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A Guide to Surviving and Thriving in the New Global Economy

Written by Gregg EasterbrookAuthor Alerts:  Random House will alert you to new works by Gregg Easterbrook

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List Price: $11.99

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On Sale: December 29, 2009
Pages: | ISBN: 978-1-58836-903-1
Published by : Random House Random House Group
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Synopsis|Excerpt

Synopsis

What can a spell-checker tell you about economic trends? Why is the world’s supply of ideas about to double? What did America get right in the nineteenth century that it’s getting wrong in the twenty-first? If Karl Marx were alive today, would he be hosting a show on Fox News?

These are just a few of the provocative questions asked by Sonic Boom, a (mainly) optimistic look at the near future. Sonic Boom tells why the world’s economy is likely to be just fine, with prosperity increasing; why globalization will soon drive us even crazier than it does today; why “a chaotic, raucous, unpredictable, stress-inducing, free, prosperous, well-informed, and smart future is coming.” The book is rich with specific examples and advice on how to navigate your own way through the craziness that’s ahead. Forbes calls Gregg Easterbrook “the best writer on complex topics in the United States,” and Sonic Boom will show you why.

Excerpt

Chapter One


Shenzhen  

The city did not exist thirty years ago, yet today has nearly 9 million residents, about the same population as the five boroughs of New York. Many of its residents were born into rural poverty-and today live a lifestyle approximately equivalent to that lived in Brooklyn. In mere decades the people of the city have transformed a rock-bound fishing village of tarpaper shacks into a leading urban center, if one whose existence is unknown to most of the world. Engineers flattened hills to make room for two dozen skyscrapers of forty-five stories or more-the tally will be larger by the time you encounter this paragraph-plus the world's ninth-tallest structure, a 1,260-foot-high office tower. The city contains numerous hospitals and power stations, plus hundreds of schools, almost all built during the lifetimes of those who use them. Crisscrossing the city are thousands of miles of roads and transit lines connecting tens of thousands of shops and cafés with more than a million dwellings, all structures that did not exist thirty years ago. Paris and London took many centuries to build; Manhattan's core was constructed in roughly one century; the glittering new cities of the American postwar imagination, Atlanta, Dallas, Denver, Los Angeles, Miami, Phoenix and Seattle, each required roughly half a century to reach their current status of impressive-when-viewed-from-orbit. This new city has outflanked them all, becoming the fastest-built great metropolis in human history.1 You're forgiven if you have never heard of Shenzhen.  

What is really impressive about Shenzhen is not its boulevards and apartment towers but its harbor. A dense tangle of docks, warehouses, quays, slips and monstrous cranes, the Port of Shenzhen has gone in a single generation from nonexistent to the world's fourth-busiest harbor. Cargoes borne by oceangoing container ships are measured in the prosaically named Twenty-foot Equivalent Units, corresponding to metal boxes the size of the trailer on a semi truck; a TEU typically holds about ten tons of finished products. In 2007, some 21 million TEUs departed from Shenzhen to the markets of the world-more cargo than moved through Los Angeles and Long Beach harbors combined, and Los Angeles and Long Beach are America's two busiest ports. Twenty-one million TEUs in a year equates to a trailerload of goods departing Shenzhen harbor every other second. Rotterdam and Hamburg required centuries to reach central positions in global commerce; Shenzhen did this in less time than one person's life span. Export totals for 2008 and 2009 are expected to be down, but the basic accomplishment won't change-Shenzhen fashioned itself into a city of global importance in a remarkably brief period. Lines of enormous cargo vessels leave Shenzhen low in the water owing to the weight of the electronics, clothing, industrial equipment, toys, furniture and other manufactured goods they are bearing to the United States, the European Union, Latin America, the Middle East and other destinations. Batteries are a common cargo because BYD, the world's second-leading manufacturer of batteries, is based in Shenzhen. By the time you read this, BYD may be the world's number-one battery maker-and a decade from now may become the world's leader in manufacturing electric cars. BYD did not even exist until 1996.  

Though the people of Shenzhen, China, do not hear it, the sound their city makes is a sonic boom. There have been booms before in various parts of the world: some brief, some long-lasting, some that were followed by busts, some that simply petered out. What is occurring now is a Sonic Boom-noisy, superfast, covering huge amounts of territory. Nothing like Shenzhen has ever happened before: there has never been a great city built so fast, nor a productive economy established from so little, nor a society transformed in such short time from isolationist and repressed to outward-focused and eager to be free. The international recession that began in 2008 has made the Sonic Boom quieter, to keep the metaphor, and is causing problems that may afflict many nations for many years. But Shenzhen represents the larger trend: growth, change and transformation at unprecedented velocity. Once the recession fades, the larger trend is likely to reassert itself.  

Suppose you live in the United States. Where in America would you go to observe for yourself the restructuring of the world-to a Wal-Mart? To an office that runs a social-networking Web site? You should go to a harbor. The Port of Long Beach, south of Los Angeles, was as recently as the 1980s a relatively sleepy place where tramp freighters debarked to carry crushed steel from abandoned cars and rusting iron from torn-down bridges to developing-world blast furnaces that would recycle what America no longer wanted. Today the Port of Long Beach has its own sprawling highway system, one that looks from the air like a complex interstate freeway, to handle the ever-rising volume of trade. In 2007, more than 2,700 large vessels arrived at Long Beach Harbor, and unloaded about 7 million truckloads' worth of goods. Oceangoing container ships spend days or weeks at anchor waiting for a space to dock; trailer trucks queue up by the hundreds. Even as the international recession slows this activity, the Port of Long Beach is much more crowded and busy than a generation ago, though it has expanded significantly and continues to expand as fast as construction crews can pour fresh concrete.  

In Brazil, in Flanders, in South Africa and Sydney and many other places, the restructuring of the world is best observed in the pace of operations at commercial seaports. The states of Pennsylvania and New Jersey are dredging the Delaware River to allow a new class of oceangoing container ships to reach Philadelphia; Shanghai is building a new port that will handle six times the volume of the already-bustling Long Beach Harbor. The harbor business is growing more rapidly than the fast-food business or the Internet advertising business, and may have more significance to the world's future. Quickly, what is Hutchinson Whampoa? The company is the world's largest operator of ports, employing more people than Honda Motors and the Intel computer-chip consortium combined. 

  As ports expand, so do ships. In 2006, the Odense Steelyard in Denmark launched the Emma Maersk, the world's longest container vessel. The Emma Maersk is longer than the nuclear supercarrier Enterprise, and was specifically built to take advantage of the long quays of Shenzhen. Numerous Emma-class trade vessels are under construction or scheduled to be laid down-many of them engineered to do nothing but transit between specific harbor pairs, such as Singapore and Rotterdam. Ship designers have for nearly a century spoken of the "Panamax," the largest vessel that can squeeze through the Panama Canal. Today they speak of the "post-Panamax," the even-larger vessels that will fit through the Panama Canal once its expansion, inspired by the sharp rise in global trade, is completed; and of the prospect of a "Kramax" ship if the Kra Canal, proposed for Thailand, is built. In 2008, the Mediterranean Shipping Company, based in landlocked Switzerland, launched the world's heaviest container ship, MSC Daniela, which weighs about a third more than the newest supercarrier, the George H. W. Bush. The vessels that really engage the attention of today's ship engineers are called "Malaccamax," meaning the maximum length and maximum draft of a ship able to traverse the Strait of Malacca. The Malaccamax vessels being designed at STX Shipbuilding in South Korea would be twice the length of the largest aircraft carrier.  

The world's surge in port activity and commercial trading vessels, assuming this continues during the Sonic Boom this book foresees, is the epitome of the mixed blessing. Rising global commerce has created jobs in China and other developing nations, lifting hundreds of millions out of poverty; shipments of affordable and increasingly impressive-quality goods produced in the developing world keep standards of living high in the United States, Japan and the European Union. But at the Port of Long Beach, three ships arrive loaded for every one that departs loaded. The United States, and European Union and Japan are buying like mad in the new globalized marketplace, but selling at a lesser pace. This has profound impact on jobs, community stability and the sense of anxious unease that characterizes much of Western life.  

Before we move to those topics, ponder what the fantastic increase in ports and ships-and telephones and airplanes and broadband lines and other aspects of the Sonic Boom-represents to the world.  

From the Industrial Revolution until the current generation, most nations threw much of their wealth and energy into building machineries for warfare. Nations eyed one another suspiciously, attempting to raise barriers to trade and intercourse, dealing with each other economically only when they believed it suited them at the expense of their partners. Now most nations put the majority of their efforts toward improving their standing in international commerce-that is, toward cooperative competition in which some members of the group may do better than others, but all members of the group become better off than if they had not participated.  

Exactly as global trade has expanded, military spending has declined. Global military expenditure peaked in 1985 at $1.5 trillion in today's dollars and has fallen since, to $1.4 trillion in 2008.2 Because the world's population rose during that period, total military spending might have been expected to rise. Instead it decreased, falling by almost 40 percent relative to population growth. In turn, the frequency and severity of worldwide combat has declined. According to the annual survey conducted by the Center for International Development and Conflict Management at the University of Maryland, the number of country-to-country conflicts in the world grew steadily from 1950 until peaking in 1989 and has dropped in most years since, to a 2008 level that is below the 1970s average: in the years after World War II, the number of global fatalities from combat peaked in 1989 and has tended to decline since.3 Because television beams into our living rooms close-up images of belligerence wherever it occurs on any continent, it may seem that the world grows ever more deadly. The opposite is true, with a person's chance of being engulfed in war much lower than for most previous generations.  

There are many theories on what caused World Wars I and II. Cordell Hull, Franklin Delano Roosevelt's secretary of state, believed the root cause of both conflicts was the system of high tariffs and strict trade barriers in place at the time. These barriers gave nations little reason to cooperate, leaving them to channel their competitive urges into militarism. Hull pushed FDR to host the 1944 Bretton Woods Conference, at which the Allied nations agreed that when the fighting stopped, they would begin to engage in free trade, and would extend free trade to the defeated Axis powers, allowing them to recover. The Bretton Woods Agreement set in motion what we now call globalization. And since that moment, five hundred years of nearly continuous European conflict has ended, while more than fifty years have passed without great-power combat. Nuclear deterrence is obviously a major factor, and "low-intensity" warfare continues, but the interconnectedness caused by trade has been a leading reason the great powers have stopped shootimg at one another. Global trade has increased twelvefold since World War II ended, partly because the average international tariff has fallen from 50 percent to 5 percent. Tariffs, once used to discourage international commerce, a deleterious purpose, are now merely used to raise money for governments. Big increases in trade cause most nations to stand to gain from a stable international system untainted by combat, and in the era of biggest-ever increases in trade, we observe a mainly stable international system untainted by great-state combat. As the transition toward knowledge-based economics makes ideas more valuable than physical resources, the incentive for war to seize resources declines. In the past, nations invaded other nations to seize the value of land or resources. Today it is more cost-effective to buy what you covet than to seize it, and so military spending and military adventurism are declining.4   Economists have long maintained that if only people stopped fighting one another and cooperated, prosperity for all would rise, while most nations would acquire incentives to get along rather than inflict harm. Because the new internationalized economic system has existed for only a few decades, we should be cautious about drawing conclusions: so far, however, the globalization of economics is guardedly positive for almost everyone. That countries are furiously devoting their energies to commercial production and trade, rather than missiles and submarines, can have unhappy effects, such as job insecurity and environmental harm, but its overwhelmingly positive side is inarguable. At this writing, China was breaking ground for the most expensive public-works project in world history-a $62 billion system of aqueducts to supply the populous part of the nation with fresh water for drinking and agriculture. Once completed, that system could be rendered worthless in mere minutes by precision-guided U.S. conventional weapons. That Beijing is investing such a huge amount in a structure vulnerable to rapid destruction from the air shows that the government of China believes it will never go to war with the United States. Capitalism causes all kinds of problems, but is so much better than militarism, there's just no comparison.  

Clearly the last two years have been disagreeable ones for the world system. But many of the years before then were good, and what did the majority of Americans and Europeans do in those good years? Complain. The larger context of recent generations has been persistent focus on the negative, with little heed paid to the positive. Heeding the positive is not Pollyannaism-it is perspective. To achieve perspective, both positive and negative must be considered. There's an ample supply of negative. Yet most underlying global forces have mainly been good in recent decades; one shudders to think what the world might be like today if most underlying forces were not mainly good. Consider the underlying forces that point toward a Sonic Boom:   GLOBAL GROWTH ACCELERATES  

Even taking into account the post-2008 slowdown, worldwide economic production has risen at a pace that is difficult to believe. In the last thirty years, China's gross domestic product rose from around $500 billion to $2.7 trillion-that is to say, five times as much new economic production in the last thirty years as all forms of economic production just a generation ago. China is not some spectacular exception to a rule; rather, it is the leading indicator of an extraordinary economic surge across most, although of course not all, of the globe. Costa Rica, for example, increased its economic production from $8 billion in 1977 to $30 billion in 2008-more than three times as much new economic activity in the last three decades as total economic activity a generation ago. India increased its economic production from $400 billion in 1977 to $1.2 trillion in 2008, three times as much new economic activity created in the last thirty years as all forms a generation ago. (This chapter uses the period since 1977 as its benchmark not because Led Zeppelin broke up that year, but because modern Shenzhen is roughly three decades old.) Much of the new global economic activity does an end run around the wealthy West-for instance, the fast pace of construction in China has meant increased business for ArcelorMittal, the Indian firm that is now the world's leading steelmaker. Neither India nor China consult Washington or London about their steel trade-they're just taking care of it on their own.  


From the Hardcover edition.
Gregg Easterbrook

About Gregg Easterbrook

Gregg Easterbrook - Sonic Boom
Gregg Easterbrook is the author of six books, including The Progress Paradox. He is a contributing editor to The Atlantic, for which he has written more than a dozen cover stories, and The New Republic. His articles have appeared in The New York Times and Los Angeles Times, as well as on the covers of Newsweek and Time. He has appeared on Today, Larry King Live, Nightline, CBS Morning News, All Things Considered, The NewsHour with Jim Lehrer, The Diane Rehm Show, and The O'Reilly Factor. And as a hobby, he writes the "Tuesday Morning Quarterback" football column for ESPN.com. He lives near Washington, D.C., with his wife and three children.
Praise

Praise

“The business book you must read.”—Eric Schmidt, chairman/CEO of Google Inc.
 
“A pleasure to read and a valuable corrective to the gloom that currently envelops us.”—The Wall Street Journal

“If you read Thomas Friedman’s The World Is Flat, you must read Sonic Boom, because this book is the next step.”—Tyler Cowen, Holbert C. Harris Professor of Economics at George Mason University and co-founder of Marginal Revolution

“Easterbrook [is] always a writer worth reading. . . . He rarely fails to surprise.”—Chicago Sun-Times
 
“[A] new set of thought-provoking observations and forecasts on things economic, political and cultural.”—Fort Worth Star-Telegram
 
“Refreshing . . . more about boom and less about gloom and doom.”—Associated Press
 
Sonic Boom is the thinking person’s Future Shock.”—Carl Schramm, president, Ewing Marion Kauffman Foundation

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