Answer The File named question using the pdf provided with the information.
1. Read Chapter 6: The Golden Straitjacket of “The Lexus and the Olive Tree: Understanding Globalization" by Thomas Friedman, . The PDF file is available on our course website. Write an essay (maximum onc page) to answer the following questions: What are the pros and cons of embracing globalization for developing countries? What does the “Golden Straitjacket™ mean? The Golden Straitjacket "We're still very much in a straitjacket for the next year or two. The new govermment will have to be quite careful." -Umar Juoro, economic adviser to former Indonesian Prime Minister B. J. Habibie, describing to The New York Times how little room to maneuver the Indonesian govemment has on the economic front, because if it does anything rash iù will get hammered by the IMF and the global markets. October 23, 1999. While I was on that trip monitoring elections in Chinese villages and my interpreter and I were wandering through the village of Heng Dao, we dropped in on a farmer-turned- mechanic who had geese and pigs in the front yard, but a stereo and color television inside his brick hut. My interpreter, a Chinese student who was studying in America, noticed something I never would have - that there didn't seem to be any loudspeaker around. During Mao's day the Communist Party installed loudspeakers in the "brigades," as small villages were known, and used them to blare out propaganda and other messages exhorting the workers. We asked our host what happened to it. "We took it down last year," the villager said of the loudspeaker. "No one wanted to listen to it anymore. We have stereo and TV now." What the villager didn't say was that he didn't need to hear the message from Beijing and the Communist Party anymore, because he knew what it was and it wasn't the teachings of Chairman Mao. The onlyy message coming from them was much simpler: "You're on your own. Get a job. Send money." A few months earlier I had been in Thailand, watching Thailand's crony capitalist economy going into a tailspin. I had arranged to interview Sirivat Voravetvuthikun, a Thai real estate developer who had gone bankrupt in the Thai economic crash. He and his wife had become the poster children for the Thai crash, because they had decided to go into the sandwich-selling business to make ends meet. This once-wealthy couple rented out some vacant space in downtown Bangkok, set up a sandwich-making operation with many of their former employees and started delivering fresh ham-and-cheese around the streets of Bangkok. Sirivat arrived at our interview carrying a yellow picnic box strapped around his neck like a sandwich vendor at an American baseball game. What II remembered most about our conversation, though, was the absence of bitterness in his voice, and the much more pungent air of resignation. His message was that Thailand had messed up. People knew it they would now have to tighten their bels and get with the program and there wasn't much else to say. Wasn't he mad? I asked. Didn't he want to burn down some government building in anger at being wiped out? No, Sirivat explained to me: "Communism fails, socialism fails, so now there is only capitalism. We don't want to go back to the jungle, we all want a better standard of living, so you have to make capitalism work, because you don't have a choice. We have to improve ourselves and follow the world rules... Only the competitive survive. It will probably require a national unity government, because the burden is so big." A few months after this l attended a lecture in Washington by Anatoly Chubais, the architect of Russia's failed economic reforms and privatization. Chubais had come to Washington to make a last-ditch appeal to the IMF for more aid to Russia, but at the time the still-communist dominated Russian Duma, or parliament, was resisting the IMFs conditions. The Duma was also regularly denouncing Chubais as a traitor and foreign agent for submitting to IMF demands that Russia radically reform its economy along real free-market lines. I asked Chubais how he answered his crities, and he told me:., 0.K.I tell them, 'Chubais is a spy for the CIA and IME. But what is your substitute? Do you have [any alternative] workable ideas?" Chubais said he never gets any coherent answe, because the communists have no alternative. I was in Brazil a few months later, where I interviewed Fabio Feldmann, the former environmental secretary of Sao Paulo and a federal deputy in the Brazilian parliament, who was campaigning for reelection in Sao Paulo. His office was a beehive of campaign workers, awash in posters and other campaign paraphernalia. Feldmann is a liberal, and I asked him about the nature of the political debate in Brazil today. He responded: "The ideologicall left in Brazil have lost their flag. The challenge of the federal government is jobs and employment. You have to generate and distribute income. And what is the program of the left? They don't have proposals to generate income, only to distribute it" What are these stories telling us? Once the three democratizations came together in the late 1980s 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, they can demand alternatives, they can insist ona "Third Way," but for now none is apparent. This is very different from the first era of globalization. During the nineteenth and early twentieth centuries, when the Industrial Revolution and global finance capitalism roared through Europe and America, many people were shocked by their Darwinian brutality and "dark Satanic mills." They destroyed old orders and hierarchies, praoduced 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. This experience triggered a great deal of debate and revolutionary theorizing, as people tried to find ways to cushion workers from the cruelest aspects of free-market capitalism in that day. As Karl Marx and Friedrich Engcls described this era in The Communist Manifesto: "Constant revolutionizing of production, uninterupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses, his real conditions of life, and his relations with his kind." Eventually. people came along who declared that they could take these destabilizing. brutalizing swings out of the free market, and create a world that would never be dependent on unfettered bourgeois capitalists. They would have the government centrally plan and fund everything, and distribute to each worker according to his needs and expect from each worker a contribution according to his abilities. The names of these revolutionary thinkers were Engels, Marx, Lenin and Mussolini-among others. De- centrally planned, non-democratic alternatives they offered communism, socialism and fascism- helped to abort the first era of globalization as they were tested out on the world stage from 1917 to 1989. There is only one thing to say about those alternatives: They didn't work. And the people who rendered that judgment were the people who lived under them. So with the collapse of communism in Europe, in the Soviet Union and in China and all the walls that protected these systems - those people who are unhappy with the Darwinian brutality of free-market capitalism don't have any ready ideological altenative now. When it comes to the question of which system today is the most effective at generating rising standards of living, the historical debate is over. The answer is free-market capitalism. Other systems may be able to distribute and divide income more efficiently and equitably, but none can generate income to distribute as efficiently as free-market capitalism. And more and more people now know that. So, ideologically speaking, there is no more mint chocolate chip, there is no more strawberry swirl and there is no more lemon-lime. Today there is only free-market vanilla and North Korea. There can be different brands of free- market vanilla and you can adjust your society to it by going faster or slower. But, in the end, if you want higher standards of living in a world without walls, the free market is the only ideological alternative left. One road. Different speeds. But one road. When your country recognizes this fact, when it recognizes the rules of the free market in today's global economy, and decides to abide by them, it puts on what l call the Golden Strait Jacket. The Golden Straitjacket is the defining political-economic garment of this globalization era. The Cold War had the Mao suit, the Nehru jacket, the Russian fur. Globalization has only the Golden Straitjacket. If your country has not been fitted for one, it will be soon. 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 of the second half of the twentieth century. That Thatcherite coat was soon reinforced by Ronald Reagan: in the United States in the 1980s, 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 democratizations blew away all the alternative fashions and all the walls that protected them. The 1Thatcherite-Reaganite revolutions 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. Thatcher and Reagan 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. To fit into the Golden Straitjacket a country must either adopt, or be seen as moving toward, the following golden rules: 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, geting 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 coruption, subsidies and kickbacks as much as possible, opening its banking and telecommunications systems to private ownership and competition and allowing its citizens to choose from an array of competing pension options and foreign-run pension and mutual funds. When you stitch all of these pieces together you have the Golden Straitjacket. Unfortunately, this Golden Straitjacket is pretty much "one size fits all." So it pinches certain groups, squeezes others and keeps a society under pressure to constantly streamline its economic institutions and upgrade its performance. It leaves people behind quicker than ever if they shuck it off, and it helps them catch up quicker than ever if they wear it right. It is not always pretty or gentle or comfortable. But it's here and it's the only model on the rack this historical season. As your country puts on the Golden Straitjacket, two things tend to happen: your economy grows and your politics shrinks. That is, on the economic front the Golden Straitjacket usually fosters more growth and higher average incomes through more trade, foreign investment, privatization and more efficient use of resources under the pressure of global competition. But on the political front, the Golden Straitjacket narrows the political and economic policy choices of those in power to relatively tight parameters. That is why it is increasingly difficult these days to find any real differences between ruling and opposition parties in those countries that have put on the Golden Straitjacket. Once your country puts it on, its political choices get reduced to Pepsi or Coke - to slight nuances of taste, slight nuances of policy, slight alterations in design to account for local traditions, some loosening here or there, but never any major deviation from the core golden rules. Governments - be they led by Democrats or Republicans, Conservatives or Labourites, Gaullists or Socialists, Christian Democrats or Social Democrats that deviate too far from the core rules will see