Book Review: Strategic Capitalism – The New Economic Strategy for Winning the Capitalist Cold War

Author Richard A. D’Aveni has written a very compelling book with Strategic Capitalism, a book that provides some very important information for Americans to review and consider due to the coming economic cold war between the United States and China.  Mr. D’Aveni asserts that the United States’ traditional version of capitalism must be adapted in order to compete with China’s conglomeration of various types of capitalism.

The beginning of the book details the many different pure types of capitalism – Laissez-Faire, social-market, managed, and philanthropic – and how these have been used over the years in many different economies.  Mr. D’Aveni points out that rarely is a single pure type of capitalism ever the only type of capitalism in use in an economic system, but rather that many different forms of capitalism are blended together to work in the economic and political interests of the country or union in question.

The US has primarily used laissez-faire capitalism with specific components of managed capitalism to meet certain needs of the era.  China (of late) has been using managed capitalism aggressively to both protect and promote the mostly state-run companies there, as they seek to dominate across the globe.  This protection and promotion has not followed the same rules that the US has established and most western businesses adhere to.  Due to the fact that the type of capitalism used by China is thwarting the “old rules” of business, in order to continue to compete in this new world, the US must adapt the form(s) of capitalism that are used.

The second part of the book goes into great detail about the types of changes that the US must make – and admittedly, D’Aveni points out that these are mere suggestions intended to start the dialog.  Among the radical changes that the author suggests are: dropping out of the World Trade Organization (China is thwarting the rules and there is no mechanism to force compliance), dropping out of NATO (not enough economic or military support from most members to make up for the cost to the US), and dropping out of the United Nations (similar reason to NATO).

At the same time, the US should consider creating several new alliances that can be used to control the economic sphere that the US is to dominate, while at the same time limiting the areas that China can control.  D’Aveni also advocates using tactics of Sun Tzu (how apropos!) to eliminate China’s advantages indirectly rather than directly.  But first, the US needs to get its national economy in order, another topic that the author covers as well.

One area that can be resolved somewhat readily is with our extensive social programs, specifically Social Security, Medicare and the coming Obama-care. True means testing could be put into place for all programs, as benefits are being wasted on folks who don’t really need them, where the programs were designed to provide a safety net for the truly needy. Social Security taxation could be applied to all income levels as well, just like Medicare tax. Health and retirement benefits could be handled in large part by causing compulsive savings programs to be put into place for all workers. Health benefits would then be mostly covered (except for catastrophic costs) by the individuals’ own savings plans, which would likely reduce the over-use of the system and cause folks to make better health-care decisions, since the cost is borne by the individual, rather than “magically” by a faceless insurance company.

In terms of a very good primer on the capitalism environment in the world today, Mr. D’Aveni has written an excellent book.  In addition, the suggestions he has made are very well-developed, and even though it’s not likely that his suggestions would be implemented completely, they provide a good basis for discussion.  This book should be required reading by all policy makers in the western world, as I believe (at least in the US) that too many of our economic policies are designed for short-term solutions to situations that will garner votes, rather than longer-term solutions to our global economic position.

The above book review is part of a series of reviews that I am doing in an arrangement with McGraw-Hill Professional Publishing, where MH sends me books with the only requirement being that I read the book and write a review – like it or not.  If you find the information in this review useful, let me (and McGraw-Hill) know!