Three Billion New Capitalists: The Great Shift of Wealth and Power to the East

by Clyde V. Prestowitz Jr.

Book Overview

American superiority is deteriorating faster than you think. Powerful trends are converging to rapidly shift wealth and power to Asia-and, as acclaimed international trade expert Clyde Prestowitz... This description may be from another edition of this product.

• Format: Hardcover
• Language: English
• ISBN: 0465062814
• ISBN13: 9780465062812
• Release Date: May 2005
• Publisher: Basic Books (AZ)
• Length: 321 Pages
• Weight: 1.35 lbs.
• Dimensions: 1.1" x 6.5" x 9.5"

Customer Reviews

Excellent and Timely Insights!

Prestowitz summarizes much of the same material as in Friedman's "The World is Flat" - however, he adds a few additional insights, and is much more concerned about our future than Friedman. Prestowitz points out that just as our government did not connect the dots leading up to 9/11, it is similarly failing to see what is happening in economics. The Euro has become an alternative to the dollar (first real threat to the dollar in 60+ years), and OPEC and Russia have already shifted their portfolios to reduce exposure to the dollar. If other nations also reduce their dollar holdings, Prestowitz believes that the U.S. standard of living will quickly decline because we do not have the physical capacity to eliminate our trade deficit, and instead will have to cut consumption. Meanwhile, things are on a path to get worse - the number of foreign students (especially Asians) studying in the U.S. is dropping (partly because of 9/11), U.S. farmers are encountering increasing foreign competition, U.S. manufacturers who have already sent production to Asia are now also sending engineering etc. to bring the functions closer together, and the Asians are achieving economies of scale over the U.S. - further adding to their exisitng low-cost competitive advantage. Meanwhile, we continue to convince ourselves that "things are going great" by rereading David Ricardo's 1817 "Theory of Free International Trade" and pumping out misleading productivity statistics. Prestowitz points out in the first case that Ricardo's writings took place in a much different era, and that a few leading economists (eg. Baumol, Samuelson, Thurow) have pointed out that the U.S. needs to rethink our trade policies. As for the productivity statistics continually used to forecast a bright future, Prestowitz points out that their meaning is distorted by the results of offshoring and closing older factories in the U.S. So what do we do? Prestowitz recommends energy independence, encouraging savings by focusing taxes on consumption, balancing the Federal budget, improving education by buildling classroom discipline and encouraging home schooling, and PUTTING SOMEONE IN CHARGE OF IMPROVING AMERICA'S ECONOMIC FUTURE! A must read for all Americans, starting with our leaders.

America and the Global Economy: Excellent Book

Ignore the title of the book, it is not just about Asia, although Asia plays an important role here. This book attempts to do the impossible, that is, it attempts to do an economic analysis of the US economy and then predict the future, especially international trade, trade imbalances, and finances. That is all but impossible to do, but there are clearly some trends which are food for thought and discussion. The book is a 300 page discussion of the problems, the competition in the marketplace, transportation, America's love with the automobile, communications, finance, and then his ideas for solutions. In summary, the world is smaller with faster deliveries of materials and instant communications; globally we might have price deflation for labor but inflation for natural resources; more economies are interconnected and there is less resistance to trade. This is bound to cause changes in our systems of supply and demand, and it follows that there will be permanent changes in our economy. The author does not present stunning, or radical, or even new ideas. Many of his points have appeared elsewhere in print. It is not a question of connecting the dots to get an economic picture... the trade deficit is huge, and China is on the rise placing new strains on the world's resources, especially oil. Service and manufacturing jobs have moved offshore. That is not speculation. Most of his comments and ideas are sound. I bought the book after a careful inspection since it lays it out all the story in one neat package - 300 pages long, with lots of detail. The book is divided into 12 chapters that cover the costs of goods, the financing, the competition, the dollar as a world currency, express deliveries, high tech, China, India, etc. It is not limited to Asian countries. He has a final chapter - which seems short and a bit weak - on solutions. Overall, the book is written in a chatty informal style. It is not crammed full of statistics or charts and graphs like a Niall Ferguson book. For years America was financially strong, living within its means, or even with a trade surplus: it was the world's biggest creditor nation. The country could outsource manufacturing, import as much oil as it wanted, and then offset this with exports of food products, jet planes, computer and telecom hardware, tobacco, mining and oil drilling equipment, military hardware, movies, printed matter, etc. It is a free market. Shocklingly, America has become a net food importer with a staggering total monthly trade deficit and there are no signs that it will reverse soon. The US has slipped to become the largest debtor nation, something that we laughed at when it was Brazil or Mexico or elsewhere. This is all compounded by high US consumer spending, inefficient large gas guzzling trucks replacing cars, while being in the indefensible position of being the world leader in greenhouse gas emissions. The author calls this elaborate trade system a "Ponzi Scheme Economy" since it is an un

They Save and Produce, We Spend and Consume

The message that we got from Thomas Friedman in "The World is Flat" is that we are now - thanks to the internet, digitized work-flow software, and the supply-chaining of Fedex and UPS - on level playing field with billions of new capitalists in China, India, and Eastern Europe. The revised and more pessimistic message that we get from Clyde Prestowitz is that the playing field slightly favors the new capitalists. Why? They are willing to do the same work cheaper and better than their American counterparts. American companies are having to choose between setting up shop on the new frontiers of capitalism or go out of business. Prestowitz is a futurologist whose forecasts of the future have not always been realized ( remember "Trading Places," predicting the dominance of Japan), but I think now he is much closer to the mark. He thinks Americans have become to complacent about their economic superiority. Instead of spending so much time and resources in trying to fix the rest of the world it should start putting its own economic house in order. The problems that Prestowitz focuses on in this book are a contuation of the same problems dealt with in "Trading Places" with the rise of Japan. The Asians - first the Japanese, and now the Tigers, China, and India - save, produce and export, and we still spend and consume. People were worried in the 1980's when the trade deficit was $50 billion, last year it was $600 billion - $150 billion with China alone. Clyde Prestowitz was concerned then, he is even more so now, and we should be too. Add this to a federal budget deficit of $400 billion, and one can conclude that we are living beyond our means to the tune of a trillion dollars a year. The fact that the dollar is the world's reserve currency has thus far exempted us from acting responsibly. And how are we financing these deficits? The Bank of China and the Bank of Japan are buying t-bills and other financial instruments so that we have more ready cash to buy their products. The new capitalists produce and America consumes. At present both sides are happy with this arrangement, but, Prestowitz warns that the day of reckoning is coming. This imbalance cannot be sustained indefinitely. The subtitle of this book is "The Great Shift of Wealth and Power to the East." The question that one wants to keep in mind when reading this book is where will America be when the wealth and power has shifted to the East? Will it be impoverished or wealthy like the rest? Prestowitz has long been dismissed as a promoter of "industrial policy," in which the government sets policies in place that pick "winners and losers." This is nonsense. He is promoting a strategy that takes into account the "export led" economic strategies of our trading partners. People in Washington are not keen on competitiveness strategy, instead they comfort themselves with the notion that the invisible hand deals economic justice in the marketplace. However, our trading partner

Strategic, Economic Fundamentals, Compelling, Cannot Ignore

Before writing this review, I reflected carefully on the thoughts of those who say that the author, who is known to me, was wrong about Japan, that he emphasizes the best points of the new competitors (China and India) while neglecting our best points. There is certainly something to what they say, but as one who studies the entire world for our US Government clients, with a special familiarity with Chinese operations in Africa and South America, and a business familiarity with what is happening in India, I have to say that on balance, the author is more correct his critics will admit, and this is a book that we simply cannot ignore. His most important point is made in one line: America does not have a strategy. America does not have a strategy for winning the global war on terror, it does not have an energy strategy, it does not have an education strategy, it does not have an economic or competitiveness strategy. The government is being run on assertion and ideology rather than evidence and thought--a media cartoon has captured the situation perfectly: as the VP tells the President that we are "turning the corner" the two walls behind them are labeled Incompetence and Fantasy. As a moderate Republican and a trained intelligence professional with two books on the latter topic, I have to say that this book by this author, a Reaganite businessman and senior appointee in the Department of Commerce is right on target. We *are* out of touch with reality, and we do not appreciate, at any level from White House to School House, the tsunami that is about to hit us. The author makes two important points early on in the books: first, that information is the currency of this age, replacing money, labor, and physical resources; and second, that the best innovation comes from the right mix of sound education across the board, heavy investment in research & development, and a co-located manufacturing bases that can tinker with R & D and have a back and forth effect. America lacks all three of the latter, and is not yet serious about investing in global coverage of all languages, 24/7. There is a great deal of commonality between this book and Tom Friedman's The World Is Flat: A Brief History of the Twenty-first Century both written and published in the same time frame. Both authors agree that the Internet has put an end to time and space constraints, and both agree that American labor is very much at risk because our basic education is flawed and we have no strategy for demanding continuing education from employers. The author excels at drawing the connection between poor education, "it's been twenty years since anyone at Bell Labs received a Nobel Prize," and the massive increase in outsourcing of knowledge work, not just scut work. I do have to say, having called Friedman's latest book a massive Op-Ed in my review of that book, that this author is more thoughtful, provides more historical context, and delves into more basic important detail tha

Here Comes the Tsunami --- run !!

Mr Prestowitz raises alot of the issues regarding the rise of China and its consequences. He writes from the perspective of a former international marketing manager for a US corporation and a former Commerce department official. I take most of the things Mr Prestowitz is commenting on seriously and I think the tone, while pessimistic, is not over the top. I am a silicon valley scientist and I find Mr Prestowitz's perspective valuable and complimentary to my in the trenches view of this. I grew up in the rust belt and watched at close quarters the disappearance of the steel industry and started my career at a DRAM company, which was also vaporized in the early to mid 80s. In the late 90s I had my product line moved to the far east and the most recent business I am associated with is seeing counterfeiting and price competition from China. The parts of Mr Prestowitz's analysis of which I have personal and independent knowledge is almost all correct in my opinion. He correctly lays out the dilemma from the businessman's perspective and he is aware of the key reasons why tech businesses feel compelled to move manufacturing and other things to China and other locations in the far east. He gives you a good feel for the strategies of the Chinese and Indian Governments so that you get a good feeling for the dynamics of this. However, he goes much further by adding his analysis of the European hand of cards and how they are likely to play it. There is also the issue of the fate of the dollar and the trade deficit which is discussed at some length in several chapters. Much of this discussion does place some numbers out there some of which are new to me. Mr Prestowitz also discusses the effect of the steep rise of China on the attitudes of other countries and shows that China is already having a substantial effect in people's anticipation of the Chinese rise to the top of world economies. The effects of the rise on allies such as Australia were surprising to me and I was not aware of some of this. In addition the effects of China on American relations to South America were also a surprise to this reader. While I dont agree with all of his assessments, I feel he overestimates European capabilities, for example, his statements are well reasoned and certainly within reasonable bounds. The book is a very good place to start on these issues. Based upon my experience with these issues over the last 30 years and with the obvious personal knowlege of the situation that Mr Prestowitz has there is no question that this gentleman has a very solid background to write on these issues.