"HEAD TO HEAD"   Term Paper ID:20930 Click to get this paper

Essay Subject: (Lester Thurow). Reviews author's proposed industrial policy for a competitive U.S. in global economy.... More...

6 Pages / 1350 Words 1 sources, 4 Citations, APA Format $24.00 Return to List of Papers

Paper Abstract: (Lester Thurow). Reviews author's proposed industrial policy for a competitive U.S. in global economy. Paper Introduction: It is not morning in America; it is late afternoon. 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: Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. Industry and government in the United States must take stock ofthe country's economic problems and realize, contrary to traditionalAmerican economic thought, that they are not solving themselves. According to LesterThurow, America stands a good chance of coming in third in this race,unless we wake up quickly and adapt. New York: Warner Books.----------------------- 8 The American financial system should bereorganized to reflect a production rather than consumption emphasis. Governmentmust sit down with representatives of the financial and business sectorsand draft a list of special business fields that are crucial to a vigorouseconomy in the coming decades, such as biotechnology, and develop anindustrial policy to encourage production in these fields. Under Anglo-Saxon capitalist theory, theopportunity for a leveraged buyout would only exist if the company wasinefficient, and its dismantling would become a better use of resources.But according to communitarian capitalism, a functioning company createssocial benefits that are not fully reflected in its price-per-share, notthe least of which are the benefits of maintaining skilled manufacturingand sales workforces and research facilities whose disruption would becostly to the nation. Itscurrent goal is to make sure that investors get the highest possible returnon their investments. Eventually, however, this"niche competition" gave way to "head to head competition" (Thurow, 1992,pp. But without a pause, the contest for world power hasshifted from a military contest to an economic contest among the UnitedStates, Japan and Europe. Thurow,of course, never shuns the market mechanism; he recognizes that the marketis the most efficient means to determine the allocation of goods andservices. A grand bargain should be struck betweenteachers, administrators, the community and business in which objectiveeducational quality standards are established and met. The banks should provide a steady sourceof capital for its business allies; businesses, in turn, should give banksa part in management, consulting with them on major decisions. Anglo-Saxon capitalism rests on the faith that industrial societyactually works the way elementary economics textbooks say it does. Public investmentsshould also be made to develop such socially useful infrastructures as thecomputer electronic highway and projects. In recognizing that we are playingcatchup, the United States has to adopt the techniques of its competitors.If the Europeans subsidize Airbus, the United States should subsidizeBoeing dollar for dollar. For Thurow, communitarian capitalism is an industrial policy in whichthe financial markets, businesses and the government work hand-in-hand withan emphasis on production (Thurow, 1992, pp. Unlikethe earlier niche competition in the global economy, the head to headcompetition is a zero sum game in which every winner has a correspondingloser. Peopleare free agents, moving from job to job and place to place in search of thebest opportunities. It is in a country's interest to protect many of itscompanies from being dismantled. Germany and Japan are winning this new, non-military battlebecause they eschew the individualistic "Anglo-Saxon capitalism" thatdominates American industrial thought in favor of "communitariancapitalism" (Thurow, 1992, p. 32). Thurow concludes that industries funded through thisproducer-oriented system will prevail over those that rely on America'sconsumer-oriented financial system. 28-29). ThroughoutAmerican history the government has done precisely that in severalimportant fields. Their governments canimpose additional taxes to remedy deficits; ours cannot without facingpolitical peril. People want toproduce as much as they want to consume. Western European countries have been integrating their economies intothe single largest market in the world. Anglo-Saxon capitalist ideology, forexample, decreed that the takeover of RJR-Nabisco had to be beneficial inthe name of efficiency; Japanese and German business ideology would haveprevented such a transaction from occurring. It is not morning in America; it is late afternoon. Communitarian capitalism, on the other hand, acknowledges additionalfactors in economic theory beyond the individual and the market. This new economic contest is unlike rivalries ofthe past. But in the specialinterest politics of American government, there is a great danger thatprotectionism could be abused to preserve pet industries that perhapsshould decline rather than to promote industrial production into the 21stcentury. Through defense contracting and airline regulation, thegovernment fostered an aerospace industry. Head to head. Thurow's industrial policy entails more than planning and cooperationamong the many sectors of the nation's economy; a certain amount ofprotectionism may also be appropriate. Thurow is well aware of the weaknesses in America's productiveculture. The UnitedStates is facing head-to-head in economic competition with the newlyintegrated Europe (centered on Germany) and Japan. And by establishing the FHA and makingmortgage interest deductible, the government promoted the home-buildingindustry. However, the functioning of an economy is not just aboutefficiency. When companies cease to provide a maximum profit, theshareholders invest elsewhere into something more profitable andproductive, weaning the inefficient out of the economy and supplanting itwith efficient enterprises. If Motorola's cellular phones face obstacles inJapan, Japanese telecommunications equipment should face comparableobstacles in the United States. Thurow is correct in his overall theme that the United States needsan industrial policy to compete effectively in the global market. Until recently, trade between nations was a win-win situation:America's agricultural exports did not threaten jobs in West Germany andJapan, and imports from those countries generally did not compete withcommodities produced in the United States. It is not simplythat America is playing the economic game poorly; the other countries areplaying a different game. The Europeans are alreadylooking past the United States to Japan as their chief competitor. Technology no doubt will take unexpected turns andcreate new markets and new opportunities that no one has envisioned.Nevertheless, Thurow says, the coming decades will see countries forcedinto "winner" and "loser" categories more clearly than the last few decadeshave done. The end of the Cold War left the United States as the world's onlymilitary superpower. The better they do, the worse it will be for Boeingand McDonnell-Douglas. We must take care, however, when extending governmentinvolvement into the sphere of trade protectionism. References Thurow, L. Germany and Japan, on the other hand, have organizeda financial system that minimizes the influence of impatient shareholdersand places money in the hands of industrialists who will invest it toincrease production. But Thurow argues the interpretation that the United States issimply being beaten at its own game is short-sighted. Today's head to head competition is the result of a changingglobal economy in which developed countries have a nearly identical list ofindustries necessary to give their citizens a world-class standard ofliving: microelectronics, biotechnology, telecommunications, civilianaviation, robotics, and computer technology and computer software. In orderto reinvigorate the American economy, the nation's financial and businesssectors must learn to cooperate for the mutual goal of increasingproduction, and the government is the appropriate conductor to orchestratethis cooperation. Banks and industries should be linkedinto a close business alliance. Government intervention is almost alwaysdestructive for it tarnishes the free market. Businesses exist to maximize profits and the return toshareholders. Through government-sponsoredresearch and programs like Medicare, the government built the health careand pharmaceutical industries. The likely winner will be Europe.This research examines the economic theory and plan for action posited byThurow in his work, Head to Head (1992). Once the European integration iscomplete, an American company competing against a German company in Italywill find that the Germans have the advantage. Leveraged buyouts will occuronly if investors believe they can make money by reorganizing ordismantling a company. This alliance between the financial sector and business can benurtured by appropriate government involvement in the economy. For example, Europe has been trying with some success to make theAirbus the aircraft of choice and Japan is working toward building anaerospace industry. One popular explanation for America's weakness in the global economyis that the Germans, Japanese, Koreans and other countries have simplybested America at its own game. Their automobile executives are paid lessthan ours, but they plan better for the long term. In particular, the other countries are employinga different mode of capitalist production that is leaving the United Statesin the dust. No believer in consumer economicswould have built the great cathedrals, the buildings and roads of Rome, orthe monuments of ancient Egypt. (1992). An industrial policythat equalizes trade barriers would be constructive. Their students spend evenings studying mathematics; oursare at the shopping mall or watching MTV music videos. 117-12 ). A clear illustration of these other social benefits involvesleveraged buyouts and corporate takeovers. Add to it the contiguous, highlyeducated, law wage peoples of the former communist bloc and you have themakings of an economic juggernaut. Government can also play an important role in economic development bystrengthening society's infrastructure, particularly the skills andeducation of the workforce. There are other social benefits and purposes behind aneconomy. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.