Saturday, October 01, 2005



I've got a link over there, down and to the left, to Richard Pachter's reviews for the Miami Herald. He comments on business-related books, and one review he emailed early last month has been sitting with me.

It was of the book Three Billion New Capitalists: The Great Shift of Wealth and Power to the East, by Clyde Prestowitz.

According to Pachter, who describes the book as "scary," the book reasonably presages that the United States is just a step or two from economic disaster.

Pachter reminds us that Prestowitz, the founder and president of the Economic Strategy Institute, served as counselor to the secretary of commerce in the Reagan Administration, and led many trade and investment negotiations with Japan, China, Latin America and Europe. This ain't Michael Moore.

Prestowitz says that with the shift of manufacturing to the Far East, subsequent transfer of strategic technologies, establishment of the dollar as the international monetary standard, termination of the gold standard, lack of government support for competitive industries, huge government and private debts, lack of savings and a laissez faire approach to international trade, bad things are in our future.

We already know about the joys of outsourcing... we have airplanes built partly in China and tech support in India. These are scary because they're the most populous nations on the planet, but as they make rapid economic progress, not only will they grow quickly, but the growth will be further enhanced by the power of their population. Our answer is that our productivity is good. Pachter quotes Prestowitz:

"It is comforting to Americans to keep telling themselves they have the best productivity and GDP growth and will therefore remain the location of choice for foreign investment. But is it true? While there is much evidence to indicate that U.S. productivity has indeed taken a jump, there is also cause for prudence about this conclusion. While American productivity per worker per year is improving faster than that of Europe, on a per hour basis the Europeans are starting to come out ahead.

"This once again raises the issue of living standards. Americans are not only working more hours than Europeans or Japanese, they are working six more weeks a year today than they did 20 years ago. Yet median family income has not risen much. As for unemployment, it's easy to keep it low if you put 2 percent of all the men in the country in jail and don't count them as unemployed -- which the United States currently does. Further, we only count as unemployed those receiving unemployment benefits or who tell poll takers they are actively seeking a job.

"To see how this works, look at Kannapolis, North Carolina. When the town's only mill shut down, reported unemployment soared. A year later, however, unemployment magically disappeared -- not because people got jobs, but because their benefits ran out. The real story of the U.S. economy is rising hours worked, rising debt and job creation largely restricted to low-paying categories like retail sales and fast-food restaurants. This is not a formula for long-term prosperity."

When Bill Clinton was president, the standard joke was, "Sure, Clinton created 100,000 jobs, and I have three of them." What kind of jobs is George W. Bush creating? And, as labor is devalued by both employers and employed, what future is there for the average working guy without huge wealth? Remember, capitalists with great wealth have easily transportable wealth -- Bill Gates could live just as pleasantly in Macao as he could in Medina, WA -- but if I can't find anyone to buy my house because nobody's making money, and if my house is my biggest investment, how much capital do I really have? (See my references elsewhere to the growing fear of the real estate bubble, just to add to the fun.)

As a nation, we have already shipped our wealth overseas. We are now shipping our manufacturing overseas. That's going to leave us as a nation whose sole productivity will be the movement of money, the making of films with large explosions, and government expenditure. The conservatives can't reduce the size of government. It's the only thing that's propping up the GDP right now.

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