New Book on America's Dwindling Prosperity from Economic Expert Clyde Prestowitz
This month, Clyde Prestowitz, the President of the Economic Strategy Institute and former counselor to the Secretary of Commerce under President Reagan, has published his third book on the topic of improving America's economy: The Betrayal of American Prosperity. This publication seeks to demonstrate the irony behind why conservative thinking has handicapped American business. It argues that such thinking may eventually bring the United States to third-world status. The book focuses on U.S. imports and exports, including both goods and labor.
According to Prestowitz's book, China exports $46 billion of computer equipment to the U.S. annually, while the U.S. exports to China a mere $7.6 billion of waste paper and scrap metal. Prestowitz criticizes what he calls "free-market delusions." He claims that the 2004 McKinsey analysis which projected a $1.12 - $1.14 benefit for every dollar off-shored is unrealistic because of flawed assumptions about how well American workers can find new jobs when their old ones have been sent overseas. The book says that America still has a services trade surplus, which reached around $140 billion in 2008, but former Vice-Chairman of the Federal Reserve, Alan Blinder, has predicted as many as 29 percent of remaining jobs (especially those in accounting, customer service, research and development, and information technology) could be off-shored within only a few years. research in Asia has steadily climbed, while U.S. scientist and engineer employment continues to fall.
The Betrayal of American Prosperity bemoans the loss of manufacturing jobs in the U.S. Prestowitz points to strong links between manufacturing and desirable research and development in manufacturing. For instance, a company is more likely to innovate the new, desirable technologies of the future, if they have to create the current technologies and can explore inefficiencies in production or options for alteration of the product. The U.S. is currently running a trade deficit in high technology areas, especially in green markets. The Information Technology and Innovation Foundation (ITIF) reported back in 2009 that China, Japan, and South Korea have surpassed the States in production of nearly all clean-energy technologies. Over the next five years, the ITIF predicts that these governments will out-invest the U.S. by three to one. If this comes to pass, then these other countries will hold greater private investment, and gain first-mover advantages. By 2012, China, Japan and South Korea plan to produce 1.6 million gas-electric or electric vehicles a year while North America only plans to produce 267,000. This means that America may simply be switching from our dependence on the Middle East for oil to a dependence on East Asia for wind, solar, battery, and reactor produced energy.
The book lampoons the recent "Cash for Clunkers" program, which Prestowitz claims mostly benefited Japanese and Korean automakers. The book asks such uncomfortable questions as, if U.S. workers spent about 300 more hours a year working than the OECD average, why do 99 percent of German, Japanese, British and French workers have higher incomes that U.S. workers? It also asks how the U.S. has moved from being the world's largest creditor nation to the world's largest debtor nation. The author blames sentiments such as "markets can do no wrong", "government is the problem", and "potato chips, computer chips, what's the difference?" as well as our attachment to unilateral free trade, spikes in our oil imports, failure to recognize the close relationship between manufacturing and support services, privatization, balanced budgets, floating exchange rates, the pursuit of a strong dollar, rule of law, democracy, and relaxed government regulation. The Betrayal of American Prosperity ties together the Great Depression, the dot.com boom, the 1994 Collateral Mortgage Obligations, comparative educational achievements, and the growth of Asian power into a narrative that describes the steps that brought us to where we are today.
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