Capitalism without Capital

Geoffrey Hawthorn

  • The Endangered American Dream: How to Stop the United States from Becoming a Third World Country and Win the Geo-Economic Struggle for Industrial Supremacy by Edward Luttwak
    Simon and Schuster, 365 pp, $24.00, October 1993, ISBN 0 671 86963 9
  • Japan’s Capitalism: Creative Defeat and Beyond by Shigeto Tsuru
    Cambridge, 277 pp, £24.95, June 1993, ISBN 0 521 36058 7

Even at the end of his new book, it’s not clear where Edward Luttwak is coming from, as they say in his country. He leaves no doubt, however, about where he dreads coming to. Instead of being smoothed through ‘the spotless elegance of Narita or Frankfurt or Amsterdam or Singapore’, the hapless international traveller who comes into New York’s Kennedy Airport will walk into one of the tatty terminals that near-bankrupt airlines no longer maintain, mildly surprised at the naked plywood and unfinished gypsum board. He will stand in line for an hour or two at passport control, perhaps more if several planes have arrived, as everyone knows they will, together. Already unhappy at his luggage having been thrown off the belt by angry handlers, he’ll have to present it to an unhelpful customs official. And if he’s not transferring to an internal flight, in which case he’ll have to suffer clerks tapping in his connection with one finger, more angry ground staff, and another broken walkway, he’ll emerge to be bounced over potholes, past decayed public housing and corners piled high with garbage, until his smoking bus or audibly unsafe taxi, ‘usually driven by an unkempt, loutish driver who resembles his counterparts in Kinshasa or Islamabad rather than London or Tokyo, where licensing requirements are strict and dress codes enforced’, drops him in front of the beggars outside his Manhattan hotel. Safe at last in the lobby, he will pause before choosing one of the tours that now offers a drive past the drug dealers on the streets of the South Bronx.

We’re in the new America, the land of capitalism, as Luttwak puts it, without capital. His researchers at his own directorate of Geo-Economics in the Centre for Strategic and International Studies in Washington have given him sheets of scary statistics to make the point. He’s a sophisticated man, and knows that one can’t take these neat. But he loves them, and hurls them at the reader throughout this compelling polemic. Consider the crudest. In 1970, the gross national product per person in the United States was twice as large as its Common Market equivalent and larger still than Japan’s. By 1980, America’s edge on the Community had been halved. By 1989, the inclusion of Greece, Portugal and Spain had slowed the increase in the EC, but what was then West Germany had caught up, and for Japan the figure was nearly half as large again. If the trend were to continue to 2000, the average income per head in Europe would be where it is in Japan now, and in Japan it would be twice as big. If it were to continue to 2020, per capita income in Japan would be fully five times as big as it is in the United States, a difference more or less exactly the same as the difference between the United States and Brazil in 1980. And since the ratio of the highest incomes to the lowest in Japan is only about 20 to 1 – more or less the same, Luttwak cannot bear to mention, as it was in the Soviet Union; all but incomparably narrower than in the United States now – the truly average American is not, by Northern standards, going to be very well off.

Not that he or she is secure now. By 1990, nearly a fifth of full-time, year-round workers weren’t earning enough to keep a family of four out of what the Federal Government itself defines as poverty. The number had doubled in a decade. Not all these people, of course, have the modal family. They include a quarter of a million women with children and no husband present. There are also husbands with working wives. Nonetheless, more than thirty million Americans now live below the official poverty line. Twelve million of them are under 18 – which, with the further four million under that age classed as ‘near poor’, adds up to a quarter of all young Americans. These people will be coming into the labour force in four or five years’ time with all the disadvantages of their early lives, including, as Luttwak emphasises, what is indisputably the poorest education now provided for any children anywhere in the industrialised world. And jobs for the less educated are in any event decreasing. No wonder, therefore, that crime is rising. ‘With its 248 million all-out individualists,’ Luttwak reasonably observes, ‘diverse and sometimes clashing races, and a long history of violence, America could never be compared to famously law-abiding Japan, cohesive Finland, strict Switzerland, or indeed any First World country at all. Of late, however, it cannot even be compared with itself: between 1980 and 1989 the number of inmates in federal and state prisons more than doubled, from 329,821 to 710,054’ and is still going up. In 1992, in the nation’s notorious capital, it was estimated that 42 per cent of all black males between 18 and 35 were in prison, on parole, or on probation awaiting trial. ‘Correction officer and jailer’ is now one of the two fastest-growing occupations.

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