Debt Trap; Facing up to the real challenges of globalization.
Lester Thurow's Fortune Favors the Bold is one of the most maddening books written on the international economy in many years. A Big Think book that offers few specific ideas about "building a lasting global prosperity" and leaves many key analytic dots unconnected, this latest popular work by the noted MIT economist nonetheless has much to teach anyone concerned about his or her pocketbook, the future of capitalism and everything economic in between.</br></br>By far the most important dots left inadequately connected by Thurow concern the mind-numbing international economic imbalances that the United States has piled up for roughly the last decade. Every presidential candidate -- especially the incumbent -- should read Thurow's discussion of these deficits and the nation's resulting international debts. For the author argues with unusual force and clarity that they represent mortal threats to the economic health of the United States as well as the rest of the world. Yet he overlooks what may be the main cause of these deficits.</br></br>The U.S. economy remains so strong that most Americans understandably ignore or simply don't know how deeply in debt the nation has sunk, and thus how heavily their living standards now depend on borrowing from abroad. This dependence results from Americans buying so much more from other countries than they sell to them, and from foreign creditors' willingness to provide affordable loans to fill the gap.</br></br>America's unique advantages have permitted prime-rate borrowing to continue despite these towering debts. In addition, much American borrowing during the 1990s was invested -- in theory promoting robust future growth.</br></br>More recent borrowing has been spent largely on consumer goods in a frenetic national shopping binge. America's economic and business establishment still believes that the debts can be managed without triggering national and worldwide recessions or worse. Thurow's greatest achievement is systematically demolishing the case for a so- called soft landing.