TCS Daily


The Great Shift?

By Christopher Lingle - August 24, 2005 12:00 AM

There are reasons to doubt whether the US economy can continue its global dominance. These include US trade and fiscal deficits, massive dollar reserves held by Japan and China, billions of new workers in India and China, and the relocation of technological innovation from America to the East concurrent with a new wave of outsourcing. Sound familiar?

For his part, Clyde Prestowitz may have forgotten the errors in his earlier prediction about Japan taking America's economic mantle in his 1993 book "Trading Places: How We Are Giving Our Future to Japan and How to Reclaim It". Then as now, he believed new economic laws are afoot. Or at least old ones simply will not suffice. To ensure we do not doubt him after his dismal record, he assures us that this time, with the publication of his new book "Three Billion New Capitalists: The Great Shift of Wealth and Power to the East." (Basic Books, 321 pages), things are different.

This most recent tome offers a lively tale that gains of geo-political and economic strength by Asian countries challenge America's claim to be the sole global hyper-power. As the title suggests, 3 billion people from China, India, and the former Soviet countries have joined the global economy in the last dozen or so years and sparked a tidal wave of competition.

Responding to these conditions, Mr. Prestowitz insists on a rethinking of America's strategic economic options. He may be right about the need for serious thinking on these matters, but readers would be well advised to look elsewhere for the answers and perhaps even the questions.

A glance at this intriguing book reveals the author to be a smart chap and a good story teller. He also comes across as a quick learner as he deciphers the deep mysteries of the vast Eastern world by reflecting upon a recent around-the-world jaunt. India was added to a planned itinerary as an afterthought upon hearing his software-developer son anguish over the prospects of his and other jobs being outsourced.

With the enthusiasm of a new religious convert and armed with remarkable "discoveries", he weaves an entertaining tale. Support for his grand schemata of the future is anchored by a heavy dose of personal anecdotes and extensive insights drawn from the headlines of newspapers from around the world.

Readers inclined to question the gravitas of these earnestly-provided insights will be comforted by the personal job data from Mr. Prestowitz's impressive CV that pepper the text. He also reveals travel tales of whirlwind visits to far-flung outposts. If these are not enough, the truly stubborn may be persuaded by relentless name-dropping. To this end, many chapters begin with gems of wisdom from captains of industry or high-level public officials, some gleaned from private conversations with the author.

In turn, the author lays out a rendition of global historical events and then conjures up an interpretation based upon hindsight to suggest they are the outcome of a coherent plan. His conclusions are all the more remarkable as they are derived from an analysis of events from 1415 to the near-present in a total of about 6 whole pages (pp. 8-15)! That may set a record for brevity and "shazam" analysis whereby conclusions are magically drawn from selective observations.

Lest cynicism overwhelm a cautious reader, some charity is in order. It should be noted that the impressive list of high-level meetings and heavy travel commitments place heavy demands on most mortals. Anyone who has encountered jetlag will know it does little to support deep contemplation or clarity of thought.

Readers will find the author's undeniable gift as a writer gives the impression of a seamless rhetorical jet stream. Unfortunately, there is a considerable amount of turbulence when facts and logic enter the rarified atmosphere of Mr. Prestowitz's meta-musings.

For example, he observes that during a meeting in 1982 with high-ranking Chinese officials that many of those he encountered had been educated in America (p. 24). But China sent no students to the US from the 1950's until 1979. Given that most universities follow a 4-year time frame, it is unlikely that such rapid movement up the bureaucratic hierarchy could have occurred.

Worse, there are also some serious internal contradictions. For example, he bemoans the fact that America has no strategy and that capitalism has no inherent direction as though this is a failing. Indeed, he suggests that challenges from regulated economies and buffeting by forces of globalization facing the US require greater government involvement in the economy.

To support this idea, he asserts that the assumptions of Adam Smith and David Ricardo no longer hold together so that trade theories from the 19th century are now irrelevant. He supports his conclusion based upon successes of public-private collaborations even though his examples are limited to the development of the Internet.

Perhaps in the rush to get to his conclusions about the need for a thoughtful strategy overseen by selfless politicians and bureaucrats, he forgets one of his earliest insights. On page 16, we are told that a "third wave of globalizations" will be..."less driven by countries or corporations and more driven by real people".

In sum, this book may be a harbinger of bad tidings; Mr. Prestowitz provides us with reason to worry that it is China, India and other countries' "turn." But following history, perhaps the ones who should worry are political leaders in those countries who continue to promote policies that support export-led economic growth that inevitably leads to massive wealth destruction.

Christopher Lingle is Global Strategist for eConoLytics.

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