In September 1999, a 60-second earthquake rocked Taiwan, turning buildings to rubble, killing about 2,400 people and cutting electricity. Most Americans didn't pay attention until the aftershocks rattled across their economy.
Days after the quake, factories from California to Texas began closing for lack of Taiwanese semiconductors. Shares in computer makers like Dell Inc and Hewlett-Packard Co dropped more than 20 percent over the next month. Christmas shoppers faced shortages in laptops and Furby dolls.
The quake shows how interconnected our world has become, says Barry Lynn in his engaging polemic, End of the Line: The Rise and Coming Fall of the Global Corporation. The multinational assembly lines of companies like Dell are so finely tuned that "a breakdown anywhere increasingly means a breakdown everywhere," he says.
ILLUSTRATION: YU SHA
Lynn, a former journalist and now a fellow at the nonpartisan New American Foundation in Washington, makes his case well, showing how US laissez-faire policies have mixed with advances in technology and logistics to make the country dangerously dependent on foreign goods. The US, which once exported stability through programs such as the Marshall Plan, now risks importing instability, notably from China.
End of the Line traces the evolution of today's global corporate outsourcing partly to the US' Cold War strategy of transforming countries like Taiwan into capitalist showcases.
Taiwanese companies thrived on a diet of aid, trade, education and technology transfer, then gained an extra edge in the 1980s by farming out production to low-wage workers in China.
Amid the bellicose blustering between Taipei and Beijing, Taiwanese companies subcontracted for companies like International Business Machines Corp and sneaker maker Nike Inc.
This "tristate relationship," Lynn says, became the center of today's global economy.
Lynn places blame for this state of affairs on former US president Bill Clinton. Never mind that former president Richard Nixon opened the door to China, while the administration of Ronald Reagan promoted Chinese trade as a way to intensify US sanctions against the Soviet Union and Warsaw Pact.
The crucial decision about China, Lynn argues, came after Clinton backed a "pragmatic policy of engagement" that would somehow undermine communism by building a Chinese middle class.
This represented "a radical reversal" of US anticommunist strategy stretching from the late 1940s through 1989, he says.
In chapter after readable chapter, the author shows how Clinton's China policy coincided with technological and logistical innovations that revolutionized US manufacturing.
Lynn brings the lessons to life through crisp case studies of 1990s corporate heroes, from John Chambers, Cisco Systems Inc's evangelist of outsourcing, to Michael Dell, the "fizz kid" who created the world's largest personal-computer maker by turning the industry on its head.
Dell, after early flops, became the master of cutting inventory. Chambers pushed outsourcing to the max: By 2000, only 15 percent of the people who worked on Cisco-branded routers, switches and other products were Cisco employees.
Fred Smith invented package-delivery service FedEx Corp, allowing companies to ship components just in time to factories around the globe. Sam Walton reinvented logistics, turning an Arkansas five-and-dime into Wal-Mart Stores Inc, which draws almost 140 million shoppers a week and dictates terms to consumer-goods makers such as Procter & Gamble Co.
Adding intensity to these trends was the 1990s merger boom, which bred behemoths such as DaimlerChrysler AG, Exxon Mobil Corp and Citigroup Inc. These combinations created "immense oligopolies that generate profits ever more through the exercise of power," Lynn says.
Here and there, Lynn lapses into hyperbole and rants against investors and the economist Milton Friedman. Yet the author also offers realistic suggestions for how the US government might make the world a more stable place, beginning with a greater willingness to use its antitrust clout.
If nothing else, Lynn forces us to think about the world that the West has created since the crackdown in Tiananmen Square and the fall of the Berlin Wall in 1989. He also reminds Americans of how far they've wandered from the path Alexander Hamilton marked out after the War of Independence, when shortages of shoes and muskets nearly broke George Washington's army. Manufacturing, Hamilton wrote, is crucial to "the independence and security of a country." More than Furby dolls may be at stake the next time an earthquake hits.
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