Customer Reviews

Head to Head: The Coming Economic Battle Among Japan, Europe, and America

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Head to Head is a great example of one way books are superior to TV and Internet postings: they stay around for us to learn from the errors made by people TV personalities identify as "experts." When Lester Thurow was writing his book in 1991-1992, the U.S. was in the midst of what we know now was a mild and short-lived recession. But with the bias that many academics and government bureaucrats have against free market forces, which seem to the risk adverse who are attracted to a life in academia and government service, a chaotic way to deal with the powerful forces which provide a nation with jobs, products and the wealth that make mega-universities and fat government programs possible. Thurow took a book that looked as if it were going to be about Japan, Germany and the U.S. competing with each other, head to head, brain to brain as opposed to the old competition based on natural resources, and almost from page one made it into a diatribe warning that without Japan's Ministry of Finance's economic management and Germany's coddling of workers, America was going to be a second or third class nation. Of course we know now that Japan's economy was on the verge of stagnation and Germany is only now recognizing the need to remove employment guarantees if it is going to be globally competitive.

If Thurow had been America's Minister of Finance we know into which businesses he would have directed funds: high definition television for which American consumers have never shown a great interest and the automobile building robots General Motors tried for a few years before replacing them with simpler machines. Meanwhile many of us were typing in cumbersome commands, using gopher and telnet to share information stored on around 70 computers. In 1989 Tim Berners-Lee created HTML and HTTP to launch the World Wide Web. This development seems to have been unnoticed at MIT's economics department, but at the University of Illinois at Urbana-Champaigne an undergraduate student, Marc Andreesen recognized how a point and click way of collecting information might change the world. The beta version of Mosaic came out shortly after Thurow's book and Andreesen then created Netscape.

Computers and the Internet went on to give America the increase in productivity Thurow thought we couldn't achieve because the government wasn't building highways and bridges. The funding came from entrepreneurs who risked their own money and consumers who saw the benefits of the new technology. Once again, history proved that individual investors and consumers can guide Adam Smith's invisible hand to do things no government bureaucracy or academic researcher could envision. But academics and government functionaries, such as Thurow's colleague in MIT's economics department, Paul Krugmann, our new Secretary of the Treasury, Lawrence Summers formerly a Harvard economics professor and his former colleague, Martin Feldstein are arguing that bureaucrats have a better idea of the value of a Thai baht or Korean won than the currency traders who signal to corporate CFO's how many baht they should ask for goods they sell today to pay their German employees in marks tomorrow. They dream of something like an International Ministry of Finance. Some people never learn.

This book is racy reading , and is made of the stuff non-fiction bestsellers are sometimes made of - a lack of intellectual rigour combined with a hypothesis that appeals to the general public. Tell the world that countries are like corporations , and that America and Japan (or any two countries) are engaged in a competitive game similar to that between Coca Cola and Pepsi - and there is a likelihood that a lot of heads will nod in supposed understanding.

No mention is made of the fact that international trade is NOT a zero-sum game , and that exchange based on comparative advantage will lead to a win-win situation for both countries involved. Instead the book harps on the assumption that somehow at the end of the game there will be winners and losers. In fact, it asserts that a united Europe will be the winner among the US , Japan and Europe. That prediction does not look like being borne out anytime soon , and Japan is languishing in a decade long mild recession - even though Japan did follow a policy of preferentially promoting "strategic" sectors , similar to what the book suggests.

The book's assertion that there are some high value-added sectors that ought to be promoted have been demolished by more careful analyses - notably by Paul Krugman's articles in Foreign Affairs ( March/April 1994) . These analyses show that productivity growth , rather than victory or defeat in some supposed economic Olympics , is the primary causal factor behind continued growth or stagnation.

Someone (I think Jagdish Bhagwati , but not sure) said in response to the assertion that it is better to produce semiconductor chips than potato chips ---- that you can produce sophisticated semicon chips, export them and import potato chips, lie in front of the TV all day long eating potato chips, and become a society of morons. On the other hand, you can produce potato chips , export it and import semiconductor chips, and use them to improve education. The hollowness of a lot of assertions in this Thurow book can be demolished by this silly-sounding but relevant quote.

The doctor's prescription is as follows - if you read this book , read some effective antidotes (like the Krugman articles) - otherwise you may be condemned to a view of the world that is siren-like in its appeal , but lacks even a modicum of truth.

The book is disappointing as it uses flawed arithmetics. The author views economics as a zero-sum game. He confuses competitiveness among corporations as being the same as amongst countries. The book seems intellectually rigorous but any serious economist will tell you it is full of fallacies. One gets a better idea of international economics by reading Pop Internationalism by Paul Krugman, one of the most brilliant younger economist.

Thurow made a good comparative sytudies between the economic models of Japan, US, and Europe. He illustrate the pros and cons of the three models very well.

However, I am disapointed with his conclusion. I still do not understand how he come to his conclusion that Europe will win the economic race in the future!

I bought this book, and I really wish I could have my money back!

Another reviewer wrote that Paul Krugman, a very highly respected economist who also writes for popular audiences, had published a refutation of Thurow's thesis in Head to Head. Actually Krugman wrote several in the early nineties, during the NAFTA controversy and Clinton's first term. These are collected in the book Pop Internationalism, which is a fine book for anyone to read, as are Krugman's other books.

Of course you can read Thurow's book, and it has some interesting observations, among its flawed analysis, of business cultures in Japan and Europe; they make interesting comparisons with business culture in the USA. For this I give it one star above the minimum.

Also, it is interesting that this new updated version includes only a new forward; the text remains unchanged. Perhaps this is a little disappointing, since it would be nice to see Thurow's predictions for the future from now. But its nice to see how wrong he was about all his predictions before. His new forward says that he was wrong because America read his book and reacted.

Actually, he was just wrong. So I recommend that you read Pop Internationalism in addition to, if not instead of, Head to Head.

Taking a snapshot of the economic world of the early 1990's, Thurow made predictions that turned out to be as accurate as George W. Bush's Iraqi Intelligence estimates. Looking through a perspective of three economic superpowers dueling it out, namely the U.S., Japan and Germany, Thurow did not predict the rise of many other nations economically, as well as Japan's struggles during the 1990's.

Thurow put too much empasis on Japan's supposed strengths, including an active national banking policy as a means of promoting exports and job growth. Nowhere in Thurow's analysis is there a place for the rise of Chinese capitalism in a totalitarian state. The dynamics have changed dramatically since Thurow put together this book, which at the time, I would have given four to five stars for.

Economists have a tough job. They put their predictions on paper. We rarely hold a weatherman accountable for missing the high temperature by 5-10 degrees, but in this case, you have to atleast acknowledge that the author missed the green and ended up in a sand trap.

Even being an (unemployed)agronomist here in Brazil, I love to read books about world's situation.I read this book about eight years ago.
This book has many usefull informations.The best in this book is chapter 6.At the same time, this book is now outdated.Japan has no possiblity to be world's leader, in XXI Century.Europe is changing.USA had no big problem after all, with military expending or anything else.After all, this book is outdated, but not useless.

This book is a very good overview of some of Thurow's more interesting economic ideas. It makes a great counterpoint to "Free to Choose" by Milton Freedman. The book is written at an intellegent, but by no means difficult, level.

With the fall of the dollar and the rise of China together with the bursting of America's housing bubble this book is looking more presentient.

The assertions in this book remain just that. Thurow has once again produced a populist book that lacks any academic foundation. Playing on current trends and American paranoia this book presents distorted facts and hence distorted conclusions- ignoring some of the most basic ideas of free trade, such as mutual gains. Read Krugman, Obstfeld or Rogoff, but please don't read this.