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The War for Wealth: The True Story of Globalization, or Why the Flat World is Broken

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Steingart believes we spend too much time worrying about places like Kabul and Baghdad, and not enough thinking about places like Shanghai. "The War for Wealth" then details that case. Steingart also contends that the true tale of globalization is not being told - it is anything but a win-win situation. By 2025 China and India will likely dominate the world market with their purchasing power. It took both the U.S. and Japan about 40 years to double their per capita GDP; China took only twelve years.

Harvard historian David Landes believes that their success (and others) is determined by culture - moral values and behaviors. Unfortunately, per Steingart, we currently are paving the road to our demise with self-deception and self-affirmation.

Premier Deng Xiaoping was underestimated by Western leaders when he took over after Mao's death - partly because capitalism was seen as incompatible with a lack of democracy. Deng began by gradually liberalizing restraints on China's collectivized farmers, and in five years 98% of farmland was back in their hands. Deng also put off the military demands for resources, telling them the economy needed to grow first. Subsidies for government businesses decreased, then stopped, in exchange for the state no longer claiming all their revenues. Deng also opened China to foreign investment - $7 million in 1980, $250 billion now. Deng's changes were much more successful than those in resource-rich Russia which underwent a U.S. consultant-led crash immersion.

Brazil, Russia, China, and India together comprise about 45% of the world's labor supply. This will increase further - by 2050 another 1.2 billion are expected to live in Asia.

Those waiting for Chinese wages to equal those in the U.S., thereby eliminating its competitive advantage, have a long wait - Steingart estimates it will take another 30 years before Asian incomes are half as high as those in the U.S., if wage growth in Asia remains constant.

Eighty percent of Wal-Mart's suppliers are in China; until 2004 the U.S. was the largest exporter of IT products - now it is China.

Chinese innovation is accelerated by partnership requirements placed on Westerners building in China, piracy, espionage, R&D spending about 1/3 that of the U.S. (not adjusted for currency differences), extensive training in U.S. universities, higher IQs (about 10 points, on average, per research elsewhere; nine of Microsoft's ten most promising employees are Asian), and buying Western companies and resources. (Hitachi bought RCA and found it could sell its products at a higher price using the RCA label.)

Not only is Chinese labor much cheaper than that in the U.S., it doesn't have the social overhead costs of the U.S. - eg. health care and pensions.

Potential Flashpoints in the Future: North Korea (supported by China) vs. South Korea, India (backed by Russia) vs. Pakistan (backed by China), and Taiwan. Meanwhile, the U.S. and China continue their strange economic relationship.

"The War for Wealth's" one weakness lies in its recommendations - eg. more R&D in the U.S. That cannot overcome a dramatic cost difference held by a nation that is rapidly moving from production to also provide capable design and invention as well.

I am currently researching NATO's history, so I was immediately intrigued when I heard about Gabor Steingart's ideas on an "economic NATO" - a stronger partnership between Europe and the US intended to grapple with the challenges posed by emerging economic powerhouses such as China and India and the new forms of authoritarian democracy they propagate. I would not agree with all the conclusions of his book -- overall, I am more optimistic that future giants such as China will ultimately come to the conclusion that increasingly playing by the rules is in their best interest, and that current giants like the US will manage to remain competitive, just as they did when confronted by another economic threat from Asia, Japan, in the 1980s. However, Steingart presents an inspiring and thought-provoking case for the need for stronger transatlantic cooperation: he mixes compelling reporting from all over the world with sharp and concise analysis. The far-reaching interview with Prof. Samuelson at the end of the book is big plus, too.

I particularly liked, though, that Steingart does not hesitate to develop a real vision for the partnership between Europe and the US. In the conclusion, he refers to John F. Kennedy's Philadelphia speech from 1962 and his often overlooked ideas on a transatlantic cooperation beyond NATO. Given the roadblocks even minor agreements seem to encounter, it might be overly optimistic to hope for really closer ties anytime soon -- but any outline of a vision for the future is badly needed in the current debates on the relationship between Europe and the US. That is because, unfortunately, far too many people on both sides of the Atlantic seem to consider the "special relationship" a thing of the past rather than the huge field of opportunity it actually is

Gabor Steingart not only takes the incredibly complex issue of globalization and puts it into terms we can all recognize and understand, but he then dares to go where many authors fear to tread: he offers solutions. For anyone seriously interested in the future of America, it's a real page-turner. Kris Kline, co-author Estados Unidos/United States

Gabor Steingart argues that the biggest challenge that the United States, and more generally the West, faces, is not terror, but globalization (p. ix). Globalization is a process that polarizes and divides, producing a large number of winners and losers (p. 142). Think for example about what has been going on in the United States for decades: Deindustrialization, a persistent trade deficit, and a fast-growing debt (pp. 9, 13, 69-76, 79, 81-90, 145-49, 159, 172, 190-93, 225, 229-32, 237). Steingart observes that economic strength is not a guarantee but a condition of the ability to become and remain a world power (pp. 123, 172-78).

Steingart is critical of both die-hard free traders and unreconstructed protectionists in the West. Both groups share an inability to change due to their unwillingness to acquire new knowledge that challenges their moral values and behaviors (pp. 8-10, 15, 21, 122, 133, 190-93, 241-45). Openmindness is the key driver behind the rise and fall of world powers (pp. 7-8, 224).

Steingart points out that the 20th century triumph of (Western) liberalism over both fascism and communism went hand in hand with the resurgence of Asia (pp. 7, 125, 161, 167). Democracy and the market economy are not connected like Siamese twins (p. 102). Asia is the theater of a clash of values and behaviors that fuels instability (pp. 203-22, 225-30). Unlike countries such as India, Japan, South Korea, and Taiwan; China and Russia combine capitalism with an authoritarian state (pp. 102-05, 124-25, 207-08, 228). Steingart pleads for the democratization of globalization, a new paradigm for the worldwide economy that takes away its archaic and authoritarian characteristics (pp. 21, 230-60).

To achieve this goal, Steingart spends most of his time debunking what he calls the seven fallacies of globalization (pp. 10-21):

1. The logical progression for a developed economy is to move from an industry-based to a service-based economy. Like Erik Reinert, Steingart rightly stresses the critical importance of the manufacturing sector as a vector of innovation and riches for a (developed) economy. Service jobs are at the end of the production chain, not an independent unit. When manufacturing jobs get offshored, service jobs will soon follow (pp. 11-12, 77, 79, 232). The West is losing jobs that cannot be replaced with jobs in the service economy (pp. 123, 143). In their arrogance, some politicians regard consumption without production a sign of strength (pp. 80-81, 237). Unfortunately, Steingart does not acknowledge that Asian countries like China are also subject to the offshoring of manufacturing jobs to "more convenient" locations.

2. Economics and morals have no commonality. Steingart contrasts the more sophisticated capitalism of the West, which aims to protect both the environment and its workers, with a brutal and primitive form of capitalism that prevails in some Asian countries that are willing to do everything for less (pp. ix, 13, 35, 52-53, 178-90, 217, 242-45, 257-58). Most Western consumers are co-responsible for this situation: they compare prices and performance, but they could not care less about nationalities or social welfare systems (pp. 152, 193). However, Western economies as a whole suffer, and in the end even the individuals pay an additional price through, for example, deindustrialization and wage adjustments (pp. 13, 15, 152-54, 190-93)

3. The new world is flat. Steingart disagrees with Thomas Friedman by demonstrating that unlike the labor market in the West, the worldwide labor market is not a flat world or a playing field (pp. 14-15, 66-67, 130, 241). The labor market is unlimited for the Western capitalist, not for the (high-wage) Western worker (pp. 140, 147-50, 154-66). Wage declines and unemployment are the two forms of wage adjustment in the West to cope with the (Western-driven) competition from Asia (pp. 136-40, 144, 184, 193-201).

4. The tide of globalization automatically lifts all boats. Globalization does not benefit everyone to the same degree. It also produces many losers in the lower and middle classes (pp. 15-17, 69, 73, 76-77, 192-93, 235). Many Americans have the feeling that they are no longer valued as workers, but only as consumers (p. 122).

5. Globalization fosters peace. Steingart reminds us that the first wave of globalization died on the battlefields of WWI because the industrial revolution did not go hand in hand with a revolution of political thought in Europe (pp. 27, 37, 41-42, 210-12, 218-19). History could repeat itself. Economic globalization alone is no guarantee of peace because globalization to this day remains excessive and unstable (pp. 35, 47, 58-61, 64-65, 122, 170, 203-22). There is no institutional cross-border framework to reduce the imbalances and alleviate the tensions in Asia (pp. 221-22).

6. A nation is powerless to do something for the people in its care. Steingart correctly remarks that no government in the West has the legitimacy to fundamentally transform the state and the economy. Blaming politicians for it is both cheap and wrong because of the checks and balances of a democracy (pp. 122-23). However, Steingart invites those responsible for making economic policy in the West to keep in mind that the interests of the employed are no less global than those of capital. Steingart exhorts trade politicians to become globalization politicians (p. 19).

7. Globalization is too hot an issue to handle for a single person. Steingart challenges this powerlessness by remarking that in a democracy, people are citizens, consumers, and/or investors with the power to push for changes (pp. 21, 152, 193, 241).

To summarize, Steingart invites the United States to play a more active role in designing the ground rules so that globalization serves the people (pp. 21, 230-60). Steingart pleads for the enactment of stricter industry standards worldwide to level the playing field in order to strike a better balance between capital and labor (pp. 237-41, 245-50). Trade is a question of usefulness and not a matter of belief (pp. 15, 232, 243, 257). Power follows ideas, not the other way around (p. 252). Otherwise, Asia will take the lead in rewriting world history (pp. 125, 232).

Gabor Steingart's book, the War for Wealth, offers a compelling and frightening assessment on the global balance of power and how it is changing. Steingart shows that while the US, Europe and other liberal democratic countries have enjoyed preeminent economic status and a high quality of life, the rise of China and India and other developing nations are emerging as very real and serious threats. He offers a wealth of informed and insightful commentary on the nature of these threats and what can be done to counteract them. This book is essential reading to anyone interested in understanding the way in which the global balance of power is shifting and how we can respond.

I feel almost personally grateful to Steingart because he has written something I have always wanted to say, but couldn't possibly have said so well.

The questions he asks on page 227, for example, have been troubling me for years. I beseech every American to pause and respond to these buring questions.

"Did you really believe that you could live, in the long term, on borrowed money?
"Who actually claimed that such a large nation doesn't need an industrial base?
"Where are the men and women who made us believe that a negative balance of trade is a sigh of strength?
"Why did no one on Wall Street sound the alarm bell when the U.S. dollar became eroded and lost intrinsic value for such a prolonged period of time?
"Is it possible that no one could have noticed a country that was once the world's biggest lender selling off its assets to others?
"How could the entrenchment of economic inequality in a democratic nation have been tolerated for so long?
"What happed to the upward mobility that was once this country's trademark?
"And, last but not least: why did democracy, which is supposed to react more quickly to malfunctions than other forms of government, fail so miserably?"

As someone who genuinely wishes America well, it pains me to see this great country de-industrialized and become the biggest debtor in human history, reduced to begging more loans from foreign powers such as the Chinese Communist regime.

My gut feeling is that it's too late to remedy the dire situation. I pray miracle happens. I wish to be proven wrong.

By the way, Deng Xiaoping was never premier of China, as Steingart told us. His official position, when he did hold one, was vice-premier, though he was the paramount leader of the Chinese Communist Party from the early 80s. Chinese politics was bizare.

I congratulate Gabor Steingart for writing a book that clearly defines the problems for the West brought about by globalization. He suggests realistic ideas for mitigating the worst aspects of this process. His historical context of India and China and analysis of their current direction and strategies makes it very clear that the West better act quickly to protect our culture and institutions. America's foolish self-subjugation to corporate self interest is the wrong path. We're empowering China without regard to our long-term needs. My only criticism is that he's much too lenient with the Bush administration's many failures. This is a great book and Pulitzer Prize quality writing.

This book is worth reading simply for the pertinent information on world economic trends. I found it interesting and well written, though shallow. If you are a devotee of "realpolitik" this book will likely "fry your burger." If, however, you are looking for in-depth analysis of the forces driving globalization and are committed to the advancement of human rights you may be disappointed in this book. It is like a flyover of a landscape at a few thousand feet; it gives a nice overview of the topography but fails to seriously address the tectonics, climate, and plant and animal communities that shape it, to dangerously stretch the metaphor. His bottom line on globalization: You can't fight the future, but maybe the West can unite to fend off the economic warfare being waged against us by the yellow scourge. He sees the demise of the welfare state and labor unions as natural and not particularly lamentable outcomes of globalization. He advocates nationalized health care paid for by a national sales tax in order to unburden the flagging US corporations of their labor obligations. I think this is a splendid idea as long as the tax is levied on all sales at the same rate, including stocks and securities (that will be the day). One sub-text to be gleaned:If you're in the upper economic strata, relax; life will only get better. It's only the working stiffs at the bottom who will really suffer. The parasites at the top will always find plenty of fresh blood to suck (my terminology, not his).

Among the fairly simple, but politically difficult recommendations is to eliminate income based taxes and instead tax consumption. The US policy of taxing income of individuals and, especially corporations, effectively makes US products gives importers a free ride and makes US exports uncompetitive internationally. Taxing sales not only levels the playing field for US producers domestically and internationally, but also greatly reduces tax fraud and black market free riders.

Eliminate the tax on savings and capital gains and odds are people would save and invest more.

Globalization has had a strong, yet subtle, propaganda from both the "liberal" and conservative media in the last years. Just take a look at magazines Newsweek, Time and many others, but above all The Economist. They are always reminding us how important is that companies can freely operate globally. Fareed Zakaria, for example, wrote some weeks ago that while ipods are made abroad, most of the profits go to Apple. Good for Steve and Co. but bad for common people who don't own corporations. Instead, Mr. Zakaria chose to show off the startlingly low American unemployment statistics. As for web sites, go to the ultraconservative [...], which has a single one writer against free trade, Pat Buchanan.

Gabor Steingart is one of the few writers who goes deeper that and exposes what holds the terrific unemployment statistics: part-time jobs (no matter how few hours a week), minimum wages and plain unemployed simply masked. We can even say it is as hard to get in those statistics as getting into an ivy-league college. According to the US Labor statistics, the minimum wage jobs are meant to be the main jobs sources by far and large in the next years. There will be like 600,000 opening for college professors and many others for college graduates, which all in all won't take the whole youth needing jobs. Yet, most of the media (both "liberal" and conservative) remain simplifying the issue and keeping repeating the great unemployment statistics and Wal-Mart prices (which are not so great either), just like a nazi general used to say to keep lying until people believe them.

The news channels don't promote globalization as much, instead they distract us and focus on the oversimplification of the "culture wars" (both excessive liberals or conservatives, who are minorities in USA) , missing people (like 1 in 100,000) and most recently have only paid attention to the political campaigns and the financial crisis. These issues are surely important and still second in importance to the basic need of making a living, which globalization won't let us do. No matter how cheap a product can be as the propaganda always says, if you don't have a job you can't buy much, which is happening to more and more millions of people all over the 1st world, as Gabor well exposes.