary tool the global economy has at its disposal against the whims of government policy-makers. That relations between these two entities should be sometimes difficult is hardly anything new, but Gray seems oblivious to the fact that there is also nothing permanent about their present configuration. Six years ago, it was conventional wisdom that markets would punish countries that raised taxes. Today’s global markets might very well punish the U.S. economy if Washington lowers taxes. The only solution to this impermanence, itself a permanent fact of economic life, is autarky, or national self-sufficiency. Something very like this discredited populist project lurks at the heart of both Luttwak’s and Gray’s critique, and it presents as blind an alley as Friedman’s elitism.

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What, then, should we do about globalization, which obviously presents new problems in addition to new forms of old ones? A good place to start is with empirical reality, to which my own favorite guide is the MIT economist Paul R. Krugman. Fortunately, Krugman has recently put between covers eight highly specific and splendidly written essays on the global economy.¹ While he is hardly happy with every outcome produced by our new arrangements, neither is he a dogmatic enemy of them; his examination of the severest of the crises that have arisen in the 1990’s is refreshingly precise, never blinking the genuine causes for alarm but never succumbing to the Friedman-like call for a grand guru to set things right through wholesale political or social change. You can call such an approach diagnostic, empirical, or pragmatic. You can also call it bland. But for now it seems like the only road to prosperity that does not entail choosing between Friedman’s aspirations to run the global economy and Luttwak’s and Gray’s to stop it in its tracks.

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¹ The Return of Depression Economics. Norton, 176 pp., $23.95.

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