Book Review
Title: "The Betrayal of American Prosperity: Free Market Delusions, America’s Decline and How We Must Compete in the Post-Dollar Era"
Author: Clyde Prestowitz
Publisher: Free Press, 352 pages; $26
Americans are stressed out about money. We are individually stressed out about the state of our household finances. But we’re also collectively stressed out about the future of our country’s prosperity, economic well-being and world leadership on a macro level.
We hear story after story reflecting brick after brick crumbling out of the figurative masonry that makes up the edifice of America.
Foreign students would rather stay home and study; America costs too much money and offers too few jobs. Canadians don’t want to visit out of fear that a vacation accident will cost them their life’s savings. Teenagers can’t find summer jobs; adults can’t find jobs at all.
Our kids’ math and science scores are rotten, and urban high school graduation rates are rottener. Real estate has crashed, stocks have crashed, woe is us, etc., and so forth.
"The Betrayal of American Prosperity: Free Market Delusions, America’s Decline and How We Must Compete in the Post-Dollar Era," by Clyde Prestowitz, relates the woe-filled (and woe-inducing) tale of the rise and fall of American prosperity and superpowerdom on the global stage with intricate historical analysis, depth and detail.
Then, just when you were about to pack your bags for Vancouver, Prestowitz offers some insight on how we, the people and the nation, must shift our behavior in order to be globally competitive going forward.
The book’s introduction makes much of the trade imbalance between China and the U.S., a vastly disproportionate outflow of cash and waste when viewed in light of the influx of Chinese computer and consumer goods. This lopsidedness, Prestowitz projects, is one of many status quo economic situations that cannot continue without endangering American prosperity.
According to Prestowitz, this Chinese trade imbalance and these other crises — from real estate to energy — are not the orthodox "American Way" we think they are.
Rather, he argues forcefully throughout the first section of the book, the last generation or so involved a 180-degree change of direction from the first 180 years of American economic policy; it behooves us, he argues forcefully in the last section of the book, to make another U-turn, and fast.
In the first chapter, The Real State of America, Prestowitz vividly creates a snapshot of the current decline of America — from the falling dollar, to our falling influence, to falling industry, health and more.
Then, Prestowitz relates what he deems The Real Story of How America Got Rich: the "American system" of "government policies and programs aimed at development of intellectual property and manufacturing industries," which were expressly intended to contrast and surpass the results of British "free-market, laissez-faire policies."
The American government’s promotion of innovation, technology and education in the context of Britain’s unrestricted free trade led quickly to America achieving supremacy over Britain in "virtually every sector of the economy," between 1870 and 1900.
After the second World War, though, America reversed direction, as Prestowitz chronicles in America Changes Course, shifting priorities to promote consumer spending (and penalize saving, which was the value pushed during the wars) and following in Britain’s free-trade footsteps.
Exploring why on earth we would choose to follow such an unsuccessful path, the book then covers Goldilocks and Bubbles: the Faith in Efficient Markets (a faith that, in retrospect, seems to have been misplaced), and points out the Irrationality of the Rational. The latter chapter exposes critical flaws in the real estate data that was plugged into the models that gave birth to mortgage-backed securities.
The book moves forward to spend a couple of chapters deep-diving into free trade and trade theory, the evolution of multinational corporations and the history of our extreme dependence on foreign oil, unabashedly explicating the unequivocal economic dangers these phenomena now pose to America’s global position.
Wrapping up its interesting, yet dense, analysis of America’s current status and how we got here, the book moves to its two final chapters, exploring how the rest of the world — inevitably dominated by Asian economies — operates and views America, and offering some uber-macro-level strategies Prestowitz exhorts America to adopt in order to win on the global playing field.
From ditching orthodox and outdated theories in exchange for the reality of how markets and humans actually behave, to adopting a vision of competitiveness, to what Prestowitz calls "smart" globalization — from realigning American business interests with the interests of individual Americans and reforming aspects of politics and government — Prestowitz offers some very visionary aspirations for America to consider and, ideally, act on.
