Page 2 of
2 BOOK
REVIEW The challenge
of China's rise In China's
Shadow by Reed
Hundt
Reviewed by Benjamin A
Shobert
protectionism, which is not to say
that Hundt believes government is powerless to
facilitate the transformation he outlines.
Rather, Hundt wants Americans to be
reminded that it will be enough to remove
obstacles to entrepreneurship and trust that the
uniquely American ingenuity will find new ways to
be successful:
No
commissions or select group of leaders can or
should invent the new jobs or select the new
industries. The only adequate response to rising
Asia lies in the cultural reform that will
vastly increase entrepreneurship. Leaders need
to encourage broader (more markets) and deeper
(more entrepreneurs) new initiatives without
knowing what specific results will follow. They
need to focus on architectural changes that
support the culture of entrepreneurship. Then
American society will see the creation of
startup technological companies in more numbers
and in more markets - because increases in scale
(bigger efforts) and scope (more fields of
endeavor) of entrepreneurship are required to
meet the challenge of rising China. (p 58)
Among
the recommendations that Hundt makes, a handful
are likely to provoke resistance from both
conservative and more liberal minds. Hundt
argues that certain public goods - specifically
improved broadband infrastructure - are issues
government does have a role in advocating and
funding. His argument seeks to parallel the
logic that led to the massive highway-building
programs in the US after World War II with a
current need to improve national broadband
access - the goal being "to reduce the costs all
firms pay for these input services" (p 101).
Because both roads and broadband benefit
companies' ability to disseminate information,
goods and services, Hundt believes both should
be actively funded by government. Obviously,
Hundt's belief is that today's need to access
information efficiently has an equivalent with
yesterday's need to transport goods efficiently
through the use of public resources.
In
a similarly progressive spirit, Hundt advocates
(p 104) a policy of micro-lending to startup
entrepreneurs through a similar setup as
post-secondary loans are provided through the
Federal National Mortgage Association (FNMA,
known in the US as Fannie Mae) and the Federal
Home Loan Mortgage Corp (known as Freddie Mac).
Why the US banking system does not currently do
an adequate job at servicing this need is not
sufficiently explored by Hundt; in fairness, an
exploration of this was outside the scope of his
central argument. Startup entrepreneurs who have
gone through the efforts to locate financing and
discovered the truth to the adage that "banks
only give money to those who don't need it" will
appreciate Hundt's suggestion.
The more
provocative point he touches on is that if
government wants to counter the China threat, it
should begin looking to develop policies and
incentives that treat the collective needs of
the somewhat diffuse entrepreneurial group on
equal footing as it does the needs of
established industry. If the government can
choose to intervene in certain industrial
sectors by providing incentives, it should do so
for the entrepreneurial group as well.
Few of Hundt's recommendations are more
loaded than his reminder that another obstacle
to an invigorated entrepreneurial culture is
health-care reform. Hundt is careful in this
area, and his insight is appreciated.
Health-care reform is one of the true
litmus-test issues for the future of the
American republic: not only is the medical
health of millions of Americans in jeopardy, the
reforms that are needed are tests of the
substance of the country's leadership.
In what is an interesting transition,
within three pages Hundt moves easily from the
need for health-care reform to what will make
this type of painful and risky reform take place
- finding entrepreneurial leadership within
government. Hundt seems to recognize that
talking about health-care reform in detail is a
book unto itself, and so he focuses on the
aspect of the debate that he believes is being
overlooked: if health-care reform is going to
happen, it will only happen by attracting people
to government who are willing to take chances
and be the bureaucratic equivalent of the
market's entrepreneurs.
Of all portions of this book,
this particular section is one where true
progressives from both conservative and liberal
caucuses can agree: for government to reform,
competent non-partisan people who understand risk
and can function within government are going to be
necessary. If the US system is going to rot, it is
going to rot from within, and Hundt eloquently and
forcefully makes this point:
American political leaders feel
increasingly overwhelmed by the challenges of
governing.
They cannot rationally
believe elections give them mandates, much less
guidance. They are overwhelmed by the demands of
fundraising. They are frustrated by the
inefficiencies of tripartite federalism. They
expect to be misunderstood, but even when their
words rally support for some action, they doubt
that they will be able to translate their
intentions into results. In their frustration,
they blame the voters, the media, and each
other.
They wash their hands of
outcomes. Where no one takes responsibility,
corruption flourishes ... Government becomes
more populated by the incompetent, ignorant, and
indifferent. Patronage overwhelms
professionalism; loyalty trumps expertise. To
manage over time a sensible response to China,
America needs to use the talent at its disposal
... The United States needs to root out graft.
It needs to recruit talented people into
government. It needs to empower capable people
to use the law towards good goals. (p
111)
Hundt is not shy in reminding his
readers that Americans are forgetting that someone
will always be a threat to their economic
prosperity - rather than fixate on the threat, we
should re-energize and advance those features of
our society and system that have made the United
States the unique place it has managed to be since
its independence. By reorienting the debate and
using China as a mirror with which to see more
clearly the changes the US needs to make, Hundt is
able to step above much recent US-China dialogue
and offer a refreshingly unique set of insights
that hold the promise to reshape US business,
culture and government.
This book is one
of the very few recent additions to US-China
relations that actually manage to move beyond the
rehashed state of fear and advance a set of
reforms that would allow the United States to rise
to the challenge China is indicative of: the
challenge that the US might not understand its own
needs to reform and change in order to protect the
unique and grand American experiment.
In China's Shadow: The Crisis of
American Entrepreneurship by Reed Hundt. Yale
University Press (October 16, 2006). ISBN-10:
0300108524. Price US$26, 208 pages.
Benjamin A Shobert is the
managing director of Teleos Inc
(www.teleos-inc.com), a consulting firm dedicated
to helping Asian businesses bring innovative
technologies into the North American market.
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