Building Wealth: The New Rules For Individuals, Companies and Nations In A Knowledge-Based Economy

Building Wealth: The New Rules For Individuals, Companies and Nations In A Knowledge-Based Economy

by Lester C. Thurow

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As we stand on the brink of the new millennium, MIT economist Lester Thurow addresses the critical issue of wealth creation. The result is an essential road map for how individuals, companies, and nations can and must build wealth in a knowledge-based global economy.

There is no doubt that we are in the middle of a transition to a knowledge-based economy;

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As we stand on the brink of the new millennium, MIT economist Lester Thurow addresses the critical issue of wealth creation. The result is an essential road map for how individuals, companies, and nations can and must build wealth in a knowledge-based global economy.

There is no doubt that we are in the middle of a transition to a knowledge-based economy; breakthrough technologies in microelectronics, biotechnology, new materials, telecommunications, robotics, and computers are fundamentally changing the game of creating wealth. Thanks to the impact of these technologies, new industries (software, gene therapy) are growing explosively and existing industries (banking, retail) are being transformed beyond recognition.

Out of these transformations, a new global economy is emerging to replace existing national economies. Almost alone, the American economy seems to be enjoying a period of unprecedented growth. Is this growth sustainable? Is global integration a boon or a threat to this trend? Will the forces that sparked the Asian meltdown—a crisis that is meticulously evaluated in these pages—provoke a more persistent era of stagnation or worse? Should global integration be slowed? Can it be slowed? What lies ahead in the near future?

What skills are needed to succeed in this new economy? What new rules must apply to the creation and protection of new ideas? How are environmental problems such as global warming going to affect wealth creation? How can marketable wealth be rising at ever-faster rates while productivity growth is slowing? How can nations create a social system in which the entrepreneurial spirit can flourish without also creating income and wealth inequalities that threaten the system?

In the groundbreaking final chapters of Building Wealth, Professor Thurow turns his attention to the three current major economic sectors of the world: America, East Asia, and Europe. He provides a trenchant analysis of each as a significant competitor in the coming decades, and predicts the likely outcome of the complex forces that are presently shaping global society.

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Editorial Reviews

Sylvia Nasar
...[L]ooks like a stock market tip sheet and reads like a diet book....Where others might trot out hypotheses and hard evidence, Thurow reaches for metaphors and glib generalities. Never mind. You don't read a diet book to learn science or history. You read it to learn how to get thin. —The New York Times Book Review
Business Week
A thoughtful and comprehensive assessment of the manifold problems facing the U.S. economy, written in a style that is clear and compelling.
Atlantic Monthly
Thurow's book should be read by all Americans who want to understand the economic realities that are remaking the world.
Washington Post Book World
This is an important book.
Industry Standard
The best-selling MIT economist outlines principles 20th-century businesses will need to survive in the 21st century.
Library Journal
The U.S. economy surged past those of Europe and Japan in the last decade in terms of the creation of jobs and market wealth. According to best-selling author and MIT economist Thurow (The Future of Capitalism, LJ 3/15/96), the U.S. economy has been successful because of its adaptability. American entrepreneurs seized upon opportunities in the new knowledge-based industries, while established U.S. companies restructured themselves to enhance profitability. Emphasizing the global nature of modern economic competition, Thurow explains that the continued creation of wealth depends upon improving social organization, creating entrepreneurial opportunities, enhancing knowledge, expanding human skills, building physical tools, and augmenting natural and environmental resources. While his subject is complex, Thurow expounds his theories on modern capitalism in clear, jargon-free language. Given his stature and popularity, this book is recommended for all but the smallest libraries. [Previewed in Prepub Alert, LJ 2/15/99.]--Lawrence Maxted, Gannon Univ., Harborcreek, PA Copyright 1999 Cahners Business Information.
Kirkus Reviews
A lesson plan for coping with the realities of the economic future. An economist at MIT and author of several previous books (The Future of Capitalism, 1996, etc.), Thurow is no stranger to the task of purveying information about economic concepts. Here, he tackles the issues that affect societies, workers, and businesses in a world where globalization is a reality, not a buzzword, and brainpower has usurped muscle power as the major component in business success. As the subtitle suggests, his conclusions are straightforwardly organized in a list of "rules" that summarize major points, as in Rule Seven: "Any society that values order above all else will not be creative, but without the right degree of order, creativity disappears as if into a black hole." Thurow's ideological bent is generally moderate—sometimes he leans toward a libertarian philosophy; at other times, toward a more liberal government-as-benefactor position. While he extols "chaos" (i.e., disorganization and lack of central control) as necessary to promote creativity and "tool building," he also states that too much disorder is not desirable. Thurow proffers history lessons, profiles of success, and morals to be drawn from such failed concepts as communism. Yet while he clearly favors capitalism, he's willing to find fault with this economic system as well, describing its "tendency to save and invest too little," which he calls a "built-in genetic disease." Thurow emphasizes that while economic globalization spreads, there will be no corresponding global government to control it, and he urges readers to stay ahead of future dangers, although this lecture seems mostly aimed at politicians and policy makers.Instructive and to the point, an overview of emerging economic realities, including scenarios for the US, Europe, and Japan. (Author tour)

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Product Details

HarperCollins Publishers
Publication date:
Product dimensions:
6.12(w) x 9.25(h) x 1.05(d)

Read an Excerpt

Chapter One
The Economic Landscape

Two hundred years ago, at the end of the eighteenth and the beginning of the nineteenth century, the industrial revolution brought eight thousand years of agricultural wealth creation to an end. Agricultural activities, which had been the sole economic activity for 98 percent of the population in the eighteenth century, were the sole source of income for less than 2 percent of the American population by the end of the twentieth century. By providing a source of energy much bigger than either animals or humans could provide, the steam engine opened up opportunities to do things previously impossible. Leonardo da Vinci could imagine all kinds of brilliant mechanical devices, but all of them remained on paper, unbuilt, because he could not imagine an engine to power them. With the advent of the steam engine, much of what he could only imagine quickly became reality.

A hundred years later, at the end of the nineteenth and the beginning of the twentieth century, electrification and the invention of systematic industrial research and development created what economic historians know as the second industrial revolution. Night literally became day. New industries emerged -- the telephone, movies, aluminum -- and old industries were transformed (steam railroads went underground to become subways).

Not left to chance, technological frontiers moved outward much more rapidly than they had in the past. Local economies died and new national economies emerged.

It took Americans and the rest of the world the first half of the twentieth century to learn how to make these national economies work. Antitrust laws had to beinvented to control the monopolistic tendencies of the new national corporations. Companies only too quickly learned that there was more money to be made from combining into monopolies and restricting output than from expanding output. Standard Oil was broken up in 1911. For the first time a national currency was needed. The Federal Reserve Board was established in 1913. A central bank had not been necessary in the first three centuries of the American experience.

It took the searing experiences of the Great Depression to teach Americans that unfettered financial markets can implode and bring whole economies down with them. In response, government regulations were imposed to eliminate the weaknesses (insider trading, phony bookkeeping) that had been revealed in the structure of finance. The Securities and Exchange Commission (SEC) came into existence. The Great Depression proved that banks could not be allowed to default on their depositors if prosperity was to be assured. Depositor's insurance was invented.

World War II taught America that big technological breakthroughs were possible (radar, the atomic bomb) if governments financed basic advances in science. Industrial R&D could be made much more productive. New products could roll out the door faster than Americans ever thought possible.

After World War II Americans assumed that capitalism would spontaneously combust in Europe and Japan. It did not happen. Three years after the war was over, Americans woke up in 1948 to find that Europe and Japan were not recovering. There was a real danger that Europe and Japan might abandon capitalism for communism. It took massive aid, the Marshall Plan, to get capitalism going again. Americans had no choice but to pay attention to the economic health of the rest of the world if they wished to be healthy themselves.

Today a third industrial revolution is under way. Microelectronics, computers, telecommunications, designer materials, robotics, and biotechnology are transforming all facets of life -- what we do and how we do it. Biotechnology is changing the characteristics of life itself Genetic diseases do not have to be accepted. New plants and animals with different characteristics are being bat.

What comes first, the Internet that permits the faster and cheaper flow of information or the new materials such as fiber optics that permit the Internet to exist? What really changes is not the information that we have about what we might wish to buy, but the way we buy the everyday necessities of life -- and what we buy. Physical stores go out of business; electronic stores come into business. In both we buy clothes sewn from Lycra and Kevlar rather than cotton.

Microelectronics make possible the lasers that power the trunk lines of the telecommunications industry, but those same lasers allow eye surgery that will make glasses an unneeded remnant of a past age. In medicine, microsurgery is a revolution all by itself Larger robots are revolutionizing production of almost everything else. Computers on a chip are changing how our car engines and suspensions work. The laser in the CD player in the trunk of the car is changing the nature and quality of the music to which we listen.

In this third industrial revolution, technologies are changing so rapidly that no one knows where future profits will be made. The CEO of the old AT&T decided to split off its research laboratories (Bell Labs) and its hardware manufacturing arm (Western Electric) into a new company called Lucent. As the CEO of the old AT&T he could have made himself CEO of the new AT&T or the new Lucent. He got it wrong. He made himself CEO of the new AT&T. The new Lucent quickly became more profitable and acquired a market capitalization one-third bigger than that of the new AT&T.THe CEO of the old AT&T couldn't even plan his own career -- and he's not dumb.THe same confusion and chaos about where success is to be found exist almost everywhere in our economy.Great profits are being made, but where they are to be made is changing very rapidly.

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