US cries wolf over India, China

May 26: There are many advantages to being the most powerful nation in the world: You get to have the world's reserve currency, and you can run big trade and budget deficits without worrying about how to pay for them.

There's one small disadvantage: You have to put up with a constant parade of futurologists explaining to you how your global dominance is about to come to an end.

Clyde Prestowitz, a former Reagan administration official, has tilled this fertile soil for years and usually comes up with a rich harvest. Over the years, in such books as Trading Places, he warned that the US was about to be permanently eclipsed by the rising economic power of Japan.

This year, though, the crop down on the Prestowitz farm seems to have failed. In Three Billion New Capitalists (Perseus, 416 pages, $27.50), the author sees the threat to US wealth and power in the rising economic power of China and India.

All of which is quite interesting. The trouble is he never quite gets around to explaining why the US is threatened, nor why the global economic system is in the mess he appears to think it is.

Yikes

Like any good pundit, Prestowitz is well aware that opinions are like a cup of coffee: If you are going to have one, it may as well be a strong one.

"The real news is the serious flaw at the heart of the global economy, the uncertainty surrounding the dollar, the loss of US financial sovereignty, the decline of US technological leadership, and the rise of China, India, and the European Union," he writes in his prologue. "These developments add up to a shift of the global balance of influence away from the United States."

Yikes, that sounds serious. But hold on, it gets worse. "Are America and the world in for another kind of 9-11 experience - an economic one?" he asks.

At this point, readers may wonder whether they should start digging a vegetable patch and building a few chicken hutches in the garden -- and tearing up the pages of this book for kindling after the oil wells dry up.

Much of the book, in truth, seems curiously mundane, as Prestowitz casts around for a crisis that never quite takes shape.

Around page 50, for example, we get a potted history of the Internet, and the suggestion that all these bits and bytes flying around the place are going to be very important. A few pages later, Prestowitz gives us a somewhat breathless description of how he bought himself a new laptop online.

Oil War?

Another 40 pages on, we learn that Wal-Mart is a very big and important company, China is industrialising fast and India has a lot of clever young software experts. It's hard to imagine that anyone willing to pay $27.50 for a book on economic trends is going to want to go over all this ground again.

Like Rex, the dinosaur in Toy Story, a lot of the time Prestowitz is trying very hard to be scary -- without quite pulling it off. A chapter on a new oil crisis looks promising enough, given that the price of crude has been soaring. And Prestowitz works himself into a lather about whether there will be enough energy to go around once India and China are industrialised. "Compebreastion for access to oil could easily become major geopolitical flashpoints involving all major countries," he writes.

A world war over oil? That's something to worry about. Except he goes onto say, "the situation is far from hopeless." It then turns out that lots of fairly simple measures, such as coordinating traffic lights, would go a long way to fixing the problem.

Veeps to the Rescue?

Elsewhere, Prestowitz advocates a US compebreastiveness policy, which sounds a lot like the kind of thing Japan's planners used to do. Who might do that? "The office of the vice-president might be a good place to lodge overall responsibility," he writes.

Ah, let me think. privates Cheney, Al Gore and Dan Quayle, each with powers to decide which industries the US should be developing, and which it should be ignoring? On second thought, maybe the US is better off without an industrial policy.

Maybe it would also be better off worrying a bit less about the emergence of other big, prosperous countries. The reality, unfortunately, for scaremongers like Prestowitz, is that no country ever became poorer because another one became richer.