SYNOPSIS: Claims that the New Economy will change EVERYTHING are vastly overstated.

Every few years a book comes along that perfectly expresses the moment\'s conventional wisdom ‑ that says pretty much what everybody else in the chattering classes is saying, but that does it in a way that somehow manages to sound fresh and profound. Notable examples were Paul Kennedy\'s 1989 The Rise and Fall of the Great Powers, with its theme of "imperial overstretch", of a United States declining under the weight of its military commitments; or Lester Thurow\'s 1992 Head to Head, with its vision of a desperate commercial struggle among the advanced industrial nations, and of a United States unable to compete effectively because of its naive faith in free markets. It is already clear that Thomas Friedman\'s The Lexus and the Olive Tree ‑ which tells the story of the new global economy, and of a United States triumphant because it is the nation best suited to capitalize on that global economy ‑ is the latest in the series. The question is whether Friedman\'s vision will date as quickly as those of his predecessors.

It\'s possible to summarize what Friedman has to say fairly quickly, mainly because it\'s what you read in just about every issue of Business Week. Information technology, he tells us, has made the world a small place, in which ideas and money can move almost instantly across borders. This smaller world richly rewards countries and societies that meet its needs ‑ which is to say places that have strong property rights, open minds, and a flexible attitude; but it inflicts devastating punishment on those who fail to live up to global standards. And old‑fashioned power politics is becoming increasingly obsolete, because it conflicts with the imperatives of global capitalism. We are heading for a world that is basically democratic, because you can\'t keep \'em down on the farm once they have Internet access, and basically peaceful, because George Soros will pull out his money if you rattle your saber.

This story is told via hundreds of anecdotes, most of them involving the author. (Someone once defined an intellectual as a person who can utter more than two consecutive sentences that do not mention himself or anyone he knows. This definition might have been specifically crafted to exclude Friedman; as a reader‑reviewer at ‑ hey, the Internet really can be a democratizing force! ‑ puts it, he "uses the first person singular the way most writers use commas.") And these anecdotes, annoying as they may be, do serve a purpose: by personalizing the story, they make it seem more convincing to readers who find analytical abstractions off‑putting.

But as the history of global visions teaches us, what is convincing is not necessarily true. Has Friedman got it right?

Well, he has at least one big thing wrong. If there is one single fact that transformed America\'s image of its place in the world, that made earlier‑vintage global visions look so foolish in retrospect, it is the contrast between our own unexpected prosperity and Japan\'s even more unexpected economic malaise. Now there isn\'t really any careful discussion of what went wrong with Japan in this book, but the clear implication of his various parables and metaphors is that Japan is in trouble because it is hidebound and inefficient, and that this makes it unfitted for the global economy. Yet as Friedman himself points out, Japan\'s export sector remains world‑class (in fact, it\'s sort of bizarre that he names a symbol of Japanese manufacturing prowess, rather than some American specialty like software or entertainment, in the book\'s title). What has faltered in Japan is production for the domestic market ‑ and while this production is and always has been inefficient, the immediate problem is not inadequate supply but inadequate demand. Put in a nutshell, the Japanese simply save too much ‑ that is, although Friedman\'s only reference to Keynes is a disparaging one (he\'s a "defining economist of the Cold War system"), Japan is in fact suffering the most classically Keynesian crisis since the 1930s. And the United States, for its part, is not doing well because it is spectacularly successful in global markets ‑ except for the entertainment industry, U.S. producers are still