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Saving Capitalism: Keeping America Strong (Vintage)

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Saving Capitalism: Keeping America Strong, By Pat Choate (Vintage 2009) Paperback

Review by Donald A. Collins

Veteran political economist, Pat Choate truly understands how to better manage our broken capitalist system. A policy analyst, and best selling author, his books include Agents of Influence, Preparing for War (forthcoming from Knopf), and, with Ross Perot, Save Your Job, Save Our Country. In 1996, he was Ross Perot's Reform Party vice presidential running mate.

His most recent book, "Dangerous Business: The Risks of Globalization For America" (Alfred A. Knopf, New York 2008), explained perfectly how the neo mercantilism of China (e.g. state capitalism) and our failure to exact trade concessions from such low labor cost trading partners has led us into unsustainable trade deficits.

Having served for some years on a non profit board with the author, I await eagerly the products of his lively mind for the incisive books on economic policy he produces in a most timely fashion. His latest, only 168 pages, again captures the essence of our dangerous present situation.

Now, as America has plunged into a recession (Choate sees this as a depression) unseen in decades, Mr. Choate has produced another powerful economic roadmap in his book, Saving Capitalism: Keeping America Strong (Vintage-2009) (Paperback).

I might comment he proves his economic perspicacity by issuing the book in paperback-most hard covers go for north of $25-so that readers can learn what our bumbling policy makers should consider for $15-or even less when discounted!!

In his Prologue, Choate posits this contention, "President Franklin D. Roosevelt not only saved the American economy, he saved market capitalism itself. 75 years later President Barack Obama now faces the same challenge, but in a far more complex and economically integrated world."

For anyone who thinks the recent upturn in the US stock market mean an end to the financial shocks when began in early 2008, Choate suggests, "The US is in the midst of a basic structural shift in the global economy that reaches to the very core of its economic institutions. Where American leaders once believed globalization would lead to the widespread adoption of market capitalism, this depression has brought into focus a different reality-the rise of state capitalism." Example abound: China, Japan, South Korea and even Germany.

He notes the "de-industrialization of the United States" and eloquently proves with numerous examples that the US cannot survive without a manufacturing base. "People without assets, jobs, and credit cannot buy the goods and services made and sold by others. They become poorer and their lives more difficult."

In recent decades, he reports "the number of jobs in the financial sector (the winner) grew and those in manufacturing (the loser) declined. The math is clear. Between 1981 and 2009, manufacturing employment fell from 18.7 million jobs to barely 12 million, a 40 percent loss, while finance grew from 5.1 million jobs to 8.1 million, a 60 percent increase. America lost almost three jobs for every one it gained in that exchange."

Over recent decades, the governing ethos has ben "government is the problem, not the solution". After the chicanery perpetrated by all sectors of US capitalism, many nations and half the US public now see capitalism as unworthy of emulation, a tragedy since "capitalism, properly regulated, is the most efficient means in the world to allocate scarce resources and stimulate economic innovation and growth."

So what does Choate see as the way out of this morass? He offers 6 "game changing" proposals. Sadly, with Congress lost in the brambles of even more than usual democratic government game playing, it doesn't seem focused at the moment on doing any of them, despite their obvious urgency and validity. They are restated here for brevity:

1. Strict federal supervision of all financial institutions (hey, I note we citizens already own majority stakes in many), leading to a sound currency.

2. Replace federal income and corporate taxes with value added or flat taxes, balance the budget and start pay down of the federal debt. (Would this give cover to raising taxes, maybe?)

3. Balance our trade deficit by pragmatic non protectionist deals with state capitalism.

4. Strengthen the American social net, stressing education, training, health care, jobs, insuring all a minimal income and pensions adequate for dignified retirements.

5. Initiate a massive capital budget of public works to improve our aging infrastructure, creating millions of new jobs. (Simultaneously helping to revitalize our manufacturing sector)

6. Create a national innovation strategy to facilitate more creativity, enhancing job creation.

Ambitious? You bet, Choate's text argues plausibly for exactly how to accomplish these steps, many of the same FDR used to stabilize a dire situation. Many key FDR advisors, including Walter Lippman, the nation's most influential editorial voice, called for FDR to become a dictator, something he declined to do, trusting no one not even himself with such power.

Real unemployment, now at 16% per the head of the Atlanta Federal Reserve Bank, coupled with rising deficits, now projected to be $9.2 trillion over the next decade, suggests Choate's point that "the rest of the world is unlikely to loan that much money to a nation whose people cannot control their government's spending."

I should point out something that Choate and I both know must also happen: Stop the massive flood of unneeded immigrant labor now!!. Choate has again provided readers with a brisk, engaging read. Don't miss it.

Author, renowned economist and former vice presidential candidate Pat Choate's latest book, "Saving Capitalism," is a must-read for any American concerned about the economic plight of their country.

Free of partisan bomb-throwing and inside-the-beltway conventional wisdom, "Saving Capitalism" is a timely, thorough and thought-provoking examination of just how far America has fallen economically since Franklin Delano Roosevelt saved the American way of life in the 1930's.

Faced with an almost as daunting task, Choate lays out detailed real-world policy solutions for current U.S. President Barack Obama to right the ship and avert disaster - much in the same way that FDR was able to through aggressive government action and a common-sense economic approach.

Inside Choate details how the "favored money industry" has manipulated Washington politics in its favor to the detriment of nearly every American and how scrapping the current federal income tax system and replacing it with a value-added tax would boost revenues, increase savings and drastically reduce the ever-growing U.S. trade deficit.

In addition, Choate details how "free trade" ideologues and their insatiable appetite for open markets and deregulation have decimated the once-mighty American manufacturing base, sending jobs overseas by the millions.

But "Saving Capitalism" is hardly all doom and gloom. Choate offers comprehensive solutions to America's most pressing problem, including fixing the nation's broken health care system, rebuilding America's crumbling infrastructure, balancing the country's out-of-control trade deficit and much, much more.

Any American concerned with the economic direction of their country or just plain interested in what went wrong or how to fix it should not be without a copy of "Saving Capitalism" on their bookshelves.

This book is written by an economist for the average person. This reads like a book, not a text book. The problems and the solutions the author gives are real world practical, the average Joe will see and understand. Every politician, every American, should read this book. It lays out how we got into the economic crisis we are in and practical ways that we can get out of it. If you are thinking of buying this book, fir the price you should get two, send one copy to your congressman.

At the start, the author spells out his key proposals for making the American economic system sound and placing it on a forward-looking path to future prosperity and fairness. These include:

- Implementing strict federal supervision of financial institutions,

- Replacing the current tax system with either a value-added, flat, or fair tax,

- Balancing the budget,

- Paying down the national debt,

- Balancing the U.S. trade accounts

- Strengthening the social safety net providing every worker with education, training, health care (a single-payer, universal system), employment, minimal income, and a sound and sufficient pension system

- Developing a national capital budget and then launching massive infrastructure construction program

- Creating a national innovation strategy providing a very long-term basis for creativity, jobs, and investment.

Choate provides a highly readable and concise look at the background to these ideas and addresses numerous weaknesses undermining our economy today. His core message is that to save our capitalist system and keep our nation strong, systemic change is required. The topics of the seven chapters of this book focus on 1. money, 2. taxes, 3. trade, 4. innovation, 5. infrastructure, 6. workers, and 7. jobs. Each chapter presents a wealth of information, assessments, and to-the-point conclusions (e.g., "The only macro-economic tool for which the United States has almost total freedom of use is innovation policy").

The breadth and depth of Saving Capitalism are impressive and it is rich in insights, which all seem sensible. The author lays out the obstacles to his ideas, and makes a strong case for his conclusions.

While very broad, the book is highly focused, staying on target. The author does not waste words and the reader's time.

If you are seeking a comprehensive look at where our economy is today (its strengths and weaknesses), how we got here, why we are not moving as robustly forward as we might, and the enormous possibilities we have and challenges we face, this book is an excellent place to start.

Highly recommended.

For Americans bewildered by what's happening to their country, Pat Choate is the author to read. The doyen of Washington economic analysts, he has produced a succession of authoritative, well-written books that long ago identified fundamental errors in American policy -- the same errors that have resulted in the present economic train wreck. In particular he foresaw the present fiscal and banking crises, the collapse of American manufacturing, the decay of American infrastructure, and the soaring trade deficits, and the explosion in U.S. indebtedness to China and Japan.

So why were his warnings not heeded? The problem, as he points out in Saving Capitalism, is that extremist free market ideology has increasingly in recent decades subverted all commonsense in American economic discourse.

He writes: "A powerful political majority over the past 30 years has held the zealous conviction that markets are self-regulating, the gains from industrial outsourcing exceeded the costs, and mounting trade deficits were irrelevant because other nations would eventually adopt America's open market trade policies and trade would balance out....For almost 30 years the governing ethos has been, `Government is the problem, not the solution' - hardly a suitable foundation for national economic policy."

This ideology - which Choate characterizes as "free market absolutism" - originated on the wilder shores of the far right. Already by the 1970s it was being systematically promoted by the foreign lobby and it went viral in the 1980s when Wall Street spotted the possibilities. What, after all, could be wrong with an intellectual fashion in which the greedy and unscrupulous were positively lionized for fleecing the gullible and ill-informed? Washington soon succumbed. After all, for a senator in a tight reelection race, the choice between his own commonsense and the big bucks on offer from the lobbyists was no choice at all. By the mid 1990s the media were in thrall and thereafter it became almost impossible for wiser heads to get a hearing.

The problems were particularly acute on the editorial pages of the major newspapers - the very places where a commitment to balance and diversity of opinion was supposed to be sacrosanct. Editors increasingly screened out contributions from anyone who seemed less than positively Jacobin in his zeal for unfettered free markets.

Saving Capitalism identifies six key areas in which American economic policy has gone disastrously off the rails: taxes, trade, innovation, infrastructure, workers' pensions and other fringe benefits, and job creation. Devoting a chapter to each, he not only skewers what is wrong with present policies but offers realistic solutions designed to win solid bipartisan support.

On trade, for instance, he points out that the basic problem is that American trade policies have been premised on the false assumption that other nations think like Americans. Of course, they don't; and the whole history of America's efforts to "show leadership" in trade policy in the last six decades provides voluminous support for this inference. Noting that the United States Trade Representative's 2009 report on foreign nations' trade barriers runs to an astounding 547 pages, he comments:

"The ways, means, and combinations foreign governments use to thwart imports of U.S. goods, services, and investments are varied and numerous. The list of barriers for China took 56 pages of the USTR document. Korea and India each required 14 pages, Japan 22 pages....Strikingly, these barriers still exist despite more than 60 years of intensive post-war trade negotiations with other countries beginning in 1947.

"Despite America's spirited urging of other nations to adopt the Anglo-Saxon economic model - open markets and deregulation - this system has enjoyed little appeal abroad. It suits the U.S. but it would not fit most other countries. Most countries tolerate the United States' championing open market absolutism just as they would the rants of a diminished relative: They ignore it. Yet, as long as the U.S. remains ideologically blinded and does nothing about the imbalance of trade, the transfer of wealth and power will continue unimpeded. After all, it is not the responsibility of other nations to inform us of our arrogance and stupidity."

On his numbers, nations that subscribe to the American trade model -- the Anglo-Saxon model, in his terminology -- account for just 25 percent of global trade. And their share is dwindling.

He adds: "When the United States had huge trade surpluses and was the world's largest creditor, it had enough money to grant other countries special trade concessions as a means of influencing their foreign and economic policies. But now that we have accumulated a $6 trillion trade deficit over the past three decades and are the world's largest debtor, a continuation of this `beggar thyself' policy is so impractical it is madness."

Madness indeed. Although insanity has been most obvious in trade policy, it has also pervaded financial regulation. And almost right across the economic policy waterfront the story is of a nation that is becoming unhinged.

A disturbing picture but in his final chapter Choate holds out hope there may still be time to avert total disaster.

Disclosure: I am a friend of Pat Choate's and read the book in manuscript.

Eamonn Fingleton

Author of In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, Is the Key to Future Prosperity (Boston: Houghton Mifflin, 1999)

SAVING CAPITALISM is one of the best recent books on the economic crisis that I have read so far.

Pat Choate is a very efficient communicator of his message to the reader.

In the Prologue Mr. Choate questions why our government leaders didn't anticipate this depression and then responded slowly and so incompetently.

His Chapter titled "Money" was one of the best I have read on what he calls the "economic hurricane".

There are so many relevent areas that the author addresses.

Some of them are:

* The Wall Street bloodlines of the financial cabinet members from the Clinton, Bush II, and Obama administrations.

* The contrasts between market capitalism and state capitalism.

* Why long-term investment is healthier for the economy than short-term speculation.

* Why the real unemployment rate is much higher than the figures in media reports.

* Why multi-national corporations that were once considered American corporations oppose all "Buy American" policies.

* The myth that "free trade" is really free. He details various countries' closed markets regarding American products.

* The details of the Andrew Rosenfield and Isaac proposals for addressing the crisis.

Another strongpoint of this book is Mr. Choate's solutions to the crisis. He offers numerous ideas that make sense. From taxation (he discusses three plans) market regulation, and trade policy, the author looks at possible solutions and cautions the reader of a possible recurring crisis.

If I could recommend one book on the crisis and the solution it would be this book! It's organized, realistic, and highly readable.

More than 20/20 hindsight, Pat Choate's "Saving Capitalism" offers Americans brilliant stark analysis and lucid solutions that could really work to lift the United States from the orchestrated economic quagmire we now face. With the vast majority of politicians and media firmly under the influence of Special Interests, anybody seeking a viable yardstick against which to measure rhetoric, legislation, and action will not find a better place to begin. Vastly worth my time!

Choate calls a spade-a-spade in expose' terms and offers common sense, compelling economic solutions that make yummy reading for the concerned American citizen, politician, and patriot. The title's easy to read facts are astoundng;the solutions Choate offers fit this American crisis like a tailored suit. All critical problem areas are covered: money, taxes, trade, innovation, infrastructure, workers, and his spectacular epiphany on jobs. The Congressional expose on how the special interests have our federal legislators by the balls will infuriate and sicken the concerned reader. [...]

If Choate's brilliant, although common sense, solutions are rendered into law, capitalism in America will be saved.

Once again Pat Choate delivers a groundbreaking look into the American economy with a complete play by play of the long brewing economic collapse. Written in layman's terms, Choate succeeds in relaying his poignant message through unwavering facts.

Choate states that the United States is in the midst of a basic cultural shift in the global economy, which America's leaders failed to anticipate. The U.S. currently finds itself experiencing a depression and Choate outlines fundamental transformations the U.S. must adapt in order to emerge from our current crisis. He refers to these shifts as the six game- changing proposals. Choate writes that these game changers are powerful enough to turn away economic disaster and are fully within the power of the nation to complete.

The message of this book is vital to all Americans, Choates proposals are realistic and within reach. Saving Capitalism is an easy read chock full of relevant information. Do yourself a favor and read this book.

Pat Choate's Dangerous Business gave a solid overview of the perils this nation faced if it continued to follow head long into unfettered globalization. His newest work, Saving Capitalism, discusses the catastrophe we have already witnessed from unfettered market capitalism.

As Choate sees it the United States is in a fierce competition against other nations of the world; not on ideological terms like during the Cold War or physical terms like during World War I and World War II, but in purely economic terms. The United States practices "market capitalism", the rest of the industrialized and developing world practices "state capitalism" in one form or another. In essence, an American company must face off against the coordinated efforts of an entire country in international competition. This is a losing scenario every time.

The author sees a way to save market capitalism, and we can do so by incorporating some of the oversight and regulatory framework employed by our competition while still encouraging the innovation and free competition of our own. The world of high finance, for example, was riddled with instabilities because the government had turned a blind eye and for so long allowed the industry to run itself. The result was a cataclysmic collapse which nearly destroyed what was left of the American economy. With only a moderate amount of regulation and oversight, by existing agencies like the FDIC, the U.S. could shed the bad, keep the good, and prosper in the future.

In the international marketplace, Choate believes it is time to get America back on its feet and committed to what is in essence and raging trade war. By simply adopting a value-added tax to all consumption in the economy the United States could raise hundreds of billions of dollars from the imports it brings in every day - without the VAT these imports represent nothing more than a drain on our economy. A simplified tax structure at the same time discourage waste, prosecute fraud, generate revenue, and increase efficiency. The government could fund itself without foreign loan programs and become a viable and solvent agency once again.

Choate's work outlines dozens of areas of improvement and a simple way to achieve mutually beneficial goals. Most importantly, with the clarity of hindsight as our guide, it offers real solutions to the problems which have because obvious to nearly every American.

A must read for anyone interested in U.S. or foreign policy.