America And The New Triangle Of Power


By Lester Thurow

Morrow -- 336pp -- $25


By Jeffrey E. Garten

Times Books -- 304pp -- $22

With the collapse of Soviet communism, economically drained Americans are reexamining how they organize themselves at home and conduct themselves abroad. They know that military power suddenly counts for much less, and economic competition much more. But the great debate about just how to respond to this post-postwar reality is just beginning.

That's what makes these two books so timely and provocative. Head to Head is the latest of several books by economist Lester Thurow, dean of Massachusetts Institute of Technology's Sloan School of Management. A Cold Peace is the first for Jeffrey E. Garten, an investment banker with the Blackstone Group and a former State Dept. policy planner.

Both men reject the notion of one happy, win-win global economy in which all nations organize their economies the same way and share the same interests. This has been the basis of President Bush's mushy vision of a U.S.-dominated "new world order." Its essential flaw is glaring: Without the need for U.S. military protection, why should successful nations follow the lead of the U.S.?

In fact, it's clear that Japan, Germany, and the rest of Europe don't necessarily share U.S. goals or values. One sign: Europe's and Japan's thwarting of the U.S. drive for a new round of trade liberalization in the General Agreement on Tariffs & Trade (GATT). Both Thurow and Garten believe such multilateral coordination is dead or dying. With Moscow defeated, Thurow writes, "no one has to moderate economic positions to preserve . . . military alliances."

One corollary is that pure free trade--part of what Thurow calls America's "economic theology"--can no longer work. Like it or not, the world is moving in the direction of more managed trade. Pressure on the U.S. to better manage its industrial and technological policies is also growing. In short, Americans must define a new economic strategy.

Thurow is best when describing individualistic Anglo-Saxon capitalism as just one model competing with the communitarian German and Japanese variants. He repeats oft-heard criticisms of the Anglo-Saxon system--too financially driven, too short-term, too antagonistic--but weaves them into a compelling argument for making American capitalism more competitive. The U.S. system, he notes, is the "exact opposite" of those of Germany and Japan, where larger industrial groups, insulated from short-term financial pressures, dominate.

But Thurow's grasp of foreign complexities is weak. He says, for example, that "at the stroke of midnight on December 31, 1992, the European Community integrates, and . . . instantly becomes by far the world's largest economic market." In fact, this dauntingly complex melding will take years, and the outcome is far from certain.

Garten understands Europe much better. Germany, he emphasizes, is preoccupied internally with reunification and externally with Western and Eastern Europe. So the Germans, he says, won't emerge to stabilize a global order as the U.S. once did. The Japanese won't either; they simply don't believe in it.

Rather, Garten foresees a grand power triangle made up of the U.S., Germany, and Japan, within which alliances will shift depending on the issues at stake. The challenge for America will be "to live with nations that are fundamentally different, without viewing every challenge as a provocation, and without creating the wild gyrations of emotion that characterized the past," he writes.

Both men are short on practical recommendations. Thurow wants to relax antitrust rules so that U.S. companies can form larger competitive groups and to wring the obsession with short-term profits out of the system. Both are easier said than done. Garten asserts, rightly, that U.S. thinking and resources remain too geared to military conflict. He would include in the National Security Council such departments as Education and Treasury, to create a central policy mechanism. But why create a new bureaucracy where others have failed?

Neither author offers strategies for Americans asking such questions as: How do we create economic growth in Des Moines or Decatur? How can our companies compete internationally? How do we stay on technology's cutting edge? How do we pay for it all?

The message to Americans, it seems, should be to stop worrying about ideology and focus, instead, on results. If economic planning helped build a strong defense, shouldn't we apply those lessons to the civilian economy? If nurturing deep relations between companies and university researchers will give U.S. companies an advantage, why not do it? If a government agency can help a company get into the European market, why not let it happen? Those who fret that such "industrial policy" interferes with the purity of the marketplace have their heads stuck firmly in a bygone era.

Just as the U.S. once organized for military conflict, it must now align companies, government, schools, and unions for the global economic contest. Americans must find intersections of interest with each other, rather than revel in old schisms between Republican and Democrat, conservative and liberal. While Thurow and Garten provide building blocks for understanding this new era, much work remains to translate America's new weltanschauung into reality.

Before it's here, it's on the Bloomberg Terminal.