Turbo-Capitalism; Winners and Losers in the Global Economy


In this incisive critical analysis of today's free market capitalism, Edward Luttwak shows how it is vastly different from the controlled capitalism that flourished so successfully from 1945 to the 1980s. Turbo-capitalism is private enterprise liberated from government regulation, unchecked by effective trade unions, unfettered by concerns for employees or investment restrictions, and unhindered by taxation. It promises a dynamic, expanding economy and new wealth.

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In this incisive critical analysis of today's free market capitalism, Edward Luttwak shows how it is vastly different from the controlled capitalism that flourished so successfully from 1945 to the 1980s. Turbo-capitalism is private enterprise liberated from government regulation, unchecked by effective trade unions, unfettered by concerns for employees or investment restrictions, and unhindered by taxation. It promises a dynamic, expanding economy and new wealth.

The winners—the architects and acrobats of techno-organizational change—become much richer; the losers, the majority, become relatively or absolutely poorer and are forced by downsizing to take the traditional jobs of the underclass, more and more of whom end up in prison. Edward Luttwak challenges the conventional wisdom that jobs lost in old industries will be replaced by jobs in new ones. If General Motors fires you, Microsoft will not hire you; instead you'll be working in 'services,' often poorly paid.

Led by the United States, closely followed by Britain, turbo-capitalism is spreading fast throughout Europe, Asia, and the rest of the world (only in France and Japan is there any resistance) without the two great forces that check its enormous power in the United States: a powerful legal system and the stringent rules of American Calvinism. Acknowledging the great efficiency of turbo-capitalism, Luttwak provides no solutions but describes in powerful detail the major societal upheavals and inequities it causes and the broad dissatisfaction and anxiety that may result. He suggests this is a high price to pay for this great dilemma of our times.

"They call it the free market, but that is shorthand for much more than the freedom to buy and sell. What they celebrate, preach, and demand is private enterprise liberated from government regulation, unchecked by effective trade unions, unfettered by sentimental concerns over the fate of employees or communities, unrestrained by customs barriers or investment restrictions, and molested as little as possible by taxation. What they insistently demand is the privatization of state-owned businesses of all kind and the conversion of public institutions from universities and botanical gardens to prisons, from libraries and schools to old-age homes into private enterprises run for profit. What they promise is more dynamic economy that will generate new wealth—while saying nothing about the distribution of any wealth, old or new. They call it the free market, but I call it turbo-capitalism because it is so profoundly different from the strictly controlled capitalism that flourished from 1945 until the 1980s, and that brought the sensational novelty of mass affluence to the peoples of the United States, Western Europe, Japan, and all other countries that followed their paths."
— Edward Luttwak
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Editorial Reviews

Robert Kuttner
...[M]uch of his analysis parallels that of left-of-center critics. But since he is not really of that tradition either, his insightful book is short on remedy.The New York Times Book Review
Christopher Lehmann-Haupt
...[O]ne of those books that offer the reader perspectives on practically everything, often enough an unexpected one....True, some of the book's arguments are a little pat....[;however,] much of what Mr. Luttwak writes makes sense....In the end, he offers no prescription for turbo-capitalism, merely predicts that "the wave of the future could be populism."
The New York Times
Douglas A. Irwin
Mr. Luttwak is engaging and provocative, quirky and unpredictable. But his arguments are weakened by his use of empty cliches...[he] is not entirely convincing with the data....The biggest problem with Turbo-Capitalism is that Mr. Luttwak never sets forth a plan of action.
The Wall Street Journal
Jonathan Rowe
...[Q]uietly the more principled conservatism survives, and evidence of this is Turbo-Capitalism.....He sees the market as a qualified good rather than an absolute one, a means to an end but not an end in itself....Perhaps it will take a conservative to explain this new politics and prod the opinion establishment to acknowledge it. Edward Luttwak has offered a large contribution to this end.
Washington Monthly
Publishers Weekly - Publisher's Weekly
Since the administrations of Reagan and Thatcher, the virtues of deregulation and privatization have become accepted wisdom in the U.S. and the U.K. Luttwak, a senior fellow at the Center for Strategic and International Studies in Washington, D.C., and the author of The Endangered American Dream, has dubbed this free market, with its accelerated rate of structural change, "turbo-capitalism." Although he shares the general opinion that deregulation, privatization and globalization have reinvigorated sleepy economies, he writes that within the shiny apple of prosperity achieved in the U.S. and Britain lurks a worm in the form of reduced real wages, greater income inequality and increased alienation among those excluded from the benefits of growth. Luttwak argues that, in the U.S., such negative consequences are balanced by a vigorous legal system and Calvinist values. He is not as sanguine about the prospects for countries where turbo-capitalism is unchecked by such legal and cultural balances. Seeing unemployment as the global problem of our time and realizing that turbo-capitalism is more likely to aggravate than alleviate it, Luttwak singles out Japan as exemplary for its full employment policy, which endorses the position that the economy exists to serve society, not the other way around. Clearly relishing his Cassandra-like role, Luttwak outlines worst-case scenarios: conservative European monetary policy (with the euro) inhibits employment opportunities; geo-economic conflicts erupt with the spread of globalization. Even if his darkest forebodings never materialize, Luttwak puts readers on notice that, at the very least, speed bumps lie along the road ahead.
Holman W. Jenkins Jr.
[Littwak's] villains are deregulation, free trade, and the anti-inflation religion....Luttwak could not fail to write an interesting book, beng a man with an interesting mind...
National Review
Kirkus Reviews
Cosmopolite Luttwak again turns his attention to geoeconomics and offers a new locution for overheated, unregulated free-market enterprise. "Turbo-capitalism," he calls it, and it's what's happening in a new kind of boom-and-bust cycle. The fundamental structural change from the controlled capitalism that held sway from 1945 until the 1980s has been accelerating, and it creates more and destroys more, brings more efficiency and more inequality. Domestic controls are being dismantled. Unhampered by regulation, taxes, trade policy, national tradition, or humanitarian concerns, turbo-capitalism is ascendant worldwide as diverse economies join the free-for-all. The consequences are, to many, wonderful. To others, the author included, the dynamics of the rapid change are unsettling. New wealth seems to be everywhere, but, asks Luttwak, how is it distributed? Sure, unemployment in America is low. That's because American labor is increasingly cheap, he answers. Workers tossed overboard as corporate vessels race ahead, leaner and meaner, must reduce expectations to get on board again. Private mores and public morals change. Privatization increases and hegemony is shifting from governments to business. Heads of state become salesmen for indigenous industries in international trade wars. For each victory in geoeconomic combat, though, there's a loss of another kind. The new public policy will "accelerate the fracturing of. societies into Silicon valley heroes and vales of despond," Luttwak warns. Perhaps, according to his premise, it's a universal zero-sum game, but the disruptions are undeniable. And the disparity between rich and poor really is growing. A decidedly even-handed, cogentdiscussion, more descriptive than prescriptive. Here is an independent, thoughtful text, useful for interpreting tomorrow morning's economic news.
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Product Details

  • ISBN-13: 9780060193300
  • Publisher: HarperCollins Publishers
  • Publication date: 2/17/1999
  • Edition description: 1st U.S. Edition
  • Edition number: 1
  • Pages: 304
  • Product dimensions: 6.12 (w) x 9.25 (h) x 1.01 (d)

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Winners and Losers

0n penalty of suffering high unemployment and indeed longterm decline, the entire world is urgently being summoned to imitate the new ways of work and wealth of the American economy. New they certainly are. It was not until the end of the 1970s that today's roaring turbo-capitalism was unleashed by the abolition of anti-competition laws and regulations left over from the 1930s, by the technological innovations thus allowed, by the privatization of whatever could be privatized, and by the removal of most import barriers.

For individual Americans, the results have been spectacular, one way or another. Tens of thousands of acrobatic entrepreneurs and mere corporate managers, hundreds of thousands of bold or just lucky investors, have become multi-millionaires, billionaires or even multibillionaires. Because many prefer to believe that great enrichment is justified by great personal achievement, the computer pioneers from Microsoft's Bill Gates down to ordinary software centi-millionaires are forever being cited as typical of the new ultra-rich. But many prospered hugely in newly deregulated industries from natural gas to commercial banking, simply by taking what was offered to them once restrictions were lifted. Others still did very well yet more easily in plain old trades, just by floating on a rising stock-market tide.

High achievement is rewarded, but so is mediocrity, given an indulgent board of directors. Lawrence Coss, chief executive officer of Green Tree Financial, concurrently appeared on two different 1997 Business Week rankings of US corporate chiefs: one for the highest earners of 1996 —he was number one at $102,449,000, or $280,682 per day including weekends and vacations — and one for the least effective in raising shareholder value.

Some sixty million less enterprising Americans who were once paid rather well for routine work in unionized factories and corporate offices must now in effect compete every day with the labor-saving technologies which could replace them, and even with cheaper foreign labor. To keep their now perpetually insecure jobs, they and their unions have had to accept stagnant or even declining earnings and fringe benefits. By January 1997, with unemployment falling below 5 per cent in high boom times and emerging labor shortages here and there, the Chairman of the Federal Reserve, Alan Greenspan, worried aloud that this implicit bargain (job security for low inflation) would come to an end, bringing higher wages — not a worthy aim, but instead a dreadfuI prospect for America's official slayer of the dragon inflation. His fears were misplaced. Having increased by a mere 2.7 per cent — less than inflation — and thus fallen in real terms during the recovery year 1995, total pay and benefits increased by only 2.9 per cent even in the boom year 1996, and then by 3 per cent at the peak of the boom in 1997, only then finally gaining a fraction over inflation. 2

Others among the sixty million less fortunate Americans have failed to keep or find industrial or office jobs, thus being driven into poorly paid selling, serving, guarding, handling, laboring and cleaning jobs. In so doing, the downwardly mobile have claimed for themselves all the traditional occupations of the underclass, whose non-workers in turn account for most of the 1.8 million people behind bars at the last count. 3 Another 3.7 million were on probation or parole awaiting trial, so that the criminalized total of 5.5 million accounts for 2.8 per cent of the adult population of the United States, twice the proportion of 1980 when turbo-capitalism was just getting started.

The causal link between turbo-capitalism and crime passes through the accelerated technical and structural changes that have eliminated many urban industrial-type jobs. In the past, when the unskilled were still employable, it was enough to muster the energy and motivation to walk down the street to the nearest factory gate to be inducted for life into the economy. After that, mere inertia was enough to keep one's job and respectability.

As the economy has been transformed and nearby jobs have migrated away to suburbs, to non-union rural areas or abroad, or else have simply disappeared, many inner-city people have failed to become highly skilled cosmopolitans. Not everyone can find his or her own niche among the dazzling opportunities that turbo-capitalism offers, from foreign-exchange dealing on Wall Street or the City of London, to software writing in Silicon Valley or France's Sophia Antipolis and the better-paid professions. Unable to enter into the realm of work, they five on the fringes or in the core of criminal life, whether in America's inner cities or rural backwaters dotted with rusty trailer-homes, or in the run-down areas of Glasgow or Liverpool for that matter.

Another fifty million or so working Americans and their children have been living increasingly affluent lives. It is their prosperity that is so plainly visible in the ample houses of hundreds of suburbs across America, in the proliferation of luxury vehicles and pleasure boats, in palatial shopping centers and crowded holiday resorts. Many of them can live so well because they have high earnings in skilled trades or professions, in middle-high management, or by self-employment ranging from at-home consulting to the running of their own substantial business enterprises. Many Americans, however, live at an even higher standard than their incomes allow, because personal 'consumer' credit is so easily obtained. At the time of writing, the combined personal debt of all Americans has now reached the truly colossal level of five trillion dollars ($5,000 billion), almost nine-tenths of their total annual income. Perhaps it is the atmosphere of turbocapitalism, with its transatlantic private jets and designer mansions, that encourages people lower down the income ladder to spend much more than they earn. In any case, consumption is at an all-time high as a proportion of income, and savings are at an all-time low: a mere 4 per cent.

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Table of Contents

1 Winners and Losers 1
2 What is Turbo-Capitalism? 27
3 Glories and Downfalls of the Global Economy 54
4 The Microsoft Mirage 76
5 The Return of Poverty 91
6 The Era of Unemployment 102
7 The Theory and Practice of Geo-Economics 127
8 The Industrial Policy Debate 152
9 Turbo-Capitalism Comes to Russia 162
10 Free Trade as Ideology 181
11 Money as Religion 187
12 Shopping as Therapy 204
13 The Great Dilemma 215
App The Global Advance of Turbo-Capitalism 238
Index 280
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  • Anonymous

    Posted March 17, 2000

    A book that goes nowhere

    It seems to me a book should have a point of view. This book has none. One cannot fathom the author's purpose other than to be an outlet for his impressive knowledge of economics and the current world economy. But knowledge and wisdom are two very different things. The author explains the pros and cons of capitalism over and over and always stops short of picking a side or point of view or reform. Yes, the author seems generally somewhat negative on capitalism but the reader is never sure if the author wants reform or is merely using mild critism as an artifact to avoid writing a book that is merely a description of the world economy. If you missed economics 101 in college or want a general review of the international economy maybe this book is for you. If you want a point of view on what's going in the world try the classics: MIlton Friedman's books for an explanation of the economics of free trade or 'Understanding The Difference Between Democrats And Republicans' for a point of view on the politics of capitalism. Why go to a source that leaves you without a point of view?

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