Japan in particular has been held up by many as a country more efficient and more productive than the United States, and the image has been created of a major trade war between the U. Thurow examines this "war" beginning with the idea that the U. Thurow does not take a pessimistic view of American chances, however, and feels that America can make the adjustments necessary to become the leader. The title of the book--Head to Head--evokes the image of a direct confrontation, the "economic battle" noted in the subtitle: "The Coming Economic Battle Among Japan, Europe, and America. The success of Japan has been cited by many and has also engendered a good deal of Japan-bashing among those who feel the Japanese take an unfair economic advantage, yet few would dispute the impressive gains Japan has made over the past forty-five years.

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Certainly not, says Thurow. Was it then due to the inherent contradictions of Communist economics? Again, an emphatic no. Unrelated to any U. Because the U. Not according to Thurow. The military is being cut sharply; defense procurement is tapering off; bank, corporate, and household balance sheets are being reconstituted to reduce the role of debt; inflation is beaten and interest rates are so low that homes are more affordable now than they have been in decades; black-white income differentials are down; women have more occupational and life-style choices than could be imagined even a decade ago.

But its past successes are not the only reason Thurow thinks that America is in trouble. And why homelessness is listed as a failure of capitalism when socialist economies cannot even house returning soldiers remains a mystery. The presence of large income-transfer programs in most capitalist countries. No consideration here of the possibility that capitalist and free-market societies are so productive that their lucky inhabitants can afford large transfers of income to people who would be considered too well-off to need them in other societies.

Or that the democratic governments that freely decide on these income transfers could not exist in the absence of free-market capitalism. He recognizes that being invaded by superior foreign products is not quite the same as being invaded by superior foreign troops. A Mercedes, in short, is not a storm trooper. Strange, because America prospered mightily after World War II by practicing the individualistic capitalism that Thurow says will sink us in the next century, but not so Britain.

Note, too, that Thurow overestimates our adversaries. The major economic leagues will be in Europe. But wrong. As the Europeans approach January 1, , European federalism looks more likely to produce a stultifying bureaucracy than economic growth. As for Japan, the producer-driven, export-led economic policies that Thurow so admires have been bought at a terrible cost in living standards.

Is this the model to which Thurow would have Americans aspire? Oddly, one of these is high-definition television HDTV which, we are assured, is not apt to be an American success story. Wrong again. Both the Japanese and the Europeans, their bureaucrats operating in response to pressures from domestic producers, bet massively on what is now conceded to be an already obsolete analog technology.

And the Brussels bureaucrats who picked the loser are attempting to force European broadcasters to go analog so that French and Dutch manufacturers can sell television sets that no one wants. None of this is to say that Thurow is wrong in arguing that a system of completely free trade is unattainable in a world of nation-states with objectives other than the maximization of consumer welfare. In a world in which political pressure groups exist—Japanese farmers, American automobile manufacturers, European electronics firms—some protectionism will also exist.

But better a broad fidelity to free trade, buttressed by threats of retaliation in specific instances, than a broad program of managed trade—managed by politicians more susceptible to pressures from declining industries than to those from small, nascent ones. Unfortunately, by page Thurow is back in the corporate-aid business. In both fields, Thurow well describes the nature of the problem. But when he moves from description to prescription, he is unable to free himself from his prejudice that the government, or some quasi-governmental collective, is the only instrument for the solution.

So raise their taxes, funnel the money to unionized teachers, and trust local corporations to identify the skills that students will need in the future. The probability is not considered that this will produce West Virginians trained to mine uneconomic coal, New Englanders capable of producing Wang computers that are obsolete, and Texans skilled at finding uneconomically costly oil.

Similarly with infrastructure. He fails for two other reasons as well. First, in seeking solutions that always substitute collectivist action by big government and big business for individual initiative, he ignores recent history. Indeed, Thurow would do everything possible to discourage these entrepreneurs: 2966ew start-ups do not substitute for giant corporations that retain their vitality.

It is. New firms cannot grow big because they are always hemorrhaging their more talented people. By allowing the financial institutions that now attract such talents to buy financial interests in industrial firms, and to manage them.

But that is another story, also already well argued in these pages.




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Lester Thurow


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