The Wall Street Journal
Turbo-Capitalism: Winners and Losers in the Global Economyby Edward N. Luttwak
In this incisive and controversial exposé of the hidden effects of today's free-market capitalism, Edward Luttwak describes in powerful detail how it vastly differs from the controlled capitalism that flourished from 1945 to the 1980s. Turbo-capitalism is private enterprise liberated from government regulation, unchecked by effective trade unions, unfettered
In this incisive and controversial exposé of the hidden effects of today's free-market capitalism, Edward Luttwak describes in powerful detail how it vastly differs from the controlled capitalism that flourished 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 communities, and unhindered by taxation or investment restrictions. The winners in this free-for-all are getting much richer, while the losers are becoming poorer and are forced by downsizing to take the traditional jobs of the underclass. Led by the United States, closely followed by Britain, turbo-capitalism is spreading fast throughout Europe, Asia, and the rest of the world 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. Luttwak exposes the major societal upheavals and inequities turbo-capitalism causes and the broad dissatisfaction and anxiety that may result.
The Wall Street Journal
- HarperCollins Publishers
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- 1 HARPER
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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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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?