Introduction
Edward Luttwak is a respected author in the circles of economists, consulters, and strategists. He occupies a challenging position as a Senior Fellow at the Center for Strategic and International Studies in Washington, D.C. And these are some of the reasons to read his book and agree or disagree with the writer’s points of view on the present and future world economy.
Main body
The main points of the author lie in the comparison of free-market capitalism and controlled capitalism of 1945-the 1980s. He calls modern capitalism turbo-capitalism and exposes its different features. Among them, he calls the absence of government regulation and any social organizations’ regulation, several financial features like favorable taxation and investment liberty. Such private enterprises are getting richer and richer, and an abyss between them and the underclass deepens. Of course, such an inequity causes much dissatisfaction. The results of it we can see in protests of anti-globalists accompanying every G8 summit. And it may happen in every country, as the World Bank assumes in Russia “unemployment will translate into civil unrest” (Barry). “Information is the ‘glue’ that holds together the structure of business” (Boyett and Boyett 45). Possession of information and huge capital make rich people incomparably rich.
The main responsible parties are represented by the US and Britain, who were originators of the process called globalization. And now turbo-capitalism extends its territory throughout the world and reaches Asia and, certainly, Europe.
The fruits of such capitalism are not only positive, the author considers them to endanger society and cause anxiety. Globalization is an ideology of the upper class that allows them to flourish and avoid the legal system of the US to increase their incomes. “The idea that the fallout from the wrongheaded economic concepts of the past 30 or 40 years could be contained, with the damage limited to the increasingly troubled urban areas while sparing prosperous suburbia, has now proved” (Herbert). Nanto investigated the Asian crisis in 1997 and has noticed, that crisis affects “both the United States and the world” (Nanto). This should set thinking.
One more burning problem is the pace of capitalism. That is why it is called turbo-capitalism. Because of the opening of new markets and unregulated speed of capitals accumulation, now we cannot stop or prevent or control somehow globalization process. A rude and merciless competitive economy leaves far behind human beings’ abilities to adjust to a new work market, quickly changing social conditions, insecurity, and uncertainty in every coming day. Like in 2008 when everybody learned to do without credits (Comparing 2008 Banking crises to Mexico’s 1994 Crisis). And these factors exist almost everywhere but in France and Japan. Despite the high-tech development and smart ideas of Wall Street, the distribution of incomes leaves much to be desired. It has not changed while capitalism has changed drastically. “What they promise is a more dynamic economy that will generate new wealth, while saying nothing about the distribution of any wealth, old or new” (Luttwak 27).
The author warns that prohibitionism in the US is tightly connected with turbo-capitalism, and calls to be tolerant not only to other people and nations, following which has resulted in political correctness obsession in American society, but also be tolerant to markets whether they are free or not. Free markets endanger emerging economies, like in Russia in 1998 when “mismanagement of the opening of the country’s financial markets to foreign lenders and investors” (The Russian Crisis).
The global market brings along insecurity, anxiety, frustration. The author’s advice is definite. He finds panacea in government and considers them an agent to prevent social collapse. Economic powers should be given back to governments from private enterprises. It should be done to avoid a lack of control that may lead to a crisis like Asian in 1997: “The bubble had been created by huge inflows of external capital” (Hardy). Classes of losers will undergo a wave of populism only after they will show their dissatisfaction dramatically. Another way of solving the problem of turbo-capitalism for America lies in minds of people who depend on financial stability and security. The latter provides savings and investments which can be grounds for further improvement. The author draws a line between turbo-capitalism and Calvinism. What connects them is the assumption that rich people are rich only because God blessed them. And to be unemployed for Americans is much easier than to try to find a satisfying and lucrative job to the best of one’s ability. Strange enough America turns out to be a place where more and more cheap labor can be found.
To be well prepared for the end of turbo-capitalism, the author calls to address to political economy. It will help to overcome overproduction and deflation. But the point is that the author never tells how to do that. In one of his interviews, he told about defects in the rescue of Mexico after the crisis of 1994. “Defect number one was that the investors were not hurt and didn’t learn the lesson. The second defect is that because the investors were not hurt, all the consequences were absorbed in the economy itself as opposed to being absorbed in the financial superstructure…“ (Luttwak interview). So we may presume that the core of problem-solving lies in financial superstructures, which after the collapse will realize the mistakes and redirect financial flows. Nevertheless, the measures Mexican government took “maintenance of tight financial policies, a major external debt restructuring, and a comprehensive program of structural reforms including, notably, privatization and trade liberalization” (Factors behind the Financial Crisis in Mexico 1) do not prevent the crisis and they sound similar to Lettwak’s cures.
Conclusion
To conclude, we may assume that globalization is now a destructive process, as it has already passed its creative stage. And current world crisis is evidence. Huge funds accumulated by a few companies result in the impoverishment of the unemployed, low-income, and underpaid population. The author warns us about the disaster that may happen, and it is up to us to listen to it or not, but in any case, the book is a deep and scrupulous critique. It is a pity that the author does not give any ready recipes to use.
Works Cited
Barry Ellen. “World Bank Sees Slump in Russia Worsening”. The New York Times. 2009.
Boyett Jimmie T. and Joseph H. The Best Ideas for Operating Profitably in a Hyper-Competitive World. New York: John Wiley, 2001.
Comparing 2008 Banking crises to Mexico’s 1994 Crisis. Wallarta Real Estate Weblog. Web.
Factors behind the Financial Crisis in Mexico. World Economic Outlook, 1995. Web.
Hardy Chandra. Asia’s financial crisis. TWN Third World Network. Web.
Herbert Bob. “An American Catastrophy”. The New York Times. 2009.
Luttwak Edward N. and Weidenfeld & Nicolson. Turbo-Capitalism: The Hidden Effects of Free-Market Capitalism – Winners and Losers in the Global Economy. New York: HarperCollins Publishers, 1999.
Nanto Dick K. The 1997-98 Asian Financial Crisis. CRS Report. 1998. Federation of American Scientists. Web.
The Crash. Interview Edward Luttwak.
The Russian Crisis. TWN Third World Network. Web.