In the United States, most of the last half century has been devoted to worrying about the Soviet Union. Democracy and capitalism faced off against dictatorship and communism. Suddenly, the threat disappeared. The Berlin Wall came down; East Germany and West Germany were united; democracy and capitalism arrived in the formerly communist countries of middle Europe and then in Eastern Europe. Democracy and capitalism had won.
In 1945 there were two military superpowers, the United States and the Soviet Union, and one economic superpower, the United States. In 1992 there is one military superpower, the United States, and there are three economic superpowers, the United States, Japan, and Europe (centered on Germany), jousting for economic supremacy. Without a pause, our national challenge has shifted from being military to being economic.
From everyone’s perspective, replacing a military confrontation with an economic one is a step forward. No one gets killed; vast resources don’t have to be devoted to negative-sum activities. The winner builds the world’s best products and enjoys the world’s highest standard of living. The loser gets to buy some of the world’s best products — but not as many as the winner.
However, this shift in focus does create difficulties for the United States. Attempting to be both a military and an economic superpower is ambitious: it requires Spartan self-discipline. Both enterprises call for major investments in infrastructure, research and development, and education. Yet the United States is increasingly a consuming rather than an investing society. If it is to win the economic battle ahead, its investment and consumption patterns must change drastically.
A New Economic Game
Looking backward, historians will see the twentieth century as a century of niche competition and the twenty-first century as a century of head-to-head competition. In 1950 the United States had a per capita GNP four times that of Germany and fifteen times that of Japan. Imports from Germany and Japan did not seem to threaten the good jobs that Americans wanted, and America’s exports did not threaten good jobs in Germany and Japan.
The 1990s is a very different time. In broad terms there are three relatively equal contenders — Japan, the European Community, and the United States.
1. Nomuran Research Institute American, ’New Directions in Corporate Management and the Capital Market,” 1990, p. 1.
2. G.C. Lodge, Perestroika for America (Boston: Harvard Business School Press, 1991), pp. 15–16.
3. This section is drawn from ideas in L. Tyson and L.C. Thurow, “The Economic Black Hole,” Foreign Policy, Summer 1987, p. 3.
4. US. Congress, Joint Economic Committee, Bibliography on Europe in 1992, prepared by Hunter Monroe, 26 April 1989.
5. EC Delegation to die United States, A Guide to the European Community (Brussels: EC, 1991).
6. See L.C. Thurow, “Producer Economics,” IRRA 41st Annual Proceedings, 1989, p. 9;
J.L Baxter, Social and Psychological Foundations of Economic Analysis (New York: Harvester Wheatsheaf, 1988); and
M.A. Lutz and K. Lux, Humanistic Economics (New York: The Bootstrap Press, 1988).
7. A.H. Amsden, “East Asia’s Challenge to Standard Economics,” American Prospect, Summer 1990, p. 71.
8. E. Mansfield, “Technological Change in Robotics: Japan and the United States” (Philadelphia: University of Pennsylvania, Working Paper), p. 12.
9. Fortune, 30 July 1990, p. 109.
10. S. Yamamoto, “Japan’s Trade Lead: Blame Profit-Hungry American Firms,” Brookings Review, Winter 1989–1990, p. 14.
11. C Rapoport, “Why Japan Keeps on Winning,” Fortune, 15 July 1991, p. 85; Economist, 16 February 1991, p. 75.
12. “The Giants that Refuse to Die,” Economist, attributed to Tom Hill of SG Warburg. 1 June 1991, p. 72.
13. M. Yamazaki, “The Impact of Japanese Culture on Management,” in The Management Challenge: Japanese Views, ed. L.C. Thurow (Cambridge: MIT Press, 1986), p. 31.
14. J.C. Abegglen and G. Stalk, Jr., Kaisha, The Japanese Corporation: How Marketing, Money, and Manpower Strategy, Not Management Style, Make the Japanese World Pace Setters (New York: Basic Books, 1984).
15. K. Hirosc, “Corporate Thinking in Japan and the U.S.,” Journal if Japanese Trade and Industry A (1989).
16. D.E. Westney, “Sociological Approaches to the Pacific Region,” in The Pacific Region: Challenges to Policy and Theory, American Academy of Political and Social Science, September 1989, p. 27.
17. MIT Committee on Productivity, Made in America (Cambridge: MIT Press, 1989), p. 81.
18. Financial Times, 8 June 1990, p. 1.
19. L. Mishel and D.M. Frankcl, The State tf Working America, 1990–1991 (Washington, D.C: Economic Policy Institute, 1991), p. 121.
20. National Science Foundation, R&D Expenditures (Washington, D.C: GPO, 1990), pp. 1–20.
21. U.S. Department of Labor, The Impact of Research and Development on Productivity Growth, Bulletin 2331, September 1989.
22. Fortune, 30 July 1990, p. 109.
23. D. Julius, Global Companies and Public Policy (London: Royal Institute of International Affairs, 1990).
24. Economist, 20 September 1989, p. 105.
25. Committee on America’s Future, An “Investment Economies” fir the Kar 2000 (Washington, D.C: Rebuild America Coalition, 1988).
26. L.C Thurow, “VAT the Least Bad of Taxes,” Newsday, 9 March 1986.
27. L.C. Thurow, Zero Sum Solution (New York: Simon and Schuster, 1985).
28. D. Yankclovich, “The Competitiveness Conundrum,” The American Enterprise, September–October 1990, pp. 43 and 45;
Public Agenda Foundation, “Public Misperceptions” (New York: Public Agenda Foundation, Working Paper, 1990), Chart A.
29. Commission on the Skills of the Work Force, America’s Choice: High Stalls or Low Wages, 1990, ch. 5.
30. The following contains more than 5,000 pages of briefing papers on educational problems:
Commission on Workforce Quality and Labor Market Efficiency, Investing in People, September 1989 (Washington, D.C: The Commission, September 1989).
31. “U.S. Sets Priorities,” International Herald Tribune, 17 February 1988, p. 9.
32. M.E. Rasell and L. Mishel, “Shortchanging Education” (Washington, D.C: Economic Policy Institute, 1990).
33. Made in America (1989), p. 81.
34. This section is drawn from ideas in L. Thurow, “Let’s Put Capitalists Back into Capitalism,” Sloan Management Review, Fall 1988, pp. 67–71.
35. Commission on Workforce Quality and Labor Market Efficiency (September 1989).
36. “Keiretsu What They Are Doing, Where They Are Heading,” Tokyo Business Today, September 1990;
“Mitsubishi and Daimler-Benz Start Collaboration,” Tokyo Business Today, November 1990.
37. “Mercantilists in Houston,” Economist, 7 July 1990, p. 13.
38. W. Dullfbrce, “Japan Viewed as World’s Most Unfair Trading Nation,” Financial Times, 13 March 1990, p. 20.
39. Journal of Japanese Trade & Industry, No. 4, 1988, p. 15; and
“Fiddling while U.S. Industry Burns,” Rebuild America, February 1990.
40. CH. Farnsworth, “U.S. Is Asked to Review Japan Trade,” New York Tunes, 25 March 1991, p. 14.
41. National Institute of Economic and Social Research, National Institute Economic Review, November 1979, p. 23, and May 1991, p. 23.
42. Economic Report of the President, 1991.