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The End of Influence: What Happens When Other Countries Have the Money Hardcover – Bargain Price, January 5, 2010
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From Publishers Weekly
In this reasoned chronicle of worldwide fiscal and cultural influence from pre-WWI to the present, Berkeley academics Cohen and DeLong (Macroeconomics) measure the rise and decline of U.S. prestige, concluding that the era of U.S. dominance is over: "The United States will continue to be a world leader... But it will no longer be the boss." Presenting an in-depth examination of deficits, export policies, sovereign wealth funds, the U.S. Department of Defense, and foreign expansion (as well as caveats galore), Cohen and DeLong craft a chilling portrait of the country's accelerating fiscal woes: "In every year since 1976, the United States has run international trade deficits that collectively add up to 7 trillion. More than 70 percent of that 7 trillion has been added since 2000." Pursuing the causes underlying the current worldwide economic crisis-the financial rules and lack thereof-Cohen and DeLong depict the effort to restore the global economy as a massive task, fraught with peril and the specter of unintended consequences; growing economic inequity between the U.S. and China, for instance, represents "a financial balance of terror." Though most appropriate for fiscal wonks, Cohen and DeLong's analysis is clear and concise enough for the concerned layperson. END
“Cohen and DeLong’s interesting look at the real New World Order is worthy of consideration as it describes a reality that's fast approaching.”
“…a brilliant short tour of the rise and fall of the neoliberal project on an international basis.”
Forbes.com, January 11, 2010
" In their new book The End of Influence, Stephen S. Cohen and J. Bradford DeLong vividly describe the evaporation of American economic power and what it is likely to mean for the United States and the world."
Top customer reviews
That said, the book has its moments. The best one, for me at least, was the discussion of the bloated financial sector in the United States and its relation to the self-serving decision (politically) of the US to serve as garbage dump for the rest of the world's manufactured surpluses. Oh, the perils of exorbitant privilege: the rich get richer and the poor get lots of stuff from China, or maybe it's the middle class. In any event, there's no attempt to sort out cause and effect, and only the coyest of admissions that de Long may have been part of the intellectual establishment of the Econ (see Summers, Harvard roomate) that helped foist this neoliberal paradise on gullible Americans who, at best, lack impulse control and the ability to defer gratification. The insiders' swipe at Bill Easterly is really funny--if you're an insider.And incomprehensible if you're not.
Really, this is a piece of self-indulgent crap from a Berkeley boondogle called BRIE (clever, huh?). A little less zin while you write, guys. You might make more sense--which people who are as sharp as de Long have an obligation to do.
As for the SWF's, not a lot of new ideas were discussed here. However, the authors did provide a clear explanation of the Chinese peg of the Yuan to the dollar and how that fact has created imbalances in the world economy in the form of huge reserves on the Chinese side and massive deficits and excessive consumption on the U.S. side. The authors also raised a few interesting questions regarding the role of the SWF in the U.S. economy, and how the Chinese will use their excessive reserves to take control of American companies in order to obtain their knowledge and the like. I found it quite odd that the authors failed to mention that the Chinese have been buying natural resource companies like hot rolls straight out of the oven in order to secure themselves access to natural resources in a world where the price of commodities has been rising steadily and the U.S. dollar has been declining. All in all, the discussion of SWF's was interesting even though somewhat shallow.
As for the decline of the Neo-liberals, in short, no new added value here. The same old review of the deregulation process the Western economies went through in the past 30 years or so..
Overall, although not without flaws this book was a rather interesting and quick read. Having said that, the authors failed to provide a concrete conclusion to the question that the subtitle raises of "what happens when other countries have the money?".
It is amazing what you can pack into 160 pages without ever seeming to pack. Stephen Cohen and J. Bradford DeLong, both professors at Berkeley, make their erudition and their prose seem effortless. In the process, they tell you what happened to the global economy and why, where the money went and who's got it, what will happen next and when to start really worrying. They also manage to be ironic every now and then--something you seldom find in business books--and give this slim volume a personality lacking in most of the hand wringing and blame-laying out there.
The book starts with a stark, simple statement. After 60 years of economic dominance, the United States has seen the money on which that was based begin "to drain away. Soon it will be gone." The reader and the U.S. economy both will have to take a big gulp and go on. We will have to learn to be one nation among many, not the dominant one, just as post-imperial Britain did.
The authors' point is that the neoliberal prescription of free markets with as little government intervention as possible has run its course. To be clear, neoliberalism exists on both the right and the left. Barry Goldwater was a neoliberal, so were Margaret Thatcher, Jimmy Carter and Bill Clinton--strange bedfellows but sharing the belief that you should "free up the market and let it rip."
Several things have happened to bring that chapter to a close.
First, other countries managed their economies while we let ours rip. "America doesn't `do' industrial policy," the authors write. "We don't like it. We don't approve of others doing it. We think that when they do, it hurts us and usually ends up hurting them as well. Furthermore, we're just not set up to do it." But as Japan built its steel and shipping industries and Brazil built Embraer into a national champion in regional jets, the United States lost its manufacturing sector and its dominance in the oil industry. Those that have implemented industrial policies most successfully have what Thorstein Veblen called "the advantage of backwardness." They didn't have to reinvent themselves; they just had to catch up with us. And we became easier to catch as we lost ground over time.
Second, the juggernaut that is China has put together "the fastest, biggest economic success in world history." We do not actually import from China. We import from "an integrated trans-Asian production network" that includes high-end components from countries like Japan and raw materials from Australia, all of it feeding into and out of production in China. In addition, a lot of China's growth comes from innovation's overflow into the rest of its industrial ecosystem propped up by an undervalued currency. We squandered the opportunity to move into higher-value exports. Instead, the Chinese bought dollars and plowed them back into our financial system. As manufacturing declined, finance grew in exact inverse proportion--from 21% of GDP to 14% for manufacturing and the exact opposite for finance.
Finally, we borrowed our way out of dominance. As a nation and as individuals, we owe more than we earn. We have, as they say, negative equity. Our economy is under water and, like Britain at the end of the First World War, we don't have the money to do anything about it.
The recession recovery plans currently underway will buy us time, say Cohen and Bradford, but they can't put Humpty Dumpty back together again. "After all," they conclude, "Humpty was an egg."