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Manufacturing is still critical to the economy United States. Clyde Prestowitz, says it's time to start realizing the positive spillovers that manufacturing creates... Read more  

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Stephen Olson at Chinese Development Institute Conference

 

 Clyde Prestowitz giving presentation to CDI...

 

Steve Olson teaching trade negotiations at the Mekong Institute...

 

Stephen Olson to speak at upcoming workshop organized by the International Institute for Trade and Development on 

"Economics of GMS Agricultural trade in goods and services towards the world market"

Chiangmai, Thailand Sep 8-12.

Book Reviews & Citations

(06/22/05) Three Billion New Capitalist discussed in the Houston Chronicle

(06/22/05) Three Billion New Capitalist discussed in the Houston Chronicle
FIVE QUESTIONS WITH CLYDE PRESTOWITZ
The Houston Chronicle
June 22, 2005, Wednesday 3 STAR EDITION


HEADLINE: Moneymakers ;
FIVE QUESTIONS WITH CLYDE PRESTOWITZ ;
Ex-Reagan adviser predicts rise of developing countries

BYLINE: MASON LERNER, Houston Chronicle correspondent

BODY:
India, China, Russia and Latin America are supplying the world's economy with an unprecedented amount of inexpensive, skilled labor in a remarkably short period of time.

Eventually, one or all of them will become economic powers on par with the U.S.

Former Reagan administration official Clyde Prestowitz - in Houston recently promoting his new book Three Billion New Capitalists: The Great Shift of Wealth and Power to the East - argues that U.S. leaders need to adopt policies that allow them to do just that.

Prestowitz, founder of the Economic Strategy Institute, talked with Chronicle correspondent Mason Lerner about the state of the global economy.

Q: What is the premise of your new book?

A: There is a historic shift right now in the world economy. Six hundred years ago, the places we now call China and India accounted for 70 percent of the global economy. There wasn't any America, and Europe was insignificant.

By 1950, China and India were only like 10 percent of the world economy, while Europe and America were 75-80 percent. But in the last 10 years, we've had 3 billion new people from China, India and the former Soviet bloc come into the global economy, and these economies are growing rapidly.

We're beginning to see a readjustment back toward the historical norm.

Q: What besides the 3 billion new capitalists is contributing to the change?

A: There are two revolutions. The thing that is really interesting is that, typically, when we think of developing countries, we think of them as countries that are poor because their workers have low skills.

So we think of them as being good at making labor-intensive products, like shoes and clothing. We think of them as being good at doing this because they have low-cost labor.

They are capable of the same high-skill, high-tech production, but they can do it for 25 cents on the dollar.

The second revolution is that in the past, because of time, distance and barriers, it's been difficult and costly to move things from, say, India to the U.S., but with the Internet today anything that can be done digitally can be delivered in two seconds.

Q: Is it inevitable that we won't be the No. 1 world economic powerhouse in the near future?

A: We're going to be a powerhouse for a long time, but I think one thing that is important to understand is that we account for 5 percent of the world's population and we are 30 percent of the world's economy. That's kind of unnatural. It would be better if the other guys were doing better, and that's going to happen.

China, India, Eastern Europe and Latin America are all going to achieve a more proportional share of global output, and we want them to. The worst thing would be them failing. We don't want 3 billion people turning into refugees. What we need to do is use the leadership, capability and the power that we have to share the global economy in such a way as to help them to succeed. The benefit of their success will create a system that is complementary and allows all of us to win.

Q: So it's important for the U.S. to adjust in a way that lets the rest of the world see that we are trying to benefit the world economy?

A: Absolutely. It's also very important for us to adjust in a way that maintains our ability to continue to pay high wages and to stay at the leading edge of technology. So, it's a tricky thing that we have to do. We have to be tough but also soft enough that we don't alienate everybody. It's kind of tough love.

Q: What are some errors the Bush administration is making in regard to the global economy?

A: The thing is, this is an area where the current administration and past administrations including the Democrats and Republicans have all been pretty similar.

They've all made pretty much the same mistakes. The mistakes are we keep telling ourselves that a strong dollar is good for the U.S. economy.

Actually a strong dollar is not necessarily good for the U.S. economy, because it drives production costs up. It makes exports expensive, and it tends to result in an artificial move of productive capacity out of the U.S., of high-tech capacity out of the U.S. and into other locations that may not be suited for it.

But because the dollar is artificially being maintained at too high a rate, it artificially forces these industries into less developed, lower-cost areas.

GRAPHIC: Photo: CLYDE PRESTOWITZ: "We're going to be a powerhouse for a long time, but I think one thing that is important to understand is that we account for 5 percent of the world's population and we are 30 percent of the world's economy. That's kind of unnatural. In fact, it's not healthy. It would be better if the other guys were doing better, and that's going to happen."; BEN DeSOTO: CHRONICLE
 
 
   

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