Who Owns the Twenty-First Century?

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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.

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3. This section is drawn from ideas in L. Tyson and L.C. Thurow, “The Economic Black Hole,” Foreign Policy, Summer 1987, p. 3.

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5. EC Delegation to die United States, A Guide to the European Community (Brussels: EC, 1991).

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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).

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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.

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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.

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