Book Reviews & Citations
(05/23/2005) 3 Billion New Capitalists reviewed in the Dallas Morning News
Author Links Asia's Rise To Perot and TI
THE DALLAS MORNING NEWS
May 23, 2005 Monday
Author links Asia's rise to Perot and TI
WASHINGTON - Dallas' own Ross Perot and Texas Instruments Inc. helped
pioneer strategies that are boosting Asia above North America in
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,
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.
"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
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."
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
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.