Three Billion New Capitalists: The Great Shift of Wealth and Power to the East [Englisch] [Gebundene Ausgabe]

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 that Friedman--put bluntly, his book is more serious and more valuable than Friedman's, as in this is the meat, where Friedman is the sauce. Prestowitz addresses the core issues of the value of the dollar, the central place of energy, the role of demographics, and the fundamental macro-economic and structural imbalances that will weaken America, that are weakening America, over the passage to of a century of time--this is not a "snap-shot," this is a *deep* look into the soul of America.

Chapter 12, the author's recommendations, is alone worth the price of the book and should be required reading in every comparative economics and national security policy classroom. I won't list these recommendations but will highlight just a couple that struck me as immediately actionable: declaration of energy independence; DoD as a catalyst for socio-economic recovery by taking the lead in energy, education, and intelligence, learning how to wage peace; end to subsidies (the author uncharacteristically fails to note that we can increase government revenues by $500B a year if we not only eliminate subsidies, but stop import-export tax fraud and demand that corporations pay taxes on the profits they declare to their shareholders rather than the falsified and manipulated balance sheets they present to the IRS); join Japan and India to NAFTA--this is an outrageously brilliant idea.

Clyde Prestowitz is one of the most insightful, balanced, *sane* voices on national competitiveness today. He would make an excellent Secretary of Commerce in the transpartisan Administration.

See also (with reviews):
Rogue Nation: American Unilateralism and the Failure of Good Intentions
The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (Wharton School Publishing Paperbacks)
The Battle for the Soul of Capitalism: How the Financial System Underminded Social Ideals, Damaged Trust in the Markets, Robbed Investors of Trillions - and What to Do About It
The Global Class War: How America's Bipartisan Elite Lost Our Future - and What It Will Take to Win It Back
The Politics of Fortune: A New Agenda For Business Leaders
The Wealth of Networks: How Social Production Transforms Markets and Freedom
Revolutionary Wealth: How it will be created and how it will change our lives
Infinite Wealth: A New World of Collaboration and Abundance in the Knowledge Era
THE SMART NATION ACT: Public Intelligence in the Public Interest

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.

Back in 1988, Prestowitz wrote "Trading Places" which was about Japan taking over the world. It sure looked that way at the time, Japan had the highest savings and investment rate, it was catching up and leapfrogging past us in many technologies. It had a huge current account surplus. However, shortly after Prestowitz published his book Japan experienced a chronic recession for the next 20 years. It's stock market level has not recovered from the peak of the late 80s.

Now, Prestowits is crying wolf about China and India for a different set of well known reasons. They have an abundant, cheap, and increasingly educated labor force that will accelerate the gutting out of both our manufacturing and research-service sectors.

Everything Prestowitz states is true, well researched, and insightful. Thus, why was he so wrong nearly 20 years ago about the prognostic of Japan vs the U.S.? And, is he likely to be wrong about China and India?

There is a simple reason why Prestowitz is likely to be wrong again. He focuses only on the most positive sides of our international competitors, and the worst ones of ours. Thus, his arguments are highly unbalanced. China and India are formidable competitors, and to some degree they should take over the world. This is just so that the living standards of their citizen reaches something beyond a poor third world level. However, both China and India face extremely challenging hurdles. China is absolutely clueless about efficient allocation of capital. Credit allocation through their banking system is one of the poorest and most corrupt in the world. The percentage of bad loans within these same banks is causing the entire banking sector to be essentially insolvent. India on the other hand suffers from an incredibly high illiteracy rate which exceeds 50% of the population. It has also one of the most byzantine and inefficient government regulatory apparatus. Ordering a new residential phone line in India is more cumbersome and time consuming then starting a whole new business in the U.S. These weak spots of China and India are complete blind spots in Prestowitz arguments. Thus, he reaches dramatic and likely wrong conclusions. Just like he did when he wrote about Japan back in 1988.

The truth of the matter is that a "catastrophic" type framework sells a lot more books than a more nuanced, and balanced one. But, reality is typically much more complex than such unidirectional lopsided arguments. This is especially true when one attempts to predict complex international competitiveness outcome over the next half a century.