THE LEXUS AND THE OLIVE TREE
Thomas L. FriedmanOpening Scene: The world is 10 years old....
Within a few months the Southeast Asian recession began to have an effect on commodity prices around the world. The princes of gold, copper, aluminum, and crude oil started to fall. The Asian-triggered slump in oil prices made it harder for the Russian government to pay the interest and principal in its T-bills. On August 17, 1998, the Russian economic house of cards came tumbling down. But the system was now more global than ever, and just as crude oil prices were the transmission mechanism from Southeast Asia Russia, the hedge fundsthe huge unregulated pools of private capital that scour the globe for the best investmentswere the transmission mechanism from Russia to all the other emerging markets of the world, particularly Brazil. The hedge funds and other trading firms having racked up huge losses in Russia, started to sell assets in financially sound countries to compensate for their losses in bad ones. Investors started to cash in their Brazilian, Korean, Egyptian, Israeli and Mexican bonds and stocks and put the money either under their mattresses or into the safest U.S. bonds they could find.
The LTCM went. The Mother of All Hedge Funds. LTCM put $120 billion at risk betting on the direction that certain key bonds would take in the summer of 1998. It implicitly bet that the value of U.S. T-bonds would go down and that the value of junk bonds and emerging market bonds would go up.
xvi
The slow, fixed, divided Cold War system that had dominated international affairs since 1945 had been firmly replaced by a new, very greased, inter-connected system called globalization.
Because from the mid-1800s to the late 1920s the world experienced a similar era of globalization. If you compared the volumes of trade and capital flows across borders, relative to GNPs, and the flow of labor across borders, relative to populations, the period of globalization preceding WWI was quite similar to the one we are living in.
Great Britain, which was then the dominant global power was a huge investor in emerging markets, and fat cats in England, Europe and America were often buffeted by financial crises, triggered by something that happened in Argentine railroad bonds, Latvian government bonds or German government bonds.
This first era of globalization and global finance capitalism was broken apart by the successive hammer blows of WWI, the Russian Revolution, and the Great Depression which combined to fracture the world both physically and ideologically. The formally divided world that emerged after WWII was then frozen in place by the Cold War. The Cold War was also an international system. It lasted roughly from 1945 to 1989 when with the fall of the Berlin Wall, it was replaced by another system: the new era of globalization we are now in. Call it "globalization Round II." It turns out that the roughly 75 year period from the start of WWI to the end of the Cold War was just a long time-out between one era of globalization and another.
The previous era of globalization was built around falling transportation costs. Thanks to the invention of the railroad, the steamship and the automobile, people could get a lot more places faster and cheaper and they could trade with a lot more places faster and cheaper. The Economist has noted, today's ear of globalization is built around falling telecommunications coststhanks to microchips, satellites, fiber optics, and the Internet. These new information technologies are able to weave around the world together even tighter. These technologies mean that developing countries don't have just to trade their raw materials to the West and get finished products in return; they mean that developing countries can become big-time producers as well. Xviii
This new era of globalization is also different politically from that of the 1900s. That earlier era was dominated by British power, pound, and British navy. Today's era is dominated by American power, American culture, the American dollar and the American navy. American power after WWII deliberately set out to forge an open international trading system to stimulate employment and counterbalance Soviet communism. It was America that drove the creation of the IMF, GATT, and a host of other institutions for opening markets and fostering trade around the world.
Xix
My argument is different. I believe if want to understand the post-col war you have to start by understanding that a new international system has succeeded itglobalization. Globalization is not the only thing influencing events in the world today, but to the extent that there is a North Star and a worldwide shaping force it is this system. What is new is the system; what is old is power politics, chaos, clashing civilizations and liberalism. Xxi
That is why under the globalization system you will find both clashes of civilization and the homogenization of civilizations, both environmental disasters and amazing environmental rescues, both the triumph of liberal, free-market capitalism and backlash against it, both the durability of nation-states and the rise of enormously powerful nonstate actors. Xxi
THE NEW SYSTEM
Globalization is not just some economic fad, and it is not just a passing trend. It is an INTERNATIONAL SYSTEMthe dominant international system that replaced the COLD WAR SYSTEM after the fall of the Berlin Wall. We need to understand it as such. We are now in the new international system of globalization.
As an international system, the cold War had its own structure of power: the balance between the U.S. 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 a detente, nonalignment and perestroika. The Cold War had its own demographic trends: the movement of people 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, the neutral camp, and everyone's country was in one of them. The cold war has 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. The Cold War had its down defining anxiety: nuclear annihilation. When taken all together the elements of this Cold War system influenced the domestic politics, commerce and foreign relations of virtually every country in the World. 7
Globalization has its own unique attributes which contrast sharply with those of the Cold War which was characterized by one overarching feature: division. The world was a divided up, chopped-up place and both your threats and opportunities in the Cold War system tended to grow out of who you were divided from. Appropriately, this Cold War System was symbolized by one word: The WALL--THE BERLIN WALL.
Globalization is a bit different: it has one overarching feature--INTEGRATION. The world has become an increasingly interwoven place This globalization system is also characterized by a single word: the WEB. So in the broadest sense we have gone from a system built around division and walls to a system increasingly built around integration and webs.
THE GLOBALIZATION SYSTEM, UNLIKE THE COLD WAR SYSTEM IS NOT FROZEN, BUT A DYNAMIC ONGOING PROCESS. I DEFINE GLOBALIZATION AS:
It is an 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 enabling the world to reach into individuals, corporations, and nation-states farther, faster, deeper, cheaper than ever before. 9
the merger between capitalism/communism
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 is [helping to regionalize the world].
Public-private partnerships
Globalization means the spread of free-market capitalism to virtually every country in the world. Globalization has its own set of economic rules that revolve around opening, deregulating and privatizing your economy [PUBLIC PRIVATE PARTNERSHIP] in order to make it more competitive and attractive to foreign investment. 9
Technology
Globalization has its down defining technologies: computerization, miniaturization, digitization, satellite communications, fiber optics and the Internet, which reinforce its defining perspective of integration. 9
Cold War Globalization Defining measurement: throw weight of missiles Defining measurement: speed of commerce, travel, communications, innovation Einstein's mass-energy equation Moore's Law: the computing power of silicon chips will double every 18-24 months while the price will halve Question: Whose side are you on? How big is your missile?
"To what extent are you connected?" "How Fast is your modem?"
Defining Document: "The Treaty" Defining Document: "The Deal" Defining Style: Castro's olive drab military uniform Castro's suit Defining economists: Karl Marx and John Maynard Keynes Joseph Schumpeter and Intel chairman Andy Grove Defining people: friends and enemies Only competitors Defining system: Radar-to expose the threats coming from the other side of the wall The x-ray machine--to expose the threats coming from within Defining Power Structure: The Cold War system was built exclusively around nation-states where you acted through your nation-state and the balancing of them Globalization is built around three balances which overlap and affect each other: (1) Traditional balance between nation-states: U.S. is the sole/dominant superpower, (2) the second balance is between nation-states and global markets which are made up of millions of investors moving money around the world with a click of a mouse, (3) the balance between individuals and nation-states as power has shifted from nation-states to powerful individuals who move markets Defining anxiety: Fear of annihilation from an enemy you knew all too well in a world struggles that was fixed and stable The 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 The traditional boundaries between politics, culture, technology, finance, national security and ecology are disappearing. You cannot explain one without referring to all the others. I believe that this new system of globalization in which walls between countries, markets and disciplines are increasingly being blown away--constitutes a fundamentally new state of affairs.
THE LEXUS AND THE OLIVE TREE
Globalization is the international system that has replaced the Cold War system.
Lexus - represents the half of the world emerging form the Cold War intent on building a better Lexus, dedicated to modernizing, streamlining and privatizing their economies in order to thrive in the system of globalization. The other half is caught up in the fight over who owns the olive tree.
The Olive tree represents everything that roots us, anchors us, identifies us and locates us in this world whether it be , a tribe, a nation, a religion, or most of all, a place called home. Olive trees are what give us the warmth of family, the joy of individuality, the intimacy of personal rituals, the depth of private relationships, as well as the confidence and security to reach out and encounter others. The nation-state will not disappear even if it does weaken because it is the ULTIMATE OLIVE TREE - the ultimate expression of whom we belong to--linguistically, geographically, and historically.
In the post Cold War system, the most likely threat to your olive tree was from another olive tree. The biggest threat today to your olive tree is likely to come from the Lexus--from all the anonymous, transnational, homogenizing, standardizing market forces and technologies that make up today's globalizing economic system. There are some elements that can make the Lexus so overpowering that it can run over and overwhelm every olive tree in sight--breaking down communities, steam rolling environment and crowding out traditions--and this can produce a real olive tree backlash.
...AND THE WALLS CAME TUMBLING DOWN
The Berlin Wall didn't just fall in Berlin. It fell EAST and WEST and NORTH and SOUTH, it hit both countries and companies.
The Cold WAR was like a broad plain, crisscrossed and divided by fences, walls, ditches and dead ends. It was impossible to go very far or fast, It was impossible to go very far without running into a wall: Berlin Wall or an iron curtain or a Warsaw Pact or somebody's protective tariff or capital controls. What blew away all these walls were three fundamental changes--(1) changes in how we communicate, (2) how we invest (3) how we learn about the world. 45
Globalization changed how we communicate with each other. Friedman calls it the "democratization of technology."
Democratization of technology:
--Result of several innovations which came together in the 1980s INVOLVING: computerization, telecommunications, miniaturization, compression technology and digitization which has made it possible fro the world to get connected and to exchange information, news, knowledge, money, family photographs, financial trades, music or television in ways never witness before.
-- The Result: CHEAPER TECHNOLOGY--CALL FROM ANYWHERE, INCLUDING YOUR LAPTOP, CHEAPLY WHICH IS A RESULT BECAUSE OF MINIATURIZATION WHICH HAS REDUCED SIZE AND WEIGHT OF COMPUTER.
--DIGITIZATION - involves reducing any sound, picture, number or letters into a different codes of 1's and 0's and then transmitting them through telecommunications to another point where the one's and zeros are decoded for the receiver. Digitization is so central to globalization.
MICROCHIP IMMUNE DEFICIENCY
"You can never feel like you've won
You can never break even
You can never get out of the game" motto for doing business on the Internet
Globalization today is not global but it is global in the sense that almost everyone now is feeling--directly or indirectly--the pressure, constraints and opportunities to adapt to the democratization of technology, finance and information that are at the heart of the globalization system. 73
I call it the MIDS: Microchip Immune Deficiency Syndrome
MIDS: A disease that can afflict any bloated, overweight, sclerotic system in the post-cold War era. MIDS is usually contracted by countries and companies that fail to inoculate themselves against changes brought about by the microchip and the democratization of technology, finance and information--which created a much faster, more open and more complex marketplace, with a whole new set of efficiencies. The symptoms of MIDS appear when a country or company exhibits a consistent inability to increase productivity, wages, living standards, knowledge use and competitiveness, and becomes too slow to respond to the challenges of the Fast World.
Market economies have thrived over centuries by brutally killing off those firms that are less efficient, less able to adapt to new technologies and less able to remain in touch with the changing demands of consumers and to meet those demands with the minimum use of labor and capital. What the democratization of technology, finance and information did was put this process into hyper speed in the 1980s, requiring companies and countries to move much faster in order to avoid contracting MIDS.
The second stage in the evolution of MIDS as a disease came about with the destruction of this slow-moving world. At both the corporate and government levels, the democratization of technology, finance and information started to converge in the late 1980s and created amazing new efficiencies and economies of scale in the marketplace as well as a whole new place to do business called cyberspace. This transformation became known as the Information Revolution. 79
The Information Revolution and three democratization did to the marketplace was to (1) lower the barriers to entry in almost every business by radically lowering the costs for new entrants, (2) by lowering the barriers around companies, the Information Revolution also brought them closer to their customers, giving consumers much greater power to communicate their choices and to move quickly from companies that won't deliver them to companies that will.
THREE DEMOCRATIZATION - LOWERED THE BARRIERS TO ENTRY BECAUSE WITH A SINGLE PERSONAL COMPUTER CREDIT CARD, PHONE LINE, MODEM, COLOR PRINTER, Internet link, Web site and Federal Express delivery account, anyone could sit in the basement and start his/her own publishing house, retail outlet, catalogue business, global design or consulting firm, newspaper, advertising agency, distributions business, brokerage firm, gambling casino, video store, bank, bookstore, auto sales market or clothing showroom. It could be done overnight at very low cost and the company could become a global competitor by the next morning.
DEMOCRATIZATION OF TECHNOLOGY - HOME COMPUTERS FOR ALL
DEMOCRATIZATION OF FINANCE - CREDIT CARDS FOR ALL
DEMOCRATIZATION OF INFORMATION - INTERNET FOR ALL
There are no barriers to entry, no protection from failure for unprofitable firms, and everyone (consumers and producers) has easy and free access to all information. The Internet lowers the cost of comparison shopping to zero, and consumers can easily and quickly find the lowest price for any good or service. Now manufactures, service providers and retailers anywhere in the world can bid for business anywhere in the world and consumers can seek out the lowest price anywhere in the world. In the past companies made money by depending on the consumer's lack of information and lack of the technology to track it down. The Internet changes that forever. 81
JV: JUST AS THE PRINTING PRESS ELIMINATED THE SCRIBE AND THE COTTON GIN THE SLAVE, SO TOO HAS THE INTERNET ELIMINATED ALL HUMAN LABOR BY INCREASING PRODUCTIVITY (ELECTRONICALLY) 100 FOLD AS IT ACCESSES WORLD MARKETS INSTANTEOUSLY.
In the internet world, Ed Yardeni said, "there are no barriers to entry, no protection for failure or unprofitable firms and everyone (consumers and producers) has easy and free access to all information."
to understand what I mean by the democratization of decision making and deconcentration of power and information, the Soviet Union was built for the sole purpose of control, it centralized all the main functions of leadership. It centralized decision-making--all decisions were made at the top and the top told you what to think, what to make, what to aspire to and what to like. It centralized information--it flowed to the top and strategy decisions were made at the top. What the democratization of decision-making and deconcentration of power does is to take a centrally controlled system like this, loosen it up and redefine the center os that decision-making and information flow both top-down and bottom-up. 86.
In today's hyper-speed, enormously complex globalization system, most of the information needed to answer most of the problems now rests in the hands of people on the outer edges of organizations not at the center.
today's corporations now have a Chief Information officer (CIO). Allan S. Cohen is the Internet doctor who Cisco sends out to fix problems. He says, "
Rule #1 - to be successful in E-business you have to be an e-business. Start by getting rid of the paper. You want to talk to me you can't do it on paper, you have to do it via -email and the Internet.
Rule #2 - make your CEO your Internet evangelist, responsible for E-commerce success.
Rule #3 - Give everyone access to everything all the time. You need to have a freedom of information act for corporate data so that your employees, supplier, and customers can serve themselves.
Rule #4: Train and motivate your customers and employees to always go to the Web. When a customer calls our office, the operate will ask if he went to the internet first.
THE GOLDEN STRAITJACKET
third way
Once the 3 democratization came together in the late 80s and blew away all the walls, they also blew away all the major ideological alternatives to free--market capitalism. People can talk about alternatives to the free market and global integration, then can demand alternatives, they can insist on a "third way", but for now none is apparent.
during the 19th and early 20th centuries when the Industrial Revolution and global finance capitalism roared through Europe and America, people were shocked by their Darwinian brutality and "dark Satanic mills." They destroyed old orders and hierarchies, produced huge income gaps and put everyone under pressure but they also produced sharply rising standards of living for those who could make a go of it.
From communism to free market
It was revolutionary thinks like Engels, Marx, Lenin and Mussolini, the centrally nondemocratic alternatives offered--communism, socialism and fascism--helped to abort the first era of globalization as they were tested out on the world stage. 104
Thatcher/Reagan
The golden Straitjacket first began to be stitched together and popularized in 1979 by British Prime Minister Margaret Thatcher--who, as the original seamstress of the Golden Straitjacket, will go down in history as one of the great revolutionaries in the 20th C. It was reinforced by Ronald Reagan, giving the straitjacket and its rules, some real critical mass. It became a global fashion with the end of the Cold War, once the three democratization blew away all the alternative fashions and all the walls that protected them. The Thatcherite-Reaganite revolution came about because popular majorities in these two major Western economies concluded that the old government directed economic approaches simply were not providing sufficient levels of growth. They combined to strip huge chunks of economic decision-making power from the state, from the advocates of the Great Society and from traditional Keynesian economics and hand them over to the free market. 104-05 To fit into the Golden Straitjacket, a country must either adopt or be seen as moving toward the following:
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 and kickbacks as possible
Allowing citizens to choose from an array of competing pension options and foreign run pension and mutual funds 105
The result: your economy grows and your politics shrink. On the political front, the G.S. narrows the political and economic policy choices of those in power to relatively tight parameters. That is why it is increasingly difficult to find any real differences between the ruling and oppositions parties. With the fall of the Cold War walls and the rise of the Golden Straitjacket, I see a lot of synchronized swimming when I travel the world. 107
The Electronic Herd
The Electronic Herd is made up of all the faceless stock, bonds, and currency traders sitting behind computer screens all over the globe, moving their money around from mutual funds to pension funds to merging funds or trading on the Internet from their basements. It consists of big MNC who now spread their factories around the globe to the most efficient, low-cost producers. This herd has grown exponentially thanks to the democratization of finance, technology and information--so much so that it is beginning to replace governments as the primary source of capital for both companies and countries to grow. As countries have run balanced budgets to fit into the Golden Straitjacket, their economies become more dependent on the Electronic Herd for growth capital. To thrive in today's globalization system, a country not only has to put on the Golden Straitjacket but it has to joint the Electronic Herd. 109
The interaction between the Electronic Herd, nation-states and the Golden Straitjacket is at the center of today's globalization system.
Moody's told Canada in 1995 that if they did not get their deficit-to-GDP ratio more in line with international norms and expectations, Moody's would downgrade their triple A credit rating and every Canadian and company would have to pay higher interest. "The sheer magnitude of Canada's foreign debt in relation to the size of the economy means that Canada has become excessively vulnerable to the volatile sentiments of global financial markets. We have suffered a tangible loss of economic sovereignty," said Paul Martin, Finance Minister. 110 ( JV: democratization of capital or finance)
THE ELECTRONIC HERD
Globalization isn't a choice, it's a reality.
The Electronic Herd is often anonymous stock, bond, and currency traders, and multinational investors connected by screens and networks. It doesn't cut anyone slack.
Countries cannot thrive in today's world without plugging here, there suddenly emerged a vast global plain where investor herds from many different countries could roam freely.'s globalization system.
But the gradual lifting of capital controls in the 1970s, the democratization of finance, technology and information, the end of the Cold War system and the fall of walls everywhere into the Electronic Herd and they cannot survive unless they learn how to get the best of out of this herd without being overwhelmed or shocked by its inevitable surges.
Two groups:
1. Short-horn cattle - people involve din buying/selling stocks, bonds, currencies around the world and who can and often do move their money around on a very short-term basis. They are currency traders, major mutual fund and pension funds, hedge funds, insurance companies, bank training rooms and individual investors.
The other group, the "Long-horn cattle" are multinationals-GE, GM, IBM, Intels which are increasingly involved in foreign direct investment, building factories around the world or striking international long-term production deals or alliances with overseas factories to make or assemble their products.
Through the Electronic Herd was born and nurtured in the Cold War era, its members could never gather critical mass, speed or reach in that overly regulated, wall-up system. Most countries maintained capital controls at least until the 70s--so capital could not move across borders the way it can in today. 115
According to the U.S. Treasury, nearly $1.3T in private capital has flowed into the emerging market economies, compared to roughly $170 billion in the 1980s and a relative amount in the 70s. The supermarkets are the mega-markets of Tokyo, Frankfurt, Sydney, Singapore, Shanghai, Hong Kong, Bombay, Sao Paulo, Paris, Zurich, Chicago, London, and New York. By the end of 1997, 25 Supermarkets controlled 83% of the world's equities under institutional management and accounted for roughly half of global market capitalization around $20.9 Trillion. 116
SHORT-HORN CATTLE
The advantage for the mortgage company is that it can get its hundred million dollars back right away without having to wait for the mortgagers to pay off their mortgages over 30 years. The advantage for bondholders is that they are paid off by the cash flow from the interest and principle payments that come in each month and the interest rate will be a few points higher than a money market or savings account would pay. 119
If you can bundle home mortgages, why not.....The more capital controls have fallen between countries, the more everyone is offering everything for sale as stocks, bonds, or derivatives. This move toward securitizing everything has "fundamentally changed the character of the credit markets" says Henry Kaufman. The net effect is that this securitization has opened up literally trillions of dollars' worth of assets--which either were never traded before or no one every dreamed could be turned into bonds--"to the harsh glare of changing market circumstances." 120
This diversity of investment instruments and opportunities has been a godsend for both developed and developing countries and companies. It has enabled some of them to grow at previously unimaginable speeds. When you have so many different products with so much information always available at such high speeds, your ability to get an edge on the competition and seize on an opportunity before everyone else sees it gets smaller and smaller. 121
It is now possible to win very very big and lose very very big--the swing is bigger. JV
In order to make larger and larger bets, the short-term cattle need to use exotic trading products--swaps, futures, forwards, options, derivatives and indexations--and then leveraging them by borrowing even more money than their investors have given them. This has contributed to the huge increase in the volume of transactions sloshing around the world every day.
then there is the rise of hedge funds which bring together large pools of cash from wealthy investors and institutions then magnify that pool by borrowing from the banks to make high-risk, high-reward bets on currencies, stocks, and bonds around the world. Kaufman notes that many major banks, brokerage firms, investment banks, insurance companies, corporate treasury departments of major multi-nationals and even the trading rooms of major world central banks have felt a need to establish their own hedge-fund like trading operations. 124
In 1999 the total value of Microsoft stock was $600 billion which was worth far more than all the stocks on all the emerging-market stock markets in all the rest of the world put together. In 1980 4.6 million American households owned shares in mutual funds, today half of the U.S. population is invested in the stock market. 125
The fact that so many more people now have the instantaneously connections and information to trade from anywhere all the time is another reason today's Electronic Herd is so much bigger and potentially more volatile. 130 The ability to access information faster and quicker for more people than ever before adds to the volatility. 130 Nasdaq market markets will tell you that it isn't the long-horn cattle in the Electronic Herd--the big mutual funds--who push Internet stocks up/down like a roller coaster. It's the little short-horn day traders impulsively buying 200 or 300 shares at a time on one whiff of news. Most of them don't even know the companies they are buying or selling, just the symbols. 131
What goes around faster comes around faster but then it also goes around faster again.
LONG HORN CATTLE
These are multinational corporations which are involved in foreign direct investment they don't just buy a stock or bond --they invest in a country's factories, utilities, energy plants, and a host of other projects. 132
Under the cold war system when countries protected their markets with tariffs, multinational companies would make their long-term million-dollar investments in big-market countries primarily for the purpose of jumping over those walls. Toyota would get around the American quota on Japanese auto imports by building a factor in the US. And for would do the same. In order to survive in a world of walls, multinationals had to build factories in key market so they could become better local producers and sellers.
Once the democratization of technology, finance and information blew away many of the Cold War walls, the long-horn cattle had a much greater and somewhat different, incentive to build factories abroad. Increasingly there was a single, open global market-lace and cyberspace, where a multinational company could sell anything anywhere or make anything anywhere.
In order to sell globally, every big multinational needs to produce locally by outsourcing each segment to the country that can do the cheapest and most efficiently in order to keep manufacturing costs down and remain competitive. This has led to more multinationals investing in more cost-lowering production facilities abroad or making alliances with cheaper subcontractors abroad.
In the era of globalization, multinationals increasingly need to expand overseas, not because it's the only way to be an effective local producer in these countries, but because it's now the only way to become an effective global producer. 133
April 24, 1997 edition of USA Today:
IBM uses of foreign partners and subsidiaries to become a better, smarter, global producer in a world without walls
A group of computer programmer at Tsinghua University in Beijing is writing software using Java technology. They work for IBM. Diagram - pp.133-134
The democratization of technology, finance and information--which have changed how we communicate, how we invest, how we look at the world--gave birth to all the key elements in today's globalization system. They blew away the walls. They are what created the networks which enable each of us to reach around the world and become Super-empowered individuals. They are what created the links and the space for the Electronic Herd. 140
The rise of the Internet certainly contributed to this era of globalization. The Internet will ensure that how we communicate, how we invest, how we look at the world will be increasingly global. Because from the moment you log onto the Internet you can communicate with anyone globally practically for free from the moment you long onto the Internet you can invest in any market globally, practically for free and from the moment you start a business that has an Internet Web site, where ever you are in the world, you will have to think globally. 140
John Chambers, president of Cisco systems:
The Internet will change everything. The Internet revolution will bring together people with knowledge and information in virtual companies. And it will have every bit as much impact on society as the Industrial Revolution. It will promote globalization, at an incredible pace. Instead of happening over a 100 years, it will happen over 7."
The Internet is going to be like a huge vise that takes the globalization system which I have described and keeps tightening and tightening the system around everyone in a way that will only make the world smaller and smaller and faster and faster with each passing day. 141. 141
GLOBAL GOVERNANCE?
question:
How do we get better governance in areas such as environment, human rights, financial interactions and work conditions without having global government?
Answer:
The answer is to understand that in a world of networks, individuals, companies, communities, consumers, activists groups, and governments all have the power to be shapers--to shape human values chains. And when you are the shaper of a coalition in support of a certain human value, you would be amazed what you can do without global government to create better global governance. It requires a radical new way of thinking abut how to mobilize power through. It requires a radical new way of thinking about how to mobilize power tough. It requires thinking about how one can exploit the Internet, the power of consumers, and the exposure of multinational companies who need to do business all over the world and need to protect their brand name all over the world. 206
Globalization demands that our society move faster, work smarter and take more risks than at any time in our history. 443
Sustainable globalization requires a stable power structure, and no country is more essential for this than the U.S. All the Internet and other technologies that Silicon Valley is designing to carry digital voices, videos and data around the world, all the trade and financial integration it is promoting through its innovations, and all the wealth this is generating are happening in a world stabilized by a benign superpower--te U.S.
Globalization is to the 190s and the next millennium what the Cold War was to the 1950-through the 1980s: If the Cold War system was built around the threat and challenge of the Soviet Union which was dividing the world, the globalization system is built around the threat and challenge of rapid technological change and economic integration that are uniting the world. But as it unites the world, globalization is also transforming everyone's workplace, job, market and community- -rapidly destroying old jobs and harvesting new ones, rapidly eliminating old lifestyles and producing new ones, rapidly eliminating old markets and multiplying new ones, rapidly destroying old industries and inventing new ones. 441
with the internet we have a common global postal system, a common global shopping center and a common global library as well as a common global university