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The Lexus And The Olive Tree

THE LEXUS AND THE OLIVE TREE

by

Thomas L. Friedman

Foreword to the Anchor Edition

Globalization is not a trend or a fad but is an international system which replaced the Cold War system and, like its predecessor has its own rules and logic that now influence the politics, geopolitics, economics and environment of virtually every country in the world.

I have carefully examined the controversial sub-theses. One of them is my Golden Arches theory - that no two countries that both have McDonald's have ever fought a war against each other since they each got their McDonald's (As of April, 1999) and have found it still valid.

OPENING SCENE:

The World Is Ten Years Old

On December 8, 1997 Thailand's government announced it was closing 56 of its 59 finance houses. Thai businesses had launched a huge building program with U.S. dollars, borrowed from their finance houses who loaned, thinking themselves safely backed by their government and a strong baht. When the government failed its support due to massive, global speculation that the economy was stretched too far, value of the baht crashed. And there were not enough cheapened bahts to pay for the borrowed dollars. These investment houses were the first dominoes to fall in the first global financial crisis in the new era of Globalization - the era that followed the Cold War.

Then within just a few months, the Southeast Asian recession, originating in Thailand, began to affect commodity prices around the world. Asia had previously consumed huge amounts of raw materials. When their engines began to sputter, the prices of many essential commodities began to fall.

These lowering prices seriously affected Russia, whose factories couldn't make much of value anyway; but, even so, there was little market for their few items worthy of sale. Hence unable to sell, they produced little income. The government of Russia was dependent on taxes from...