The Future of Capitalism: How Today's Economic Forces Shape Tomorrow's World (1998)

Lester Thurow. The Future of Capitalism: How Today's Economic Forces Shape Tomorrow's World. Sydney: Allen and Unwin, 1996. 385 pp. As we approach the end of the millennium, the thought that something awful is going to happen to the world as we know it, appears irresistible to some people. We have already seen the emergence of some religious sects in the United States and in Europe, that believe that the world is coming to an end. In some cases, this has prompted some sect members to commit mass suicide, in the belief that they will be picked by God travelling in an orbiting spaceship. Nor is the existence of such sects confined to the Western world. Recent reports indicate the existence of a similar sect based in Taiwan. One interesting characteristic of such group is that they often appear to attract highly-educated, professional people Such feelings of impending doom are not confined to religious groups. In the world of academia, a number of books have recently appeared, especially in the areas of economics and finance, portending imminent doom. One notable example of this is the recent book by James Dale Davidson and William Rees-Mogg, entitled The Great Reckoning (Pan Books, 1994). Thurow's book is in the same genre, arguing that the future of capitalism is fraught with immense difficulties, and clouded in much uncertainty, as a result of a number of important economic as well as political changes that took place in the second half of this century. Using a rather strained metaphor from plate tectonics, Thurow argues that the world capitalist system can be thought of as being made up of five economic tectonic plates: the end of communism, the era of man-made brainpower industries, demographic changes, a global economy, and a multi-polar world with no dominant power. Like geological tectonic plates, these economic tectonic plates move inexorably against each other, causing pressures to build up to such an extent that periodic economic upheavals are inevitable. The economic magma that drives these changes is the result of the interaction of technology and ideology. With these massive changes in the economic landscape come new opportunities and a period of economic punctuated equilibrium comes into existence (pp. 8-19). The end of communism in Eastern Europe not only means that capitalism has no major ideological competitors, but also that large natural resources (principally from the former Soviet Union), and highly qualified, and relatively cheap labour (from Eastern European countries) will increase competition in both product and labour markets. In addition, China's embrace of market economics has opened up a vast pool of unskilled, cheap labour, enabling it to become a major world producer of labour-intensive manufactured goods. The spread of man-made, brain-power industries to many less developed countries has resulted in the decline (and in many cases, extinction) of traditional industries in developed countries. Possession of physical resources (such as coal, or iron ore), financial resources, or technologies is no longer important in determining the location of many industries. It is the quality and quantity of human resources that count. Demographic changes have resulted in rapid ageing of the populations of many developed countries, putting pressure on governments to provide welfare and services to the aged. In less developed countries, rapid population growth has led to massive out-migration to developed countries, putting pressure, not only on government services, but also on the social fabric of these countries. Globalization has resulted in increased international competition in many product markets, putting downward pressure on wages in high-- wage countries. In addition, the implementation of market-oriented economic policies in many countries has resulted in ever-widening income distribution, and an underclass of poor people, even in wealthy countries. …