Book Summary Preview : Three Billion New Capitalists

The Big Idea

The relative economic superiority and power of the United States is quickly slipping away. This is mainly brought about by the rise of new superpowers, particularly China and India, which are ushering a third wave of globalization, one that is characterized not by corporations but by highly educated and skilled individuals - the three billion new capitalists. The continuous rise to power of countries such as China and India threatens to undermine the six-hundred year old dominance of the west, particularly that of the United States. 

This book serves as a shocking wake-up call for Americans and the rest of the world as it projects the world's economic future if the current trends continue. These trends include increasingly unsustainable trade deficits, the equally unsustainable and dangerous buildup of massive dollar reserves in some countries, the end of the U.S. position as the leader in science in technology, the outsourcing of jobs and the demographic meltdown in major parts of the world.

Towards the end of the book, the author offers practical suggestions on how the U.S. can avert a totally disastrous scenario.  

The Third Wave of Globalization

The first wave of globalization refers to the global expeditions led by Portugal and other European countries that eventually led to the discovery of America.  The second wave happened when post-World War II efforts of western countries led by the United States to construct economies and trading systems to counteract the growing influence of socialism and communism.  Today, all indications point to a fact that a third wave of globalization is now underway, headed by two Asian giants, China and India.

The third wave of globalization is ushered in by the rapid transfer of technology from developed to developing countries. It is seen to greatly impact the balance of power, corporate strategies and the current role of the United States as a global leader. The main characteristic of the third wave of globalization is that is more driven by real people - the three billion new capitalists - than by corporations.

Behind the third wave of globalization are several realities:

• The shift of the United States from being a major lending nation to having one of the biggest debts, which is now nearing $3 trillion. Moreover, U.S trade deficit is now over $700 billion accounting to about 6 percent of the nation's annual GDP.
  
  
• The zero savings of American households, the federal budget deficit and the excessive savings rates of foreign countries, particularly those in Asia are behind this huge trade deficit.

• The advent of the Euro and talks of a single Asian currency creates doubts on the sustainability of the dollar as the world's main currency.

• The decline of manufacturing in the United States from 23 percent of GDP in the 1980s to 14 percent as of the moment. The trade deficit of the United States is mostly in manufactured goods. Without the developments in its capacity to manufacture goods, the United States is in danger of going into a deep recession.

• High technology manufacturing and services have found their way to Asian countries as proven by the growing number of semiconductor plants in China, the fact that all mobile phone companies have moved their R&D to China, and the outsourcing of services work such as radiology and heart and joint replacement surgery in India.

• The assumption that service industries would compensate for the loss of manufacturing jobs does not hold true in the age of the Internet.

• The decline of the U.S spending on research and development and the deterioration of the country’s technology infrastructure coupled with the fact that other countries are producing increasing numbers of engineers and scientists.

• Although the American business model is the current standard of how business is done worldwide, its success is largely determined by fortunate circumstances and strong management. The rise of non-American businesses may challenge the status of the American business model as a global standard.

• The practice of Western business leaders, particularly those in the U.S., of granting favors to authoritarian governments may make these nations agents of foreign countries instead of their own.

• The fact that American workers cannot compete with Asian workers on a level playing field mainly because of their high salaries. The size of Asian markets, their endless supply of highly skilled yet low-paid professionals and investments incentives offered by their governments poses an irresistible package that is seen to attract investments away from developed countries.

• Americans are becoming increasingly uncompetitive as a result of poor education.
  
  
• The European Union is already the world's largest economic unit and China and India are set to become the world’s largest economies by the middle of the century if current trends continue. This will ultimately lead to a shift in the balance of global power with the United States in danger of losing its global leadership.

 

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