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12 of 13 people found the following review helpful:
3.0 out of 5 stars
I found the arguments unconvincing, June 5, 2004
This is a book where I agree with the main premise, but dislike many of the conclusions as well as the delivery. The main premise is that the periods of great technological change are times of great economic growth, which is something that is very hard to disagree with. From this, the author argues that all policies should favor the development of new technologies and takes a few shots at the people he thinks are opposed to such policies. Unfortunately, his arguments are shallow and unclear. First and foremost, he neglects history. The onset of the industrial revolution was an era of great technological advancement and led to a dramatic increase in wealth. However, we cannot forget many of the consequences of this advancement. In England, it led to rapid loss of their forests and in the industrial regions, the air was so dirty from the smokestacks that people could barely see. I remember reading of an instance where a lengthy weather pattern that kept the pollution in an English city led to thousands of deaths. There is also a classic case in the United States where a river was so polluted that it actually caught fire. Therefore, some of those he classifies as enemies of growth are asking the very important questions that need to be asked concerning the consequences of technological improvements. Mandel also derides those who preach against MASSIVE federal budget deficits. He quotes former secretary of commerce Peter Peterson, who said in 2003 "When such deficits are incurred in order to fund a rising transfer from young to old, they also constitute an injustice against further generations." Mandel's next sentence is "This is the language of morality, rather than economics. From this perspective, taking on debt is wrong because it reflects profligacy and wastefulness, and shows that the government is out of control." It is immoral to saddle the next generation with an enormous debt, so Mandel's statement is inappropriate in that area. I have listened to Pete Peterson argue against massive budget deficits for two decades and his point has always been in opposition to massive deficits that require large expenditures for interest payments and take capital away from the free markets, where it would be the most efficiently utilized. Mandel then does a little bashing of former Senator William Proxmire, who regularly gave out Golden Fleece Awards for what he considered outrageous government spending. The classic example of the $600 toilet seat is mentioned. Mandel then states, "Unfortunately, this antiwaste, antidebt mind-set is inimical to innovation, which inevitably requires going down a lot of different dead-end roads before finding success. . . From the perspective of a deficit hawk, exuberant growth is intensely disturbing." This is simply not true, rapid economic growth does not disturb the deficit hawks, in fact they welcome it. What disturbs them is the unarguable fact that government spending is inherently wasteful. Mandel seems to believe that the only way new technologies develop is by throwing enormous amounts of money at them. The dot-com bubble and burst shows that this is nonsense. The Internet companies that survived the implosion were almost exclusively those that spent well within their means and were fairly conservative in their business plans. Also, many of the new technologies that are so highly praised in the book were developed on minimal budgets. This book is little more than a collection of arguments in favor of massive federal budget deficits, cloaked in a nebulous mantra of "exuberant growth." I found very few of the arguments convincing, in many cases they deal with peoples beliefs taken out of context and inaccurately. To sum them up, his point is that if we are courageous enough to accept the right amount of debt, then enough new technologies will be developed to grow the economy into surplus. Mandel presents no conclusive evidence in support of this thesis, and extraordinary claims require extraordinary evidence. I was also unimpressed with the subtitle of the book, as quite frankly he silences no one and while many people will raise legitimate concerns, few are really enemies of economic growth.
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25 of 31 people found the following review helpful:
2.0 out of 5 stars
Rational, it is not., May 11, 2004
In September of 2000, Mandel released his first book "The Coming Internet Depression." Then, he stated that the Dot.com stocks were going to take a beating. In fact, the NASDAQ had already imploded in the first quarter of 2000. Mandel thought this event would have dire economic consequences for decades. However, we never experienced a "Depression." Instead we experienced the mildest recession on record. In other words, Mandel's judgment at the time was way too "Depressed." This time around, Mandel's judgment is way too "Exuberant." Much of what Mandel says is correct. The U.S. economy remains the World's powerhouse of innovation. Our society is better at developing and implementing innovations. This is due to our being accepting of risk, our flexible labor markets, our entrepreneurship climate, and our capital markets for financing innovation being unparalleled. So far, Mandel is right. He continues his case along the "New Economy" theory, whereby our unprecedented level of innovation will have long lived benefit including superior labor productivity and economic growth for decades to come. This is correct, and is a truism by now. This theory is seventy years old, as first stated by Joseph Schumpeter, an Austrian economist who passed away in 1950. His brilliant concept was "creative destruction." This is where new technologies displace jobs, but replaces these by higher value added ones. Mandel also believes that our economic sustainable economic growth rate is much higher than we have historically thought. Well, Alan Greenspan has said the same thing for years, and has actually implemented his vision with his lacks monetary policy. Thus, in terms of technology and economic growth much of what Mandel says is true. But, there is no new material here. So, where does Mandel go astray? Mandel's analysis has overlooked the combination of demographic forces (the aging of the Baby boomers) and their staggering related fiscal costs (Social Security and Medicare). If you think of the Federal Government as an insurance company with predictable claims liabilities; this insurer is insolvent. The retirement benefit claims (Social Security and Medicare benefits) the elderly have against this insurer way exceed its premium earned (social security taxes) and its reserves (Social Security trust fund). This gap on a net present value basis, as disclosed in the Social Security and Medicare trustees' reports, amounts to $72 trillion! What are the implications of this $72 trillion? It means that a huge portion of capital will be necessary to support Social Security and Medicare benefits of U.S. citizen. This will cause: a) A dwindling of capital available for more productive use such as financing R&D; b)A huge rise in demand for money, which will increase its cost (rates). Thus, rates will go up. This will slow the rate of investment, capital formation, labor productivity, and economic growth. c)An increase in the Government debt level to potentially unsustainable level. This is a huge issue Mandel has underestimated. The concept that technological innovation can bail us out of this fiscal crisis is utopic. Every serious economist of either side of the aisle knows that. Mandel, instead chooses to criticize them all for being pessimistic. By doing so, he looses all credibility. For excellent fiscal analysis, I recommend Laurence Kotlikoff's "The Coming Generational Storm" and Robert Stowe England "Global Aging and Financial Markets" and "The Fiscal Challenge of an Aging Industrial World." Also, Robert Rubin "In an Uncertain World" and Paul Krugman's "The Great Unraveling" are also very interesting on economic and fiscal issues. Joseph Stiglitz "The Roaring Nineties" is a good piece of economics revisionism. Finally, Roger Alcaly's "The New Economy" is a better analysis on the history and prospect of technological innovation.
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4 of 5 people found the following review helpful:
5.0 out of 5 stars
Thoughtful and Passionate, June 1, 2004
By A Customer
This thoughtful and passionate book by Business Week's Chief Economist aims to reshape the U.S. political debate about economic policy. Its central concern is to keep the U.S. economy on a path of "exuberant growth," led by innovation and technology. As Mandel reminds us, from one generation to the next, the prosperity of a nation depends on the rate of growth of its economy. He identifies two unique advantages of the United States in achieving rapid growth: a deep bench of scientific and engineering professionals to identify and commercialize technological breakthroughs, and a venture capital industry that will fund promising new technologies and products. But exuberant, technology-led growth comes at a cost, as it is accompanied by instability in financial markets and the real economy. Mandel worries that too many in public life - economists as well as politicians - see that instability solely as a problem without noticing that it is the natural byproduct of innovation and rapid growth. Taming financial and economic instability, he fears, would condemn the economy to stagnation. He calls on policy-makers instead to embrace exuberant growth by subsidizing science education and R&D, protecting investor confidence in financial markets through increased corporate financial disclosure, and ameliorating the costs of instability with a stronger social safety net. Mandel embraces a cause well worth fighting for, grounds his argument in an insightful analysis of the 21st Century U.S. economy, and provides a detailed policy road map for exuberant growth advocates.
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