- The world’s best competitors—with China in the lead—have
adopted elements of managed capitalism, in which government and
businesses work together toward a single aim.
- China’s objective is clear—to displace the United States as the world’s economic leader by becoming the global rule maker.
- If
the West does not act soon, it stands to lose everything it holds most
dear: financial prosperity, economic freedom, geopolitical power,
national security, and even democratic values.
This is
disruptive innovation on a global scale. But instead of companies using
breakthrough products and brands to gain market share, nations are
devising “game-changing” economic systems to seize influence over—and
beyond—the global economy.
Bleak as the situation may be, D’Aveni
contends that the West can reverse the trends currently tilting the
global balance of power.
In order to meet the challenges of the
future, America must revisit long-held assumptions about economics and
economies, seriously consider radical alternative policies, and embrace
the concept of
Strategic Capitalism.
Most Helpful Customer Review
Author d'Aveni describes how the new 'economic cold war' began, how the
best competitors utilize managed capitalism (government and business
working together), and what America will lose if it doesn't act soon.
The Forward is by Daniel DiMico, Nucor CEO, and also is noteworthy. Mr.
DiMico asserts that we are losing the trade war with China - it has
already cost us millions of jobs, thereby devastating our middle class
and government at all levels. He contends we need to enforce existing
trade laws and agreements to right things. Second, he contends we need a
national industrial strategy to replace the wishful thinking that a
service-based economy can replace manufacturing as a wealth-creating
engine. (Manufacturing used to be 30% of GDP, now it's at 9.9% -
recommends 20%.)
Traditional American capitalism has become
outdated. We have tied our hands and closed our minds - sticking to
politically correct discussions. It makes no sense for a nation to
maximize stockholder wealth transferring jobs and capital to foreign
markets, leaving one's own people without jobs and unable to pay their
mortgages. This is the equivalent of milking a mature nation (the U.S.),
risking its ultimate survival. We need to stop accepting our weak
economy as the 'new normal,' stop being distracted by wars, terrorism,
gay marriage, etc, stop relying on theories encapsulating what used to
work, stop focusing on the short term, stop believing that Free Trade
with China, Mexico, etc. is not a mostly win-lose proposition, and stop
predicting (hoping) that China's economic miracle will not last.
The
'really bad news' is that we're handcuffed by debts and deficits, our
government decisions in these areas are made by professional politicians
lacking expertise, cobbled together behind closed doors with strong
(bud well hidden) biases purchased by political donors, numerous
compromises that breed inconsistencies, conflicts, and holes. Suggests
consolidating eg. The Commerce Dept., SBA, and several other agencies as
a first step (proposed by Obama), and removing Congress from the
equation.
Japan was the first to burst America's Free Trade
honeymoon post WWII, treating customers, suppliers, and employees well,
and refining its manufacturing skills to produce both better quality and
lower costs. Japan, however, was dependent on the U.S. for its military
defense, and probably too amenable to U.S. prodding - eg. follow
accepted international monetary policy, leading to internal inflation.
China, however, owes the U.S. nothing, has a much larger population
(greater leverage over companies and investors, a seemingly infinite
supply of low-cost labor, and strongly held values in which individuals
are expected to sacrifice for the common good). It also has mastered the
ability to use its firms as instruments of state and foreign policy,
takes the long-term view, and does not manage to maximize profits. The
CCP appoints at least the top three positions in each of its 50 largest
SOES, and other state asset supervision entities control appointments at
many others. (SOEs make up about half the economy.)
Our
laissez-faire approach lacks national goals, forces firms to march to
Wall Street's tune, allows businesses to be managed for the almost
exclusive benefit of stockholders, and permits large numbers of jobs to
be sent overseas - impoverishing the general public. Our approach also
created three major recent problems - the Internet bubble, the real
estate bubble, and then the credit crisis.
China's Three Gorges
Dam provides 8X the power of Hoover Dam. It is targeting for non-fossil
fuels to generate 15% of energy by 2020, and building one nuclear power
plan/month.
China's Five Year Plan mandates that Chinese
components replace foreign parts in all core infrastructure.' Chinese
piracy costs an estimated $48 billion in U.S. 2009 sales (2.1 million
jobs).
In 2000, most countries traded much more heavily with the
U.S. than China. By 2010, India, Russia, Spain, Germany, Indonesia,
Italy, and Japan had moved into China's trade dominance, leaving the
U.S. with Turkey, Canada, Mexico, and the U.K. China is the world's
largest exporter (> $1.2 trillion, then Germany at $1.2 trillion, and
the U.S. at slightly less than $1 trillion).
U.S. annual
government investment in infrastructure (2.4%), China (9%), Europe (5%).
the national U.S. savings rate was 4.6% on 1/1/12, vs. 14.6% in 1975.
Germany's is 16%, China's 38-53% (depending on which recent year).
The
Heritage Foundation produces an 'Economic Freedom Index' comparing
various nations. In the early 2000s, those with the least freedom grew
the fastest, and by 2009 the relationship was negative. (Wealth/capital
vs. the Freedom Index displays the expected pattern - for now.)
We
need goals, depoliticizing the economic, long-term perspective, some
free-market incentives, nationalism, benchmarking, experimentation, the
ability to address problems quickly, and continuous improvement. The
author also recommends we push China to comply with the agreements it
has made, and establish a list of strategically important industries for
ourselves - eg. telecommunications and heavy equipment, steel, IT,
robotics, machine tools, etc., and return their production to the U.S.
