Lester C. Thurow, acclaimed Professor of Management and Economics and former Dean of MIT’s Sloan School of Management, seems to have lived comfortably in the eye of successive hurricanes ever since the appearance of his Poverty and Discrimination in 1965. His prodigious flow of invigorating -- and sometimes controversial -- insights has guaranteed that neither his students nor his readers will succumb to low blood pressure or boredom. He may stir up contention, but cannot be ignored.
His most recent book, The Future of Capitalism: How Today’s Economic Forces Shape Tomorrow’s World (Penguin Books USA Inc., 385 pages, $13.95) continues to upend many of our ingrained assumptions. The five fundamental forces swiftly changing the world in which we live and work -- "the five tectonic economic plates" -- are defined in the opening chapter:
- The End of Communism. With one-third of humanity suddenly added to our presumably capitalist world, we will find that digesting this mass of humanity "with a very different set of criteria for success and failure" will profoundly alter our economic world.
- A Technological Shift to an Era Dominated by Man-made Brainpower Industries. "[M]an-made brainpower industries don’t have natural predetermined homes [determined by the location of natural resources and capital] ... They are geographically free -- capable of being located anywhere on the face of the earth."
- A Demography Never Before Seen. There is (1) a massive migration of people "from poor countries to rich countries just when unskilled labor is not needed in the wealthy industrial world" and (2) "a very large group of elderly, relatively affluent people, most of whom do not work, and who are dependent upon government social welfare programs for much of their income."
- A Global Economy. "Shifts in technology, transportation, and communications are creating a world where anything can be made anywhere on the face of the earth and sold anywhere on the face of the earth. National economies fade away."
This draws national governments into conflict with global enterprises.
- An Era Where There Is No Dominant Economic, Political, or Military Power. "[T]he twenty-first century will have no dominant power able to design, organize, and enforce the rules of the economic game. The unipolar economic world dominated by the United States is over ..."
Drawing colorfully upon geological analogies, Thurow finds us living in "an epoch of punctuated equilibrium." He develops the economic and social significance and likely outcomes of each of these five economic forces. Since the power of any single nation or global enterprise is puny in the face of these seismic forces, the "winners" in this global marketplace will be those who are able to accommodate these forces and employ them to their advantage. The winner in the Whitbread Round The World Race is not the crew with the strongest boat, but the crew with the most perceptive understanding of the complex interactions between the winds and the ocean currents.
Perhaps this has been described most graphically by Jim Graf, Project Manager for NASA’s Scatterometer (NSCAT) orbital instrument gathering wind measurements around the globe: "By combining the scatterometer wind data with ocean height data from the TOPEX/Poseidon mis-sion, Earth scientists are getting a first hand look at the forcing func-tion, the winds, and the ocean’s response, ocean height and waves, or the yin and yang that control much of our planet’s weather and climate change." The entrepreneurial leader and the economist need to have an economic scatterometer in orbit.
Thurow’s conclusion: "Technology and ideology are shaking the foundations of twenty-first-century capitalism. Technology is making skills and knowledge the only sources of sustainable strategic advantage. Abetted by the electronic media, ideology is moving toward a radical form of short-term individual consumption maximization at precisely a time when economic success will depend upon the willingness and ability to make long-term social investments in skills, education, knowledge, and infrastructure. When technology and ideology start moving apart, the only question is when will the "big one" (the earth-quake that rocks the system) occur. Paradoxically, at precisely the time when capitalism finds itself with no social competitors -- its former competitors, socialism and communism, having died -- it will have to undergo a profound metamorphosis."
Inherently a vigorous teacher, Professor Thurow is always stimulating and provocative. Nobody sleeps in his classes! This is a carefully-researched and perceptive work -- an important analysis of where we are today and where we appear to be going -- but it can scarcely be recommended for bedtime reading.
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