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Apple is touted as perhaps America’s finest firm, an innovative giant, highly productive and profitable. Its business model involves transferring the fruits of R&D, venture capital, and innovation nurtured in American labs abroad where Asian production utilizes a cheap, flexible, docile, and disposable workforce. Offshoring virtually everything in the value chain from R&D to production with barely 6% of its workforce in America, it is also an unusually disloyal American multinational. Moreover, like most multinationals, much of its profit is channeled through overseas cutouts to be hidden in tax havens, its tax burden shifted onto families and purely domestic US enterprises.”

Don‘t mistake the arguments presented in What Went Wrong for co-determination and the Australian wage mechanism as driven by notions of fairness. The elements of Reaganomics such as short-termism, offshoring, and the Apple problem are profoundly anti-growth, its weak productivity and investment performance imposing a long term competitive disadvantage on America. Equity considerations aside, it is simply impossible to conjure a bright economic future for US families when high value jobs and R&D continue to be drained abroad and firms are out-invested by international competitors. The British 19th century Edwardian Decline is being duplicated by the Reagan-era American swoon. Suffering with cognitive dissonance toward economic history, learning nothing from the Great Depression, and enthralled by the certitude of powerful personalities pursuing an ideological agenda, they launched the Reagan era. A number of these politicians fashioned themselves market aficionados and conservatives. By the standards of history, they are neither. They adopted Ayn Rand, endorsed deregulation, the emergence of Red Queen banks too big to fail, and managerial capitalism characterized by stagnant wages, slumping investment and productivity, market failure in executive compensation, and widening income disparities. But their biggest mistake was to throw the father of capitalism, Adam Smith, under the bus. First, they reversed his priorities by emphasizing the condition of firms over families. And they ignored Smith’s warning in Wealth of Nations about the dangers of a government of merchants.

What Went Wrong

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The government of an exclusive company of merchants is, perhaps, the worst of all governments for any country whatever.”

Adam Smith, Wealth of Nations

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(Adam Smith) explained that “the welfare of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.

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