Thurowly entertaining

He won acclaim for his condemnation of the widening U.S. income gap in his Zero-Sum Society (1980), arguing that the gains of the affluent came at the expense of the less politically advantaged.

The Toronto Star
November 20, 2003

Thurowly entertaining
David Olive

"Canada's always had the classic choice facing rich small countries," says U.S. economist Lester Thurow, scanning the view of City Hall from his suite at the Sheraton Centre prior to his luncheon address this week at the CEO Speakers Forum.

"You can follow the Austrian model," says Thurow, "and just ride the German tiger. Keep your wages and other costs 10 per cent below Germany's. And so when the Germans are cutting back at home during tough times, they seldom close an Austrian plant.

"It's hard to think of anything Austria has invented or is known for lately, but they have a very nice standard of living."

Thurow's face brightens. "Or you have the example of Sweden and Switzerland, which have nurtured a surprising number of world-class companies like Volvo, Ericsson and Ikea, and the Swiss drug, food and banking giants.

"That way, you get the high living standards, but you also get the R&D.

"And these few giant companies become the training ground for everyone else in the country, all the start-ups.

"Canada tries to do both approaches." Thurow pauses.

"You probably can't do either well if you try both."

Thurow hasn't changed his regard of a Canada whose branch-plant malaise is instructive to the United States and other developed nations.

In the 1980s, Thurow told Fortune: "Think of Honda making cars in Ohio. But the design is all done by Japanese, the engineering is all in Japan. We end up having the Canadian complaint. About half of Canadian manufacturing is foreign-owned, so Canadians don't get to compete for the top jobs."

Thurow, 65, son of a Methodist minister in Montana, is a former academic wunderkind. By age 30, the Rhodes Scholar was holding down two professorships at Massachusetts Institute of Technology.

After a stint as an economic adviser in Lyndon Johnson's White House, and disappointed at being passed over for a senior post in the Carter administration, Thurow became something of a preacher himself. He has turned out more than a dozen books, and for the past two decades has commanded something like $30,000 (U.S.) per speech.

"I decided that if I could not have the king's ear, I would talk to the public," Thurow told the New York Times in 1997. "That's the other way to have an impact on the economic system."

His ubiquity made Thurow a target. He won acclaim for his condemnation of the widening U.S. income gap in his Zero-Sum Society (1980), arguing that the gains of the affluent came at the expense of the less politically advantaged.

But in his equally influential Head to Head: The Coming Battle Among Japan, Europe, and America (1992), Thurow became a leader among commentators including Robert Reich, James Fallows and Robert Kuttner in championing a more vigorous U.S. response to the threat posed by the more dynamic developing-world economies.

In an epic clash to match the generational feud between conservative economist Milton Friedman and New Dealer John Kenneth Galbraith, Thurow spent the 1990s fending off attacks from Paul Krugman, 49, no less prolific than his sometime MIT colleague.

Krugman was contemptuous of Thurow and the other "pop internationalists," as he called them, who in Krugman's view were wrongly obsessed with international competitiveness, and off-base in drawing a parallel between rivalry among corporations and competition among nations.

Nations don't have simplistic bottom lines, Krugman noted. Their export performance pales in comparison to the health of their internal economies. And "global competitiveness," he felt, was a handy political justification for austerity and other tough nostrums that might not be in a country's interests.

Unapologetic about the sweeping statements that so infuriated Krugman in Thurow's earlier work, he's at it again in his latest tome, Fortune Favors The Bold: What We Must Do To Build A New And Lasting Prosperity.

Canada, Thurow writes, "falls behind because it isn't making the necessary investments in research and development"—an assessment embraced by Paul Martin last week in his Liberal leadership acceptance speech.

Of recession-bound Japan, which has failed, along with Europe, to evolve into a trading bloc threatening the United States, Thurow writes that "One has to be willing to tolerate a lot of failures to find out what will work when brand-new industries are being built. Tolerating failure is not a Japanese cultural characteristic.

"Because of widespread economic failure and the social stigma that goes with economic failure, Japan is the only country in the world where suicide deaths exceed traffic deaths."

The dogged pursuit of globalization, most recently at this week's Miami summit of the Free Trade Area of the Americas, would seem to vindicate the international competitiveness crowd.

And while China didn't figure into Thurow's Head to Head contestants, "We exaggerate our concerns about China's prowess, and India's as well," he says. "Maybe China will be the dominant world economy of the 22nd century.

"But to say its economy will equal the U.S. by 2050 is to ignore the huge population differential. Even if China does grow that quickly—and it takes longer to catch up than we realize—with its enormous population, its per capita income will remain only one-quarter to one-third that of the U.S."

These days, Thurow and his old nemesis have made common cause against the economic policies of U.S. President George W. Bush—Krugman from his pulpit on the New York Times editorial page, and Thurow on the lecture circuit.

"The ‘jobless recovery’ is due to phenomenal productivity growth—doing more with fewer people," says Thurow. "Companies have been shedding their corporate social welfare benefits since the 1990s, but the pace has accelerated as employers outsource at a more furious pace. Its' going to be an explosive issue for Bush heading into next year's election. "Everywhere I go, the questions are from professionals whose jobs have been outsourced.

"It's estimated that 14 million U.S. college-educated workers could see their jobs outsourced. These aren't blue-collar Democratic jobs. When you have high-income, white-collar jobs disappearing, those are Republican voters."

Thurow and Krugman aren't exactly on the same page yet. But they're friends again. And Thurow is more than a little chagrined at no longer being featured in Krugman's high-profile polemics. "All he writes about is Bush, Bush, Bush. Talk about an obsession! Paul doesn't even mention economists anymore. Has he forgotten about us?"

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