The United States is facing head-to-head in economic competition with the newly integrated Europe (centered on Germany) and Japan. According to Lester Thurow, America stands a good chance of coming in third in this race, unless we wake up quickly and adapt. The likely winner will be Europe. This research examines the economic theory and plan for action posited by Thurow in his work, Head to Head (1992).
The end of the Cold War left the United States as the world's only military superpower. But without a pause, the contest for world power has shifted from a military contest to an economic contest among the United States, Japan and Europe. This new economic contest is unlike rivalries of the past. Until recently, trade between nations was a win-win situation: America's agricultural exports did not threaten jobs in West Germany and Japan, and imports from those countries generally did not compete with commodities produced in the United States. Eventually, however, this "niche competition" gave way to "head to head competition" (Thurow, 1992, pp. 28-29). Today's head to head competition is the result of a changing global economy in which developed countries have a nearly identical list of industries necessary to give their citizens a world-class standard of living: microelectronics, biotechnology, telecommunications, civilian aviation, robotics, and computer technology and computer software. Unlike the earlier niche competition in the global economy, the head to head competition is a zero sum game in which every winner has a corresponding loser. For example, Europe has been trying with some success to make the Airbus the aircraft of choice and Japan is working toward building an aerospace industry. The better they do, the worse it will be for Boeing and McDonnell-Douglas. Technology no doubt will take unexpected turns and create new markets and new opportunities that no one has envisioned. Nevertheless, Thurow says, the...