Book Review: "The War for Wealth" by Gabor Steingart

For the past several years increasing numbers of jobs have been outsourced overseas. First it was just blue-collar jobs, but now white-collar positions are being outsourced as well. A union job or a college degree used to a virtual guarantee for secure employment, but that is no longer the case. We worry about our own job security while also wondering about what jobs our children can pursue that won't one day be outsourced as well. We have also seen a huge influx of products made in China. It seems we can't find anything made in the USA anymore and so we have lost a lot of consumer choice. We were told free trade would be good for all of us, but is it really? Is there a connection between all the imports from China and the loss of jobs in America? Is this just a normal economic cycle? Will things get better, or will they just continue to get worse? It was against this backdrop of questions running through my mind that I read Gabor Steingart's book, "The War for Wealth" and hoped that some of my questions would be answered.

Rather than just jumping in and focusing on the current economic climate, Gabor takes the reader back through the history of globalization in order to set the stage. He takes a look at European history and how industrialization led to increased productivity and excess goods. This in turn led to colonization as the European powers sought out other countries to purchase their goods. The drive to find new consumers often resulted in war. China wasn't interested in trading with the outside world, so Britain started a war, opened China's borders to trade, and took Taiwan as a trophy. The United States itself benefited from war and probably wouldn't have become a super power if it wasn't for World War I. The war devastated Europe and the US was unscathed, so we were able to step in and fill the void. Virtually overnight our industrial output increased by 50%. The economy suffered during the Depression, but then the economy grew dramatically again after World War II as returning soldiers were trained and productivity increased again. This era also saw the rise of social welfare programs that we take for granted today. Something I had never realized before was that the advent of aiding the unemployed didn't rise from humanitarian concerns, but rather to increase their buying power and stop the country from slipping into economic decline. I was also surprised to learn that Kennedy was the first president to institute tax breaks to corporations and the wealthy in order to increase consumer spending and keep the economy afloat.

Sprinkled throughout the book are various facts and figures that show how much things have changed in the economy in the last forty years, and it's a grim picture. The US share of global exports has been cut in half since 1960 and our products no longer compete in the global markets. We used to be the world's largest exporter, but now we have become its largest importer and our trade deficit continues to grow. One quarter or our industrial jobs have also been lost since the 1970s. Rather than our economy being fueled by production as it was in the past, domestic economic growth is now being fueled by foreign debt, consumer debt, and the frittering away of our assets. The US was a creditor at the time of WWI, but now we have become the worlds largest debtor nation. Two-thirds of the nation's economic activity is consumer spending, so the middle class is spending itself into debt and our standard of living continues to shrink. Because we are buying so many imported products (80% of WalMart's suppliers are from China), our money is flowing into other economies and creating wealth abroad while our own economy is sputtering and in the red. And as our economy struggles, China and India are surging ahead. They have no national debt and their industries are flourishing, thanks to our spending. It is estimated that if things continue on the current course, China and India will dominate the world market with their purchasing power by 2025.

So how did the tables get turned against us? Why did China and India rise out of their third world status so quickly? The simple answer is their abundance of people who are willing to work hard at low wages in order to succeed and become a world player. 1.5 billion new workers have been brought into the equation so there is now an excess supply of cheap labor in the world that is competing for our jobs. Western economies have depended on capitalists who have provided the capital for industry. Capitalists have always gone where they expect the highest return on their investments, but now they are no longer just exporting goods, but exporting jobs and entire industries as well. We should not judge capitalists though, because it is human nature - workers also seek out the highest pay and benefits possible so that they will get a good return on their work efforts. And just as businesses have moved jobs overseas in order to increase their profits, workers will often relocate as well in order to receive a higher pay elsewhere. But when jobs have been sent overseas it's not as easy for workers to follow those jobs across the borders. I suspect however that we would not find the wages and working conditions in China to be acceptable. The Chinese are accustomed to misery and hard work, but we are not. How many of us would be able to work in a factory where a sign states "If you do not work hard today you will be working harder tomorrow when you look for a new job"

The Western world has become accustomed to social welfare programs. We feel we are entitled to them because we are civilized, humanitarian nations. We expect there to be labor laws that protect our rights, ensure we have safe working conditions, provide minimum wages, allow union representation, provide for holiday, vacation and sick days, ensure race and gender equality, prohibit the use of child labor, and provide benefits when we are unemployed, disabled, or retired. However, these social welfare programs are non-existent in Asia and so they are able to underbid wage costs, resulting in the outsourcing of our jobs, and prices for their products are a lot less, which has resulted in the massive flow of their goods to our shores. The rules have changed and our social welfare net is vanishing. In an attempt to improve their competitiveness businesses are eliminating health benefits and unions have become virtually powerless as their industries are being exported. Consumers get angry at big business for not honoring their social contracts with their workers while ignoring the impact that their own purchases are having on our domestic economy. Consumers are focusing only on price and looking for bargains, but with each purchase of a cheap product from Asia it comes at the cost of our own well-being. We pay less, but our economy suffers and our social welfare is eroded further.

So, are there any answers? America has become distracted by the war on terror and has ignored the real threat to our economy and our future. We need to wake up, take the rise of Asia seriously, and address the new challenges that have been set before us. The world of business has become borderless, but we are no longer on a level playing field with a common set of rules. Along with the outsourcing of jobs and industries, our knowledge has also been transferred. The Chinese are known for ignoring intellectual property rights and regulations and so they have benefited from our knowledge through outright piracy as well as through the research facilities that they required our industries to set up in China as a requirement for doing business in China. China also has no unions, low wages, no pensions, and no health insurance. In order for the west to compete on a level playing field we need worldwide regulations and standards. It is well past time for our politicians and leaders to look beyond our borders and start thinking and acting globally.

I did not intend for this review to get so lengthy, but I found the book to be very informative and eye-opening. Rather than being the win-win situation that we were promised, globalization has led to a shift of power and wealth and the era of western dominance is ending. History is full of great societies that have failed and disappeared, so there is no guarantee that we will remain a super power or even have any global influence. The book ends with the following ominous observation: "Complete freedom of choice is part of the West's fundamental view of life. This freedom also includes the freedom to fail."