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Manufacturing is still critical to the economy United States. Clyde Prestowitz, says it's time to start realizing the positive spillovers that manufacturing creates... Read more  

Events & Activities

Stephen Olson at Chinese Development Institute Conference


 Clyde Prestowitz giving presentation to CDI...


Steve Olson teaching trade negotiations at the Mekong Institute...


Stephen Olson to speak at upcoming workshop organized by the International Institute for Trade and Development on 

"Economics of GMS Agricultural trade in goods and services towards the world market"

Chiangmai, Thailand Sep 8-12.

Book Reviews & Citations

(05/23/05) 3 Billion New Capitalists reviewed in the Dallas Morning News

(05/23/2005) 3 Billion New Capitalists reviewed in the Dallas Morning News
Author Links Asia's Rise To Perot and TI
May 23, 2005 Monday
Author links Asia's rise to Perot and TI
Jim Landers

WASHINGTON - Dallas' own Ross Perot and Texas Instruments Inc. helped pioneer strategies that are boosting Asia above North America in economic power.

That's how international affairs expert Clyde Prestowitz tells it in his latest book, Three Billion New Capitalists (Basic Books, $25).

In it, Mr. Prestowitz traces the origins of India's call centers and high-tech backshop companies to Mr. Perot's business model for taking on a corporation's information technology workload.

The book also describes how Texas Instruments' need for lower capital costs to compete with Japan led to construction of a semiconductor foundry in Taiwan able to manufacture chips designed by TI and other companies on a contract basis. TI was also the first (many have followed) to build a software development laboratory in Bangalore, India.

All three strategies - outsourcing, contract manufacturing and offshoring - made perfect sense for investors. But Mr. Prestowitz argues they've demonstrated weaknesses in a U.S. economy that, like the Titanic, is heading into an iceberg field.

Mr. Prestowitz, a Commerce Department trade counselor under President Ronald Reagan and president of the Economic Strategy Institute, a Washington think tank, travels the world to find surging change imperiling a sublimely ignorant America.

First he wrote Trading Places: How We Are Giving Our Future to Japan and How to Reclaim It. Two years ago, it was Rogue Nation: American Unilateralism and the Failure of Good Intentions.

This time, Mr. Prestowitz is raising the alarm over U.S. trade and financial imbalances that he sees no way to fix without a substantial decline in American living standards. Americans borrow and spend, while Asians save and create. Exchange rates should reflect this by weakening the dollar and strengthening the Chinese yuan, the Japanese yen and the Korean won. But so far, they haven't.

'Titanic-like flaw'

"The special role of the dollar as the world's money removes all financial discipline from the United States and enables currency manipulation by other countries," Mr. Prestowitz writes in Three Billion New Capitalists. "This is the key Titanic-like flaw in the current system. It cannot last."

While Asians pursue industrial policies aimed at capturing strategic industries like semiconductors and IT services, Mr. Prestowitz finds U.S. policy-makers pretending market forces are in command.

For U.S. companies, the logical response is to act in their own economic self-interest through offshoring, outsourcing and contract manufacturing. The United States needs a competitiveness strategy, or - in language Mr. Prestowitz admits is badly out of vogue - an industrial policy.

The windup is better than the pitch. Mr. Prestowitz urges junking the income tax in favor of consumption taxes. He wants a Bretton Woods-like meeting to create a new exchange rate regime that moves away from the dollar. He wants Mexico and Canada to adopt the dollar, and he wants NAFTA expanded by adding Japan and, possibly, India.

Before he gets to those sweeping recommendations, though, Mr. Prestowitz makes a fascinating journey from place to place offering revealing stories and anecdotes about globalization. On a ski trip near Lake Tahoe, the spread of outsourcing becomes apparent. Mr. Prestowitz's son asks him if he'd like to invest in a local snow-removal company. Why something so mundane? "Dad, they can't move the snow to India."

China's efforts

In Shanghai, he meets TI alumnus Richard Chang, who worked on speech synthesizing technology that became TI's Speak & Spell toy. Mr. Chang is now CEO of Semiconductor Manufacturing International Corp. He gives Mr. Prestowitz a tour of a $1.8 billion chip fabrication plant. Stock options, tax breaks, company housing and a bilingual school have lured hundreds of engineers to SMI from the United States and Taiwan.

Morris Chang, another TI alumnus who heads the Taiwan Semiconductor Manufacturing Co., is building a new lab in Shanghai just down the road. His firm has grown from a TI brainstorm into the world's biggest producer of custom-made chips.

In India, Mr. Prestowitz sees the night shift arrive at Bangalore call centers to "don American accents and identities and starting helping people in Boston, Philadelphia and Washington with their plane reservations, Internet service, computer glitches and credit card bills."

While this looks like a hollowing-out of the U.S. economy, Mr. Prestowitz leaves out of his narrative the other side of the story. Homegrown products meet two-thirds of the U.S. demand for manufactured goods. Jobs and national income are growing.

And, though there's no success yet, the Bush administration is wrestling with China's currency, U.S. taxes and savings.

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Latest Publications

The Betrayal of American Prosperity.

The Trans-Paific Partnership and Japan.

Making the Mexian Miracle.

Industrial Policy and Rebalancing in the US and China.

The Evolving Role of China in International Institutions.


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