The Golden Arches Theory Of Conflict Prevention

252THE LEXUS AND THE OLIVE TREEand to bring economics, environment, markets, technology, the Internetand the whole globalization system more into their analyses of geopolitics.My first reaction to these critics was to defensively point out thatNATO isn't a country, that the Kosovo war wasn't even a real war and tothe extent that it was a real war it was an intervention by NATO into acivil war between Kosovo Serbs and Albanians. And I pointed out thatwhen I posited my orginal McDonald's theory I had qualified it in severalimportant ways: the McDonald's theory didn't apply to civil wars,because, I explained, globalization is going to sharpen civil wars withincountries between localizers and globalizers-between those who eatthe Big Mac and those who fear the Big Mac will eat them. Moreover,the theory was offered with a limited shelf life, because, I said, sooner orlater virtually every country would have McDonald's, and sooner or latertwo of them would go to war.But I quickly realized that no one was interested in my caveats, thefine print or the idea that McDonald's was simply a metaphor for a largerpoint about the impact of globalization on geopolitics. They just wantedto drive a stake through this Golden Arches Theory. So the more Ithought about the criticism, the more I told people, "You know what, forget all the caveats and the fine print. Let's assume Kosovo is a real test.Let's see how the war ends." And when you look at how the war endedyou can see just how much the basic logic of the Golden Arches Theorystill applies.Here's why: As the Pentagon will tell you, airpower alone broughtthe 1999 Kosovo war to a close in seventy-eight days for one reasonnot because NATO made life impossible for the Serb troops in Kosovo.Indeed, the Serbian army ended up driving most of its armor out ofKosovo unscathed. No, this war ended in seventy-eight days, using airpower alone, because NATO made life miserable for the Serb civilians inBelgTade. Belgrade was a modem European city integrated with WesternEurope, with a population that wanted to be part of today's main globaltrends, from the Internet to economic development-which the presenceof McDonald's symbolized.Once NATO turned out the lights in Belgrade, and shut down thepower grids and the economy, BelgTade's citizens almost immediatelydemanded that President Slobodan Milosevic bring an end to the war, asTHE GOLDEN ARCHES THEORY OF CONFLICT PREVENTION253did the residents of Yugoslavia's other major cities. Because the air warforced a choice on them: Do you want to be part of Europe and the broadeconomic trends and opportunities in the world today or do you want tokeep Kosovo and become an isolated, backward tribal enclave: It'sMcDonald's or Kosovo-you can't have both. And the Serbian peoplechose McDonald's. Not only did NATO soldiers not want to die forKosovo-neither did the Serbs of Belgrade. In the end, they wanted to bepart of the world, more than they wanted to be part of Kosovo. Theywanted McDonald's re-opened, much more than they wanted Kosovo reoccupied. They wanted to stand in line for burgers, much more than theywanted to stand in line for Kosovo. Airpower alone couldn't work inVietnam because a people who were already in the Stone Age couldn'tbe bombed back into it. But it could work in Belgrade, because peoplewho were integrated into Europe and the world could be bombed out ofit. And when presented by NATO with the choice-your Lexus or yourolive tree?-they opted for the Lexus.So, yes, there is now one exception to the Golden Arches Theory-anexception that, in the end, only proves how powerful is the general rule.Kosovo proves just how much pressure even the most olive-tree-huggingnationalist regimes can come under when the costs of their adventures,and wars of choice, are brought horne to their people in the age of globalization. Because in a world where we all increasingly know how eachother lives, where governments increasingly have to promise and deliverthe same things, governments can ask their people to sacrifice only somuch. When governments do things that make economic integration anda better lifestyle-symbolized by the presence of McDonald's-lesspossible, people in developed countries simply will not tolerate it for aslong as they did in the past. Which is why countries in the system willnow think three times before going to war and those that don't will paythree times the price. So let me slightly amend the Golden Arches Theoryin light of Kosovo and what are sure to be future Kosovos. I would restateit as follows: People in McDonald's countries don't like to fight warsanymore, they prefer to wait in line for burgers-and those leaders orcountries which ignore that fact will pay a much, much higher price thanthey think.On July 8, 1999, USA Today ran a story from Belgrade that caughtmy eye. It was about the economic devastation visited on Yugoslavia as a

254THE LEXUS AND THE OLIVE TREEresult of the war. The story contained the following two paragraphs,which, had I written them myself, people would have insisted I madethem up:"Zoran Vukovic, 56, a bus driver in the city of Niw , earns the equivalent of 62 a month, less than half his salary before the war. The [Serb]government laid off almost half of the roughly 200 drivers last month.The rest had their salaries slashed. With the state controlling the price offood, Vukovic and his eight dependents can survive. But most extras aresimply out of the question."'McDonald's is now only a dream,' says Vukovic, who used to takehis three grandchildren to the Belgrade outlet. 'One day, maybe, everything will be O.K. I just don't think it will be in my lifetime.'"You can actually grasp everything you need to know about the difference between how the Cold War system shaped geopolitics and howthe globalization system shapes geopolitics by studying Albania.When Albania was engulfed in civil war in early 1997, I happened tobe watching CNN to stay abreast of the story. CNN had no live footagefrom Albania, so it kept showing a map of the Adriatic Sea, off the coastof Albania. On this map were little ships, each representing one of theAmerican, European and other countries' naval vessels that had rushed toevacuate their citizens from Albania. As I looked at that map, the firstthought that occurred to me was that if this were still the Cold War, theships on that map probably would have been U.S. and Soviet warships,each competing to see which one could fill the vacuum in Albania, whichone could support their proxies there most effectively and which onecould pull the Albanian pawn the fastest onto their side of the Cold Warchessboard. In short, the two superpowers would have been competing tosee which could get into Albania the first, the farthest and the deepest.But that is not what was happening on CNN that day. This was now theglobalization system, and in this system the different powers were actually competing to see which could get their people out of Albania thefirst, the farthest and the fastest. The country that got its people out ofAlbania the first, the farthest and the fastest was the winner in Albaniaand the loser was the outside power that got stuck with responsibility formanaging Albania-which turned out to be Italy.THE GOLDEN ARCHES THEORY OF CONFLICT PREVENTION255What is this telling us? It is telling us that the Cold War system wascharacterized by two fundamental features: the chessboard and thecheckbook. That is, the Cold War system was dominated by two superpowers, the United States and the Soviet Union. And they were engagedin a global competition for strategic advantage, resources and honor, inwhich each side's gains were the other's losses and every corner of theworld was at stake, in play, and counted as much as any other corner. AsMichael Mandelbaum put it: "In the Cold War system, the world was likea single integrated chessboard. Every move the Soviets made affected usand every move we made affected them. We were white and the Sovietswere black. If they moved onto a white square, we moved onto a blacksquare. If they moved black pawns in Albania, we moved white pawns.Every pawn was important because it was protecting your king. So ifthey took a pawn, they were that much closer to your king and thereforeyou were that much closer to defeat. And that is why you had to protectevery pawn. Defending pawns was a way of defending your king. Andthat is why we ended up getting involved in places of no intrinsic importance, such as Vietnam, Angola or El Salvador."In other words, the Cold War system had a certain built-in incentivefor encouraging regional conflicts and for elevating them into an integralpart of the global superpower competition and into a matter of globalconcern. Because there was a global competition on this chessboard, neither superpower ever wanted to concede a loss of a black or white squareanywhere, for fear that it would lead to other losses and ultimately toglobal domination by the other side. This fear became known as the"domino theory" of geopolitics.In addition to this chessboard, the Cold War system was also definedby the checkbook. As noted earlier, in the Cold War system it was mucheasier for a developing country to get by economically, despite a pooroperating system and software. Some developing countries could underperform for long periods of time, because they could suck in funds fromthe competing superpowers by simply pledging allegiance to one side orthe other in the Cold War. The U.S. government and the Soviet government, and to a lesser extent the Chinese government and the EuropeanUnion, were ready to go to their taxpayers, take their money and thenwrite big checks to foreigners in order to buy influence on differentsquares of the chessboard. This checkbook diplomacy was called "for-

256THE LEXUS AND THE OLIVE TREEeign aid." America dunned its taxpayers to pay the salaries of the Contrasin Nicaragua or the Mujahideen in Afghanistan, and the Soviets did thesame for the Sandinistas in Nicaragua and the Vietcong in Vietnam.America dunned its taxpayers to subsidize the Israeli Army, and theSoviets dunned their taxpayers to rebuild Syria's air force after Israelshot down ninety-seven Syrian fighter jets on the first day of the 1982Lebanon war. The superpowers bought allegiance not only with guns butalso with butter. They opened their checkbooks to subsidize roads,dams, cultural halls, imports-anything to bind a Third World countryto their side in the global struggle. Moscow and Washington wrotethose checks without, in most cases, making any demands on howthese countries actually ran their economies, because both Moscow andWashington worried that if they pressured their pawns too tightly onissues of internal reform, they would bolt to the other side. So venal,inefficient, corrupt regimes, such as that of Ferdinand Marcos in thePhilippines or Anastasio Somoza in Nicaragua, got their checks fromWashington, and Cuba, Angola and Vietnam got their checks fromMoscow, purely on the basis of whose economic hardware-capitalist orcommunist-they supported, not whether they actually operated thosesystems efficiently.The superpowers just were not that interested in the economic wiringof these countries, because at that time they wanted to buy their allegiance, not their telephone companies. Even in the case of Japan, America tolerated absurd levels of protectionism by Tokyo, because it neededJapan's support in the Cold War and the Pentagon and State Departmentwould never let the Commerce Department or the Trade Representative'soffice squeeze Japan very hard on trade matters, for fear of losing it onsecurity matters. But precisely because the superpowers were ready towrite blank checks, a lot of Cold War regional conflicts smoldered onmuch longer than they should have. What incentive did the PLO have forrecognizing Israel during the 1960s and 1970s, when the Soviet Unionwas there to provide scholarships for Palestinian youths and guns forPalestinian guerrillas, no matter what the PLO did?So not only did this Cold War system provide incentives for regionalconflicts to flourish and get globalized; it also provided the resources forthese regional conflicts to flourish and become globalized-with Ivanand Uncle Sam both furiously writing the checks.THE GOLDEN ARCHES THEORY OF CONFLICT PREVENTIONN257ow sweep this world away.Enter globalization. Once it became the dominant internationalsystem with the end of the Cold War, globalization put a rather differentframe around geopolitics. While the globalization system does not endgeopolitics, to think that it doesn't affect it in some fundamental ways isflat out stupid.To begin with, in the era of globalization there is no more chessboard,on which the entire world gets divided up into white or black squares.Since the Soviet Union has collapsed, there is no black anymore, so thereis no white anymore. There are no "their guys," so there are no "ourguys." Therefore, the inbuilt Cold War incentive for every regional conflict to escalate into a global conflict is gone. And so too are theresources. In the era of globalization, someone new is holding the checkbook. The Electronic Herd is the only entity now with cash to throwaround. The Soviet Union doesn't exist anymore to write big checks, andthe United States has put on the Golden Straitjacket and won't write bigforeign aid checks anymore.The only place a country can go to get big checks is the ElectronicHerd, and the Electronic Herd doesn't play chess. It plays Monopoly.Where Intel, Cisco or Microsoft builds its next factory, or where theFidelity global mutual fund invests its cash, is what determines who getsfunded and who does not. And the bulls of the Electronic Herd do notwrite blank checks to win a country's love and allegiance; they writeinvestment checks to make profits. And the Supermarkets and the Electronic Herd really don't care what color your country is outside anymore. All they care about is how your country is wired inside, what levelof operating system and software it's able to run and whether your government can protect private property.Therefore, not only will the herd not fund a country's regional war orrebuild a country's armed forces after a war for free-the way the superpowers would, just to win its allegiance-the herd will actually punish acountry for fighting a war with its neighbors, by withdrawing the onlysignificant source of growth capital in the world today. As such, countries have no choice but to behave in a way that is attractive to the herd orignore the herd and pay the price of living without it.

258THE LEXUS AND THE OLIVE TREEObviously, some countries have chosen to live without the herd sothat they can pursue their own political agendas, and some always will.Iraqi President Saddam Hussein would rather pursue his own megalomaniacal ambitions, gas and pillage his neighbors, than subject himself tothe discipline of the herd, and through his oppressive regime he is able toimpose his will on his people. The same is true of regimes in NorthKorea, Afghanistan, Sudan and Iran. The Golden Arches Theory does notapply to them because they have chosen not to plug into the herd and theSupermarkets, and they have either enough oil or enough ideology to livewithout the herd for a while. But this is true of fewer and fewer countriestoday. If you look at both Russia and China, for example, and ask why itis that they don't more aggressively challenge the United States in theirrespective regions, the answer is not only because they are weaker thanthe United States, but also because it is not in their interests. A whole different web of interests and countervailing incentives has been spun byglobalization, and this has become constraining for countries like Chinaand Russia.In 1979, China had no McDonald's. Deng Xiaoping was just openingup China to the world. When Deng came to America for a summit withPresident Carter he mentioned, in passing, that when he got back homehe was going to invade Vietnam, because the Vietnamese were gettingtoo uppity and arrogant. Carter tried to talk him out of it, using the argument that it would be bad for China's image (not its economics), butDeng was not persuaded and he invaded Vietnam.Now fast-forward to 1996. China has over 200 McDonald's franchises. I am in Beijing observing the tension between China and Taiwan.I am interviewing a senior economist from the Chinese Academy of Sciences just prior to Taiwan's first fully democratic election, which manyofficials in Beijing feared would be a prelude to Taiwan declaring totalindependence from China. China is threatening to invade Taiwan if itgoes off on its own. As we slurp down noodles in a rooftop restaurant inBeijing, I pose a simple question to this Chinese economist: Can Chinaafford to attack Taiwan? His unhesitating answer was: "No-it wouldstop investment in China, stop growth, stop our last chance to catch upwith the rest of the world."Like everyone else I had spoken to in the Chinese government at thetime, this economist felt China would be fully justified in blasting Tai-THE GOLDEN ARCHES THEORY OF CONFLICT PREVENTION259wan to smithereens to prevent it from ever becoming independent. Butunlike others, he was also ready to express what every senior Chineseleader knew but would not say aloud-that China could not attack Taiwan without devastating its own economy.In the era of globalization, China and Taiwan had mutual assuredeconomic destruction, and both knew it. In 1995-96, when China threatened Taiwan, the Taiwan stock market crashed, but China's little marketswere unaffected. In the 1999 crisis between the two countries, whenChina rattled its saber at President Lee, it knocked down Taiwan's stockmarket, the TAIEX, by 20 percent. What people didn't notice, though,was that the Shanghai Stock Exchange B-share index plunged 40 percent! Two countries, one stock market.From Beijing's perspective, China is no longer the isolated, peasantbased economy of the Mao and early Deng eras. It is now partially connected to .the Electronic Herd, and the only ideology of the Chineseleadership today is: "To get rich is glorious." China's leaders cannotdeliver on that ideology without the billions of dollars in foreign investment that pours into China each year. According to the Far Eastern Economic Review, Taiwan's total contracted investment in China by 2000was 46 billion in roughly 46,000 different factories and firms. And Taiwanese businessmen know it, and are not afaid to remind China of it."Taiwan is China's biggest capital supplier today, because [Taiwanesebusinessmen] are ready to play by the local rules, but this may not lastforever," Douglas Hsu, chairman of Far East Textile, one of Taiwan'sbiggest conglomerates, remarked to me one afternoon in Taipei. "I amtom right now. China is a big market. Where am I going to find an alternative to this market? But I am living under this cloud of uncertainty withthem. I am an industrialist. I have enough problems building plants andfinding customers. I can't be worried about missiles flying back andforth. This is a cloud, and if it stays there, [China] is going to pay aprice."China is also constrained in dealing with Taiwan militarily by the factthat the U.S. Congress would surely retaliate by blocking many Chineseimports into America-which account for 40 percent of China's totalexports. Between 1990 and 1999, China earned 65 billion from tradewith the United States-half of its total foreign reserve growth in thatperiod. Wang Shougeng, a director of Shanghai's Foreign Investment

26oTHE LEXUS AND THE OLIVE TREECommission, probably best summed up China's vulnerability to awar with Taiwan when he declared at the height of the 1996 ChinaTaiwan crisis that even if China had to attack Taiwan, "there will be nobig change in our attitude toward Taiwan investors." I loved that statement. Even if we invade you, we sure hope your investors won't take itpersonally!But this mutual assured destruction is indeed mutual. Taiwan canafford a loss of international investor confidence even less than China,which constrains its olive tree independence drive. It's not only that itsstock market would crash and Taiwanese would lose all their wealth. It ismuch deeper. The Electronic Herd would stampede away. It is one ofthose little-known facts that PCs and laptops are made in a global supplychain and Taiwan, and Taiwanese-owned firms in China and Asia, are thekey link in that chain. They make the most important parts that go intoDell, Compaq, Acer, Hewlett-Packard and IBM PCs, as well as intoCisco routers that keep the Internet flowing. Most U.S. computer firmshave moved out of manufacturing. This has left Taiwanese firms as theworld's largest supplier of thirteen critical computer components. We'retalking about cases, screens, microprocessors, hubs, modems, LAN cards,keyboards, monitors, scanners, motherboards, p

somewhere between the McDonald's in Tiananmen Square in Beijing, the McDonald's in Tahrir Square in Cairo and the McDonald's off Zion Square in Jerusalem. And it was this: No two countries that both had McDonald's had fought a war against r each other since each got its McDonald's. I'm not kidding. It was uncanny. Look at the Middle East .