REVIEW The decline of the US economy Three Billion New Capitalists by Clyde Prestowitz
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Reviewed by Dmitry Shlapentokh
This is a first-class book with a sober and penetrating analysis of global
arrangements and the US role in them. The author is well informed, with quite
critical views of the future of the US.
The source of the problems is not that the US has lost its democratic innocence
and plunged recklessly into the Iraq war, as bemoaned in recent books and
articles by Zbigniew Brzezinski, former president Jimmy Carter's national
adviser. Neither is it that the US retained its capitalist predatory nature and
engaged in war and exploitation of the rest of the globe, including polluting
the environment - the point of the American left.
The reason is the US is in the process of losing its position as the major
economic power. Author Prestowitz has actually destroyed one of the essential
myths of American civilization, the myth of American efficiency.
This myth has always been related to the image of capitalism - and America has
been the very embodiment of capitalism. This capitalism is brutal in a
social-Darwinistic way and can also be militarily weak. Indeed, for
generations, Americans have agreed that they are not militaristic and can be
beaten by others, but never economically.
During the Cold War, the Soviets were accepted as military but not as economic
peers. And it is only now that fundamental changes are occurring - America is
increasingly losing its economic standing in regard to the rest of the world.
In fact, the US is starting to be pressed hard on not just one but several
economic fronts, including those of whose very existence most Americans have
not been aware.
This is, for example, the case with Europe. With fresh views on
American/European economic rivalry, the author follows a line that one cannot
easily find in the US mass media. The media usually present Europe as a
stagnating, declining economy that cannot carry the heavy task of a protective
safety net for Europe's citizens. This stagnant semi-socialist group of
countries is juxtaposed to the dynamic, vibrant, albeit tough, America.
The author has discarded this notion. With a close look at statistical data, he
has concluded that Europe is economically not far behind the US. Moreover, in
some key areas, Europe is actually ahead. For example, in the author's view,
the US is in a process of erosion of its industrial skeleton, while the
European picture is much brighter.
Moreover, European industrial goods have retained their reputation of high
quality and thus make it possible for Europeans to sell their goods to China,
for example, despite what seems to be prohibitive prices because of the euro
With all the importance of the European economy, it is not Europe that
constitutes the major threat for the American economy. The battering ram that
could destroy it is coming from Asia, mostly China. The American economy is
increasingly unable to compete with Asian goods, and the situation will be
worse in the future.
Why is this happening? In the view of the author, it is mostly due to
globalization. At the beginning of the post-Cold War era, globalization was
hailed in the US as a blessing that would bring absolute economic and
implicitly geopolitical domination. But the reality is quite different. And the
author suggests that globalization has led to disaster for the American
economy. According to his views, Asia has the ability to acquire the technology
and skills to compete with the US in nearly all areas. Cheap labor makes Asian
goods even more competitive.
The author is absolutely right in seeing in the spread of technology one of the
major reasons for the competitiveness of Asian goods, but it is not the only
One would have to look closely at American society, its education, government
and business to see that many of these segments have become ossified
bureaucratic structures that work with exceptional inefficiency and are
shielded from any control from market or government.
In many ways, the US has become similar to the USSR in the last decade of its
existence, when the Soviet Union had only one first-class and efficient
organization - its military force.
But, if the US economy/society in general is becoming increasingly inefficient,
how can it maintain its high living standards and engage in expensive imperial
The author answers this question by pointing to America's ever-increasing
borrowing from the outside world, mostly from Asia. But why do these countries
continue to lend to the US? Why at some point do they not dump dollars or
treasury notes? Here the author once again rightfully points to the peculiar
position of the US in modern society and the reason it still has an almost free
ride - at least for a while.
The global community, or at least much of it, wishes to diminish the US role in
global affairs, but very few wish it to collapse. With an interdependent global
economy and the dollar as the global currency, the collapse of the US would
send a shock wave all over the world, leading to unpredictable and possibly
global catastrophic consequences similar to those that followed the Great
Depression of 1929.
Thus, the logic of self-interest has compelled the world community, including
China and other Asian countries, to prop up the American economy. The problem,
however, is that people in general are not always logical, and those who make
predictions about the economic future of America and the world should always
Dmitry Shlapentokh, PhD, is associate professor of history, College of
Liberal Arts and Sciences, Indiana University South Bend.
Three Billion New Capitalists: The Great Shift of Wealth and Power to the East
by Clyde Prestowitz. New York: Basic Books, 2005. ISBN: 0465062814 Price:
US$26, pages 194