Head to Head: The Economic Battle Among Japan, Europe, and America

Head to Head: The Economic Battle Among Japan, Europe, and America

by Lester C Thurow

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The classic text on the post-Cold War economic battle.

Starting with the fall of communism, influential economist and former dean of MIT's Sloan School of Management Lester Thurow deftly explores how head-to-head competition -- not military might -- among Japan, the United States, and the newly united European countries would produce the next world leader.

As Thurow explains, in the 1990s the race for economic supremacy was only just beginning. In a world no longer governed by two military superpowers, the stage was set for a dramatic shoot-out among the world's most powerful national economies. Using analytical data, key insights, and common sense, Thurow presents a solid economic game plan for the United States to follow in order to win this battle and attain dominance in the global economy.

Product Details

ISBN-13: 9780061882074
Publisher: HarperCollins Publishers
Publication date: 10/13/2009
Format: NOOK Book
Pages: 352
File size: 473 KB

About the Author

Lester C. Thurow is the Lemelson Professor of Management and Economics at the Massachusetts Institute of Technology, where he has taught since 1968. From 1987 through 1993 he was dean of MIT's Sloan School of Management. His previous books include the New York Times bestsellers The Zero-Sum Society and The Future of Capitalism.

Read an Excerpt

Chapter One

The Bear in the Woods is Gone

There is a bear in the woods. For some people, the bear is easy to see. Others don't see it at all. Some people say the bear is tame. Others say it is vicious and dangerous. Since no one can really be sure who's right, isn't it smart to be as strong as the bear -- if there is a bear.

-- Reagan TV advertisement, fall 1984

Most of the last half century has been devoted to worrying about the Soviet bear in the woods. Democracy and capitalism faced off against dictatorship and communism. In the late 1940s it looked as if the Soviet bear, helped by the newly triumphant Red Chinese dragon, wished to conquer the world. Aid to Greece and Turkey, NATO, rearming Japan and West Germany, and the Korean War were all efforts at containing the bears and dragons in the woods.

In the 1950s the Soviet bear's military power seemed to be matched by its economic and technological capabilities. The Russian Sputnik flew; the American equivalent did not. In the 1950s the Soviet Union was growing faster than the United States. If economic trends were projected forward, the Soviet gross national product (GNP) would pass that of the United States in 1984 -- a year with ominous literary overtones. Containment was not a problem limited to Eastern Europe. In the Third World, communism, based on the economic success of the USSR, was widely seen as the only model for economic development. Communist Cuba, just ninety miles from the United States, was the wave of the future. When Nikita Khrushchev banged his shoe on the table at the United Nations and threatened to bury the industrial democracies militarily, technologically, and economically, everyone took him seriously. It looked like it was happening.

John F. Kennedy's 1960 campaign for the presidency revolved around getting the country moving again -- on all fronts -- militarily, technically, and economically. With the construction of the Berlin Wall and the Cuban Missile Crisis, occurring shortly after his election, the Bear loomed ever larger in the early 1960s. At middecade President Lyndon Johnson spotted a North Vietnamese offspring of the Red Chinese dragon in the jungles of Vietnam. For the next ten years the dragon's offspring got most of America's attention and resources.

Two oil shocks and the discovery that the Chinese dragon was a friendly dragon -- if not an ally, at least not an enemy -- temporarily diverted attention away from the Soviet bear in the mid-1970s. But with a Soviet military buildup in the 1970s (now in dispute as to whether it really occurred), the American humiliation in Iran, and the USSR's invasion of Afghanistan, the bear was back -- bigger, badder, and more dangerous than ever. In response to the glimpse of this enormous bear in the woods, President Ronald Reagan doubled America's military budget in the first half of the 1980s. A huge high-tech Star Wars program would be necessary to control the bear and his "evil empire."

Suddenly, the bear 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, the Red Army withdrew to the east, the Warsaw Pact was abrogated, the Soviet Union split asunder, and communism ended in Europe, its birthplace. Democracy and capitalism had won. Together they had beaten dictatorship and communism.

In many ways the retreat of communism is just as mysterious as Genghis Khan's abandonment of his conquest of Europe 770 years earlier. While it was clear that the 1950s vision of the Soviet Union as an economic superpower was wrong, the USSR was not, if the CIA is to be believed, an economic basket case in the 1970s and early 1980s. As Gorbachev came to power, the CIA's Directorate of Intelligence was estimating that the USSR had grown at a rate of 2.1 percent from 1975 to 1985 -- a rate slightly slower than America's 2.9 percent over the same period -- but nothing that dictated radical reforms were necessary. In the mid-1980s the USSR was doing even better. In 1983 a 3.3 percent growth rate was recorded, and in 1986 an even better performance, 4.1 percent, was achieved. There were no signs of collapse. Quite the contrary, this was the period when plans for President Reagan's Star Wars program topped the American political agenda. The economic problems that are now highly visible all arose under Mikhail Gorbachev and explain why he is so unpopular at home.

The USSR's inability to deliver civilian consumption goods probably guaranteed that communism could not have lasted forever, but if the intellectual will had been there it could have continued for a long time. Just as he was about to conquer Europe, Genghis Khan turned around and disappeared into central Asia. In many ways the sudden disappearance of communism is no less mysterious.

By undercutting the authority of the old central-planning system that had been in place, Gorbachev created a situation where it was not possible to return to the past. What happened was much more fundamental than his opening the door to change. Once the door was open a crack, the old system was not so much ripped up by Gorbachev as it was dismantled by thousands of Soviet citizens who simply became unwilling to cooperate with it. When their voluntary cooperation vanished, the old system vanished. Even if the leaders of the abortive 1991 coup had succeeded, they could not have restored old-fashioned communism any more than Genghis Khan could once again sweep out of the Mongolian steppes.

Everyone from the far right to the far left in the former Soviet Union understood that the old system had come to the end of the line. Intellectually, this is why the 1991 coup failed. Its leaders had no program to offer to persuade other members of the Army and KGB to join them ...

Head to Head. Copyright © by Lester Thurow. Reprinted by permission of HarperCollins Publishers, Inc. All rights reserved. Available now wherever books are sold.

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