In China's Shadow: The Crisis of American Entrepreneurship (review)

Reed Hundt is a management consultant, Board member of Intel Corporation and a former Chairman of the Federal Communications Commission during the Clinton administration. This book about American public policy examines the challenge that the rise of China poses to the economic hegemony of the United States, details the domestic problems that are presently inhibiting an effective response and then proposes specific solutions for government policy-makers to consider.

In the first chapter, Hundt lays out the ways that China's move to capitalism threatens the United States and its position of global leadership. Drawing on a wide range of secondary sources, he enumerates China's inherent advantages: a large population, a low-cost labor force and government coordination of a strategy to achieve leadership. The balance of the chapter examines America's culture of entrepreneurship, using case studies from the growth of high technology firms and the Internet in the 1990s. Since that particular bubble collapsed, Hundt argues, entrepreneurship has been in decline. Outlining his primary thesis, he suggests that in order to compete effectively with China, Americans need to change the architectures of their culture in three areas: law, technology and leadership.

The remaining four chapters develop this argument in greater depth. Hundt notes specific challenges that the United States faces in dealing with the Chinese threat: that China's large businesses have become global enterprises and no longer put American interests first; that more and more students are immigrating to the United States, becoming highly trained in technology and then returning to their native countries to build competitive enterprises; and that growing income inequality has led to a leadership elite that no longer responds to the needs of the people. Hundt then argues that the American government must advance specific policy initiatives in order to react effectively to the situation and restore the culture of entrepreneurship. These could include a renewed commitment to basic research, a focus on education, a more coherent anti-trust policy, better linkages with Latin America, investment in broadband infrastructure and changes to the government so that it is less partisan. Hundt uses case studies such as AOL, Netscape and Intel to support his argument that more needs to be done to encourage entrepreneurship.

In China's Shadow is, in essence, an opinion piece on public policy issues facing the United States. Hence, business historians may find that certain aspects of this book reflect a rather narrow perspective. Hundt draws from a limited historical and industrial scope—only successful technology and communications firms of the 1990s are used as case studies to build his arguments. And, as a former official in the Clinton administration, he often takes a Democratic perspective. For example, he critiques: "When the political winds shifted to the right with the Bush administration, the dynamism and entrepreneurial bent of the American economy did not appear to be on the mind of Washington's leaders" (p.80). In fairness, however, he also is critical—albeit far less often—of the current Democratic leadership.

Historians often put events in perspective as part of larger overall trends. Hundt tries to do something more difficult—he looks for patterns in recent events, tries to understand their causality and finally proposes specific remedies. How the United States can continue to nurture its economy in light of growing global competition is a challenge for policy makers. Hundt's experience as a regulator and an official of a high technology firm brings an interesting perspective to this debate. His book advances our understanding of the problems and choices now faced by the United States. Readers with an interest in American public policy, globalization, or the continuing development of the technology industry will find In China's Shadow to be of great interest.