In the middle of Thomas Friedman’s The World Is Flat is a long quote that towers over the intellectual landscape of the rest of the book like a mountain over low hills. It is Marx and Engels’s celebrated prophecy of globalization in The Communist Manifesto–“All that is solid melts into air.” Friedman has apparently just discovered it and is “in awe at how incisively Marx detailed the forces that were flattening the world during the rise of the Industrial Revolution, and how much he foreshadowed the way these same forces would keep flattening the world right up to the present.”
Friedman is right to be impressed, however belatedly. After the long detour of Second and Third World pseudosocialism, capitalism has resumed the path Marx and Engels foresaw: toward one wholly rationalized, seamlessly integrated world; with everything for sale; with no one and no activity exempt from the pressure of competition, the risk of obsolescence, the specter of ruin; with no rest, no external haven, no inner sanctuary. A flat world.
This second great age of globalization began, by Friedman’s reckoning, on “11/9.” (The Berlin wall came down on November 9, 1989.) “In the Cold War era,” he explained in his bestselling The Lexus and the Olive Tree (1999), “capital could not move across borders the way it can in today’s globalization system.” Many national governments did not permit foreign ownership of core industries, foreign speculation in their currencies or unrestricted foreign access to their domestic markets. (Since the United States was the world’s dominant economy, for “foreign” read “American.”) They could get away with this because in the pseudosocialist bloc people were not free and in any case did not know what they were missing out on, while in the Free World, the United States was wary of alienating its geopolitical allies. Friedman’s account of “the Cold War system” in The Lexus and the Olive Tree is accurate and illuminating, as far as it goes. There is no damned nonsense (or very little) here about “freedom”–except for the freedom of those with a lot of capital to do anything they please with it. That is indeed what the cold war was about.
The end of the cold war made it politically feasible, and computerization made it technically feasible, to move capital around the world at dazzling speeds and staggering volumes without interference from any but the most determined governments. This allows large investors to buy control of a country’s key resources, industries and infrastructure, to put intense upward or downward pressure on its currency and thereby to influence, or even dictate, its fiscal, environmental, labor and tax policies. These new masters of the universe, gathered around computer screens in New York, London, Frankfurt and Tokyo, are members of what Friedman calls, in one of the most memorable of his many piquant coinages, the “Electronic Herd.”
What lures the Herd to graze in an economy is a favorable investment climate; or, to mix that metaphor with another charming Friedmanism, the “Golden Straitjacket.” Donning the Straitjacket means low social-welfare expenditures; low or no tariffs or subsidies to protect domestic industries; no barriers to foreign ownership, currency speculation or profit repatriation; and a flexible labor market–i.e., no unions. (If you want to know more precisely what a “favorable investment climate” looks like, study the decrees of the Coalition Provisional Authority, which were designed–without consulting any nonrich Iraqis–to fit post-Saddam Iraq for the Straitjacket.) All this is bitter medicine, but salutary: