Book Reviews & Citations
(08/01/05) Three Billion New Capitalists reviewed in the New Zealand Management
Three Billion New Capitalists: The great shift of wealth and power to the East
By: Clyde Prestowitz
Publisher: Basic Books
Depending on ones perspective and priorities, this is an encouraging or
depressing book. For those concerned about the United States seemingly
unlimited power and penchant for throwing its ideological weight
around, its reassuring to be told that Americas economic decline is now
irreversible. But if one is concerned about the consequences for the
western world, and certainly for New Zealand, should the American
century turn to very runny custard, then the book is scary reading.
Clyde Prestowitz, president of the Economic Strategy Institute in
Washington DC, argues that American policymakers seem oblivious to the
looming crisis; they are not making the connections, and joining the
dots that the author does in this absorbing, thought-provoking and very
readable book.
Prestowitz argues that the United States is in serious trouble for a
number of connected reasons. The US trade (current account) deficit was
about $650 billion in 2004, financed by huge overseas borrowing, and
mortgaging large US assets to foreign lenders. Their coffers awash with
dollars, the worlds central banks are beginning to question Americas
ability to fulfill its international financial obligations. There is
now, for the first time since the end of the Second World War, an
alternative to the dollar as the worlds money and already many
countries are upping their euro reserve ratios at the expense of the US
currency.
Even if the US dollar devalues dramatically, America may not have the
capacity to raise its exports sufficiently to balance the trade
accounts. Manufacturing, the biggest part of US trade, accounts for
just 12.7 percent of American GDP less than health care and more and
more important industries are relocating factories overseas.
In addition to the largely ignored fragility of the US economy,
Prestowitz argues, three billion new capitalists have joined the worlds
economy since the fall of the Berlin Wall in 1989 and their impact is
only just beginning to be felt.
Services, research and development in which the West now leads the
world, could all follow manufacturing to Asia, he writes. Whether
slowly or quickly, the forces now bringing wealth and power to the East
will also bring crisis and painful adjustment to the West.
Three Billion New Capitalists analyses the crisis in detail and ponders
how the inevitable adjustments can be managed to minimise the pain. IFG