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Clyde Prestowitz is founder and president of the Economic Strategy Institute. He has played key roles in achieving congressional passage of NAFTA and in shaping the final content of the[…]

The economist presents the “Prestowitz plan”—a to-do list for how we can play our cards better.

Question: How can we turn around America's decline? 

Clyde Prestowitz: Well the first one I would take is the dollar; I think we need to really mount a major effort to reset the global exchange rates. Other currencies need to revalue against the dollar so the dollar would be worth relatively less. And I’d like to be able to do that through negotiations in the International Monetary Fund and even in the World Trade Organization. I think we should try that. If that doesn’t work, then of course we’ll have to think of other steps that we might have to take, but we should try to negotiate a serious resetting of currencies. I think we should lead an effort to create a new global financial currency system; one based on a basket of currencies, not just the dollar and maybe even eventually a single global currency. We had a gold standard, of course, in the late 19th century and the 20th century that was a single global currency. It has its advantages and disadvantages, but in a globalized integrated world economy, that’s a direction in which I think we should be going. Beyond that, I think it’s very important for the United States to respond to these investment incentives that are being offered by other countries to induce the movement of productive facilities out of the U.S. and to offshore locations. 

So I would have a war chest, or a fund, that I would call a "matching fund," and for every time a country offered to make a capital grab or a tax rebate to a global company in the U.S., I would match it to try and keep that production in the U.S. I think we should have a national infrastructure bank and launch a kind of an Apollo moonshot kind of a project or a Manhattan kind of project to achieve a modern infrastructure. I find it embarrassing, frankly. I travel a lot internationally and when I go through foreign airports and come back to JFK or to Washington Dulles, I feel like I’m in a Third World country. Just coming here today I was talking to you on the telephone and you know we lost the call three times. Well, that doesn’t happen in Egypt, let alone in Singapore or Korea. And we talk in the United States about broadband, fast Internet. The Koreans laugh at us; our "fast Internet" is what they call snail mail. So I’d like to upgrade and make the U.S. world class in infrastructure and that would drive a lot of investment and technology development, that I think part of that, should be a pressure or a policy to encourage production of that in the United States. I’d like to reduce corporate taxes. We have the highest corporate taxes in the world except for Japan. I’d like to reduce them to 15 or 20 percent. I’d like to adopt a value added tax. That has the advantage of taxing our over-consumption, it would help to solve our fiscal deficit problems, and the value added tax is rebated on exports so it would make us much more competitive in the global import/export markets. I would like us to focus on developing leading-edge technology pretty much across the board with industry government partnerships, and I think that it’s very important for us to dramatically revamp our schools with national standards and with serious testing so that we maintain competitive education levels with the other leading countries of the world. 

Question: If we don’t take action, what will happen? 

Clyde Prestowitz: Well I dread to think. I don’t want to think that way; I mean the path that we’re on right now is one full of sorrow and tears for Americans—and not just Americans, but for much of the world. America is the world’s buyer of last resort. America is the defender of important global values and the world will suffer, we will suffer, as a result if we stay on the path that we’re on. I like to think about it this way: I think about this as kind of a game of bridge and I ask myself each country has a hand of cards, and I ask myself which hand would I like to play. Would I like to play the Chinese hand, or the E.U. hand, or the Japan hand, or the U.S. hand? As I’ve been telling you, the US hand is not as good today as it was ten years ago and not as 20 years ago, but it’s still not a bad hand. We still have some pretty good cards. We still have the world’s leading universities, and we still have leadership in a number of key technologies. We have the world’s biggest market, we have the greatest economies of scale potential in the U.S. market, we have the rule of law. We have a lot of good cards. But you know, if you play bridge you can have good cards and you can still lose if you play the cards badly. And right now, we’re playing the cards just about as badly as it’s possible to play them. So we really desperately need to start playing the cards better, and that’s why I have adduced the Prestowitz plan as a guide to how to play the cards better.

Recorded on May 10, 2010
Interviewed by Jessica Liebman