The Betrayal of American Prosperity: Free Market Delusions, America's Decline, and How We Must Compete in the Post-Dollar Era [Bargain Price] [Hardcover]

Clyde Prestowitz (Author)

Book Description

Publication Date: May 11, 2010

CONSIDER THIS SHOCKING FACT: while China’s number one export to the United States is $46 billion of computer equipment, the number one export from the U.S. to China is waste—$7.6 billion of waste paper and scrap metal.

Bestselling author Clyde Prestowitz reveals the astonishing extent of the erosion of the fundamental pillars of American economic might—beginning well before the 2008 financial crisis—and the great challenge we face for the future in competing with the economic juggernaut of China and the other fast-rising economies. As the arresting facts he introduces show, the U.S. is rapidly losing the basis of its wealth and power, as well as its freedom of action and independence. If we do not make dramatic changes quickly, we will confront a painful permanent slide in our standard of living; the dollar will no longer be the world’s currency; our military strength will be whittled away; and we will be increasingly subject to the will of China, Russia, Saudi Arabia, and various malcontents.

But it doesn’t have to be that way. As Prestowitz shows in a masterful account of how we’ve come to this fateful juncture, we have inflicted our economic decline on ourselves—we abandoned the extraordinary approach to growth that drove the country’s remarkable rise to superpower status from the early days of the republic up through World War II. For most of our history, we supported our home industries, protected our market against unfair trade, made the world’s finest products—leading the way in technological innovation—and we were strong savers. But in the post-WWII era, we reversed course as our leadership embraced a set of simplistically attractive but disastrously false ideas—that consumption rather than production should drive our economy; that free trade is always a win-win; that all globalization is good; that the market is always right and government regulation or intervention in the economy always causes more harm than good; and that it didn’t matter that our factories were fleeing overseas because we were moving to the "higher ground" of services. In a devastating account, Prestowitz shows just how flawed this orthodoxy is and how it has gutted the American economy. The 2008 financial crisis was only its most blatant and recent consequence.

It is time to abandon these false doctrines and to get back to the American way of growth that brought us to world leadership; Prestowitz presents a deeply researched and powerful set of highly practical steps that we can begin implementing immediately to reverse course and restore our economic leadership and excellence.

The Betrayal of American Prosperity is vital reading for all Americans concerned about the future of the economy and of our power in the coming era.

Editorial Reviews

From Publishers Weekly

High profile Washington economist Prestowitz (Three Billion New Capitalists) finds hope in the present economic collapse, which he believes will spur abandonment (however reluctantly) of "Laissez Faire Gobalization." As a campaign advisor to President Obama and a principal trade negotiator for Reagan, Prestowitz has repeatedly warned against disregarding foreign competition ("thinking of the United States as number one") as the U.S. suffers "a rapid erosion of its productive base." Overreliance upon capital markets that were actually "a corrupt, over-leveraged, house of cards" has shifted the global balance of power to Japan, China and Europe, regions with protectionist policies that the U.S. has failed to counter. The genesis of this downhill slide can be found in Cold War principles-low taxes, deregulation, privatization-necessitated by the times, but which have become enshrined at the expense of the New Deal "private sector-government partnership" that led to America's 20th century prosperity. An important contribution to the political debate, Prestowitz's volume suggests a number of solutions-abolishing the dividend tax, imposing a value-added tax, incentivizing foreign investment in the U.S., and doubling federal support of innovative technologies-all likely to prove controversial on both sides of the political divide.
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.

From Booklist

Has the economic vitality of the U.S. eroded so much that it cannot compete effectively against China, India, and other fast-growing economies? Prestowitz, consultant and former U.S. trade negotiator, thinks so, and he explains why in this challenging description of America’s fall from world leadership. Included among his reasons are the decline of the dollar, which has been the world’s main currency for carrying out international transactions; the “decisive shift in the global balance of power—away from the United States and toward East Asia and Europe . . . Brazil, India, Russia and Saudi Arabia”; and the scores of products and technologies against which the U.S. cannot compete. Prestowitz offers suggestions for restoring competitiveness, including instituting tax reform to increase government revenue; substantially revaluing “ a number of managed currencies versus the dollar and the euro over the next two to three years”; and reforming the World Trade Organization. All will not agree with the author, but his arguments are compelling. --Mary Whaley

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Product Details

• Hardcover: 352 pages
• Publisher: Free Press (May 11, 2010)
• Language: English
• ISBN-10: 1439119791
• ASIN: B0048ELCUQ
• Product Dimensions: 9.1 x 6.1 x 0.9 inches
• Shipping Weight: 1.1 pounds (View shipping rates and policies)
• Average Customer Review: 5.0 out of 5 stars  See all reviews (15 customer reviews)
• Amazon Best Sellers Rank: #851,265 in Books (See Top 100 in Books)

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Most Helpful Customer Reviews

40 of 41 people found the following review helpful

5.0 out of 5 stars Prestowitz captures the essence of America's naive approach to globalization and free trade May 16, 2010

By Bernard C. Bailey

Format:Hardcover|Amazon Verified Purchase

Clyde Prestowitz provides a candid and thoughtful analysis of the economic challenges facing the United States as we move forward in a global economic environment that has been transformed as a result of the decisions and trade-offs made by past US government administrations. As a former chief trade negotiator to Asia during the Reagan administration, Prestowitz provides a unique historical perspective on the various trade policies and economic trade-offs we have made as a nation to support our geopolitical purposes across the globe. This historical perspective is provided in the first four chapters of the book through a non-partisan approach that clearly demonstrates this is an American problem that has been created by both political parties. During the historical analysis, Prestowitz provides a thorough and thought provoking analysis of the issues our early founders, particularly Hamilton and Jefferson, wrestled with in determining the role government should play in helping to foster the economic development of the new nation. Prestowitz's argument is a convincing analysis that demonstrates that the "American Way" as outlined by the Washington Consensus is a relatively new and distinctly different approach than that fostered by our founding fathers. In other words, the early economic policies and institutions that helped to make America the richest and most powerful nation in the history of the world stand in stark contrast to those promoted by political administrations of the past forty years.

While painting a candid but somewhat bleak picture of the present day economic posture of the United States, Prestowitz does not leave the reader without hope. While clearly an opponent to orthodox free trade as espoused by the Chicago school, Prestowitz helps the reader to understand the fundamental assumptions that result in the flaws associated with this philosophy and argues for a more practical approach to fair trade that is grounded in the realities encountered in real world transactions. He concludes the book with four chapters that provide a prescription for business leaders, politicians, policy makers and all citizens to follow in an attempt to help America regain its positioning as the leader in the global marketplace.

While this book is written by an accomplished international economist, Prestowitz's style is engaging and thoughtful. Prestowitz presents his arguments with just enough relevant statistics and a splattering of case studies and vignettes to keep the reader wanting to continue to move through each chapter. Rather than gloss over some of the more difficult and important technical aspects of the global economy, Prestowitz presents them in clear and simple terms that are easily understood by those with a basic understanding of global economics. His analysis of currency valuations and the impact on trade deficits is just one example of where he excels in explaining the nuances of global economics to the uninitiated.

I would strongly recommend this book for anyone interested in gaining an apolitical perspective on the challenges America faces today in the global economy. Business leaders, policy makers, students of economics or interested citizens will all benefit from Clyde Prestowitz's deep insights and vast practical wisdom. He has done a great service to his country by presenting this forthright and candid analysis in a non-partisan prescriptive approach.

18 of 18 people found the following review helpful

5.0 out of 5 stars 4.5 stars-Excellent except for a mistaken view of Adam Smith October 5, 2010

By Michael Emmett Brady VINE™ VOICE

Format:Hardcover

The author correctly identifies the two major problems that have been occurring since the late 1970's in the world economy-a nonsensical belief in an incoherent, intellectual monstrosity called " Free Trade " ,combined with massive Wall Street speculation and securitization based on debt leverage that was financed by a deliberately concentrated," too big to fail " private banking system created by Wall Street through a constant series of mergers,acquisitions and takeovers.
This has led to the deindustrialization of the United States through the hollowing out , downsizing,and off shoring of the manufacturing industrial sector and outsourcing of millions of American jobs.
The author correctly identifies this as the policy resulting from the application of theories taught at the libertarian economics department and Booth School of Business at the University of Chicago.

The author loses a half of star for his incorrect assessment of Adam Smith's analysis of trade in the Wealth of Nations (1776) that is presented on pp.434-439 of the Modern Library(Cannan) edition with the forward by Max Lerner. Smith was an advocate of both retaliatory and revenue tariffs.He put in place the largest revenue tariffs in history as the head of Customs in Scotland in 1780.Alexander Hamilton copied Smith in this regard in 1794. Protectionist tariffs would be dismantled in a prudent,judicious,slow, and gradual manner so as not to negatively impact the fixed capital stock and/or create possible unemployment problems. Smith's views on retaliatory tariffs is, in fact, the first application of a game theoretic probabilistic mixed strategies approach in history since retaliation would automatically be resorted to unless the probability of the repeal of the offending countries tariffs was equal to 0. Any positive probability greater than 0 would lead Smith to advocate retaliation.Smith viewed a 100% free trade policy as " Utopian ". Consider,however, the author's incorrect assessment of Smith :

"Now what the GATT and its successor,the WTO,call " free trade ", is not what Adam Smith...or most American economists mean by " free trade ".For the economists,free trade means that a country unilaterally removes its tariffs and other trade barriers regardless of what its trading partners do.It means Laissez-faire or totally unregulated trade "(p.85).

This is ,in fact, the argument of Bentham, Say and Bastiat.However,it is NOT the argument of Smith.Smith would view the " modern" American economics profession's free trade argument with distain.

The author has a potential, powerful ally in Adam Smith.Adam Smith was not an economist.He was a philosopher who specialized in ethics.I recommend the purchase of this book.I hope that the author revises the book in a later edition in which he incorporates what Adam Smith actually said and not what some University of Chicago economist claims he said.

15 of 16 people found the following review helpful

5.0 out of 5 stars Mandatory Reading! May 21, 2010

By Loyd E. Eskildson HALL OF FAME

Format:Hardcover

China's #1 export to the U.S. is $46 billion of computer equipment - ours to China is $7.6 billion of waste paper and scrap metal. That factoid opens Prestowitz's latest book, "The Betrayal of American Prosperity," and pretty much sums it up. Reading any further will likely increase your heart rate and blood pressure. On the other hand, completing the book should be mandatory for every American - we're running out of time to recover from our affliction from free-market delusions and academic torpor.

Things have gotten so bad that efforts to revive our economy instead sometimes benefit others more. 'Cash for Clunkers' in 2009 boosted sales the most for Ford's 'Focus,' (50% made in the U.S.A.), with the next five greatest beneficiaries being Japanese and Korean automakers. Trade deficits have cost the U.S. economy about 10 million jobs, and lowered incomes for many of those remaining. Excluding income going to the top 1% (15% of total U.S. income, 4-5% in Japan and France), shows that the remaining 99% in Germany, Japan, U.K., and France have higher income than the remaining 99% in the U.S. - despite our working about 300 hours/year more than the OECD average. Much of our 'favorable' GDP growth vs. others is simply due to population growth (illegal immigrants), increased debt, and changes in U.S. productivity scoring. (When a 3 MHZ computer is replaced by a 6 MHZ model, we count the latest sale as '2 computers.')

Manufacturing accounts for about 75% of corporate R&D, and manufacturing wages are about 20% higher than those in services. Manufacturing also has a much higher job multiplier (4-5) than services (1-1.5), and provides better benefits. U.S. manufacturing as a proportion of GDP has fallen from 24% in 1980 to 12%, compared to Germany - 22%, France - 15%, and the U.K. - 13%. In 2008, 80 major chemical plants were constructed in the world - none in the U.S. Only 2% of new semiconductor fab plants under construction in 2007 were in the U.S. - 30% were in China, 25% in Taiwan, 22% in South Korea. Japan, Korea, and Taiwan dominate the development and manufacturing of LDC screens; two new $3+ billion plants are being built in China, none in the U.S. Other nations dominate photovoltaics, wind energy, advanced batteries, PCBs, shipbuilding, etc. Prestowitz blames higher U.S. taxes and regulations as major causes - because non-expatriated profits are neither taxed in the U.S. nor excluded from earnings reports, I'd contend pursuit of short-term profits from lower Asian labor costs as the biggest problem.

We still have a services trade surplus - $140 billion in 2008. But Alan Blinder, former Vice-Chairman of the Federal Reserve, predicts as many as 29% of remaining jobs could be off-shored in the next few years - for the same reason. Example: Infosys and Wipro are Indian software companies with about $2 billion in revenues each; EDS and computer Sciences Corp. are U.S.-based competitors, with revenues of $25 billion and $15 billion. The Indian firms have profit margins exceeding 20%, the Americans only about 3%. Guess why IBM is expanding in India (6,000 in 2003, 110,000 in 2010), and its U.S. employment (120,000) falling.

Every page is excellent - this should be mandatory reading!