Head to Head: The Coming Economic Battle Among Japan, Europe & America

by Lester Carl Thurow

With the dismantling of the Berlin Wall in 1989 and the implosion of the USSR in 1991, the Cold War era has ended. Immediately, a new economic struggle begins. Three economic superpowers emerge, each playing the game of capitalism in a strikingly different manner. And for the first time, the United States is the second largest economy in the world. As the domestic economy stagnates and the deficit financing of the federal government escalates, many Americans see themselves at a turning point. And well they might. In Head to Head, one of America's most influential economists provides his dynamic assessment of the emerging economic landscape: the rules of this new three-way competition; the strengths and weaknesses of the players; the information we need to win. Head to Head is full of surprises; one attribute of the new competition is that radical new skills and radical new ways of thinking are vital to success. For example:. Competition and Cooperation. In the 1990s, there will be no clear winners, but losers might be destroyed. The ability to cooperate effectively with your direct adversary will be a requisite for survival. Resources. If we are to thrive in this new environment, our whole notion of essential resources must be overhauled before the year 2000. Key Industries. There are seven key industries vital to the maintenance of a high standard of living. How can we maintain competitiveness in those industries over the coming decade and beyond? Education. Education is the most potent weapon of the new warfare. How can we close the education gap? Teams. How can Americans learn to become team players in new and unfamiliar ways?

Genres: Economics, Business, Nonfiction, History, Management

336 pages, Paperback

First published January 1, 1992

About the author

Lester Carl Thurow (born 1938) is a former dean of the MIT Sloan School of Management and author of numerous bestsellers on economic topics.
Thurow was born in Livingston, Montana. He received his B.A. in political economy from Williams College in 1960, where he was in Theta Delta Chi and Phi Beta Kappa as a junior, and a Tyng Scholar. Thurow was awarded a Rhodes Scholarship, and went to Balliol College, Oxford to read Philosophy, Politics and Economics, graduating in 1962 with first class honors. He received a Ph.D. in Economics from Harvard University in 1964.
Thurow is on the board of directors of Analog Devices, Grupo Casa Autrey, E-Trade, and Taiwan Semiconductor Manufacturing Corp.. Thurow was also one of the original founders of the Economic Policy Institute in 1986.
Thurow is currently an economics columnist for, among others, the Boston Globe and USA Today. He was previously an economics columnist for and on the editorial board of the New York Times, and was a contributing editor to Newsweek.
Thurow is a longtime advocate of a political and economic system of the Japanese and European type, in which governmental involvement in the direction of the economy is far more extensive than is presently the case in the United States – a model that has come to be known as "Third Way" philosophy.
His best selling book, Head to Head: The Coming Economic Battle Among Japan, Europe and America published in 1993, compares economic growth and living standards among Japan, Europe, and the USA.
His other books include:
Fortune Favors the Bold: What we must do to build a new and lasting global prosperity (2003).
The Future of Capitalism: how today's economic forces shape tomorrow's world (1996).
The Zero-sum Solution: building a world-class American economy (1985).
Dangerous Currents: the state of economics (1983).
The Zero-sum Society: distribution and the possibilities for economic change (1980).
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Reviews

[Brecht Rogissart · Rating 2 out of 5]

Written at the beginning of the '90s, Thurow is able to foresee the game that will be played in the next few decades, but unable to pinpoint the key players and their development. In

The game described is pretty accurate: after the fall of the Soviet Union, world politics will move from political competition between capitalism and communism, towards economic competition within a capitalist global market. Before the 1990s, economic competition in the capitalist world was quasi non-existent: the USA had the biggest economy, full stop. But since the '60s, and increasingly the '70s and '80s, new powers (the EU and Japan) have risen and are threatening US power.

What is needed, therefore, is the birth of a global world order able to master a world economy in which not one country wields all economic power. Just like Bretton Woods was the perfect machinery for a growing global economy under the wings of US dominance, we need new global institutions in which Japanese, American and German politics are able to pull together to get the global economy out of a slump (or tranquilize things when needed). He wants a world central bank, a stable exchange rate system, and the creation of a "manager".

Up until this level of analysis, I was following. He even gives some accurate predictions, all too familiar for the Trump era: "Ooit zullen de VS een handelsoverschot moeten creëeren waarmee de rente voor de fors opgelopen internationale schulden afgelost moet worden. Als het zover is, zullen ze minder gaan importeren en breekt er een periode aan waarin de Amerikaanse markt gesloten zal zijn voor de ontwikkelingslanden." (60)

But he was so wrong on the key players. He extrapolates the current moment of world economics into the next few decades. European unification, for example, would become the main power house for global economic growth in the next few decades, according to him. He does give a striking analysis over how currency stabilisation and mechanisms leads to common currency policies, thus a common central bank, and also common fiscal and social policies, aka political unification. Although he is right that currency unification does give a strong impetus for further political coordination (something Thatcher opposed to), Thurow underestimates how much a region can slump and hesitate, which was the case for the EU. There's nothing like social and political unification even 30 years later. It was interesting to see how he predicted the end of the GATT treaty because of EU unifcation (the GATT prohibits favouring some nations over others when opening trade, which the European countries were obviously not going to care about as they were creating a unified market).

But his extensive view on Japan as the main threat is obviously redundant now, and even was some years after this publication. In stark contrast stands China in his analysis, which he dismisses as unimportant in just one page.

And then comes his recommendations for America. First: more investments in education and R&D. Def right that low wages is not going to cut it for American competitiveness. Second, more saving and investing, less consuming. Okay I guess. Third, get rid of financial capital, give more room to productive capital. Hmmm vague. Four, have a strategic industrial policy. Visionary! Five, in trade, give hostile trading partner a piece of their own policy. Completely against the spirit of constructing a new manager, right?

A last quote: "Als de historici van de toekomst terugblikken, zullen ze de twintigste eeuw als de eeuw van 'gematigde' concurrentie en de eenetwintigste eeuw als die van de 'frontale' concurrentie beschouwen." (26)

[Wei Ming · Rating 3 out of 5]

Aged badly, interesting read, quite well written for its time. The book essentially predicts the economic future of the early 21st century. Written in 1993 in the aftermath of the fall of the USSR, it is interesting to see what top economists predict. China was written off as being too poor to actually become a major power. He writes that China could grow at 10% a year for a decade and still be minor compared to other countries bc they started off with such a low base. However, he fails to realise that after 20 years or 30 years this compounding effect really adds up. He also writes that the main thing that drives economies is investment, specifically investment in technology and education. He posits that complete EU integration will make it the economic powerhouse of the 21st century. I guess it is too soon to say. We are at an inflexion point in the EU project, and things could easily go both ways. If EU were to go on the path of further integration, they could and probably would end up setting the global standard for trade. However, this would likely lead to an erasure of national sovereignty in many of the EU countries, which I am not sure if many EU citizens would be okay with. The book also fails to predict Japan’s bubble bursting and the Japanese economy essentially being stagnant for the past 30 years in a disastrous deflationary spiral. The book is wrong on just about every prediction, but is still well written and interesting for its time. His suggestion is for USA to adopt more policies that incentivise saving, investment and the state to take more lead as in Japan or EU. He also suggests for Japan to move from export based growth to domestic consumption based growth which sounds a bit contradictory to me. At the end of the day what we learnt in H2 economics is that aggregate demand and supply in an economy has to both increase in tandem and it doesnt rly matter how as long as it works. CIGX whatever man if it works it works.

[hamad · Rating 2 out of 5]

After taking another look at this ancient book in 2018 it appears that most of thurows predictions have so far failed in that Europe is a mess and nowhere near integration but the other way around unraveling and the venture capitalists have become the merchant bankers that he said they could not be. Binning this and confirming my view of prognosticators as buffoons and soothsayers regardless of erudition especially when lacking a clear and objective methodology.

Two points for some interesting observations.

Some books just age horribly.

[Yves · Rating 2 out of 5]

I did not dare express publicly my doubts about the future of the EU when LCT - then dean of the SCM at MIT - was so vocally buoyant about it. Noticeably, he did not spot the decline of Japan and the rise of China.

[Hank · Rating 3 out of 5]

I was impressed at the time, but hasn't aged well.

[Gamal soliman · Rating 2 out of 5]

لم يعد صراعا الان لان هذا الصراع القديم اصبح احادى القطبية وبالتالي انفردت الولايات المتحدة وتربعت ولم يعد هناك أحد قادر ع الوقوف امامها

[Mika]

Comencé este libro porque estaba en mis estantes y ya no tenía ningún otro en físico para leer, asi que nunca tuve expectativas.
La Guerra del Siglo XXI habla de la economía de diferentes potencias mundiales de manera completamente entendible, el problema con este libro es que está estancado en el tiempo, fue lanzado en 1993 y desde ese año a la actualidad la cantidad de cambios que ocurrieron en el mundo es asombrosa. En los casos que plantea tiene razón, pero ya pasaron. Es como si me predijeran el pasado, lo cual vuelve esta lectura aburrida, ya que conozco lo que va a suceder, pero al mismo tiempo enriquecedora, ya que posee terminología de la materia económica y algunos datos estadísticos interesantes.

[Erika · Rating 4 out of 5]

read while lpreparing my MBA