America's New Global Challenge



The Cold War had barely been won before Americans confrontedthe unwelcome news that a new contest for global dominance was already under way -- a contest the United States was not expected to win. The tenacious recession, which developed about the same time, seemed to illustrate America's growing economic problems.

Two new books, Jeffrey Garten's ''A Cold Peace'' and Lester Thurow's ''Head to Head,'' describe this new global struggle for supremacy which they believe will determine the wealth and power of nations in the 1990s and into the 21st century. The fact that these authors agree with one another, and with a number of recent analyses about the broad outlines of a new global contest, makes their views all the more interesting, if not necessarily more correct.

There is a general agreement that, in this new contest, the world is the ''battlefield'' and the U.S., Japan and Western Europe (read Germany) the ''combatants.'' The weapons are not military but economic. The strategies involve things like technology, savings, investments, trade and industrial policies. The stakes are global power, economic autonomy, growth and living standard.

Messrs. Garten and Thurow agree with one another, and with such recent studies as Jacques Attali's ''Millennium'' and the original Japanese version of ''The Japan That Can Say No,'' that the U.S. suffers from some serious systemic disadvantages in this new competition. The biggest American disadvantage, they believe, is the failure to understand that the U.S. is already engaged in a deadly serious competition about who will control the future.

''Simply put,'' writes Mr. Garten, ''the problem is within ourselves . . . . We need to acknowledge that the very basis of American dominance in the world is ending.''

''America's tough problem,'' says Mr. Thurow, ''is realizing that there are problems that must be solved.''

Both authors assert that, by the end of the Cold War, the U.S. had lost many of the economic advantages that gave it a dominant position through most of the last century. While the U.S. bore heavy responsibilities for countering Soviet defense build-ups and foreign adventures, Japan and Germany were shaping up as America's fiercest competitors and, not long thereafter, as its most important creditors.

But military burdens were not the only source of America's growing problems. High levels of consumption and low levels of saving and investment also took a toll on America's industrial base. So did the repeated failure to translate technological strength into market share.

Messrs. Thurow and Garten believe that the ''cures'' tried thus far to treat these problems have only made things worse. The hTC effort to reduce the trade deficit by driving down the value of the dollar has had the long-range consequence of further weakening our competitive position and our economy. The effort to deal with unfair Japanese practices through the General Agreement on Tariffs and Trade (GATT) has failed to produce the expected and desired consequences.

Eventually, they argue, the U.S. will be forced to change its tactics and respond to the Japanese and German challenges in kind; that is, with a national economic strategy to build America's competitive position.

The changed balance of economic power has already produced a downward spiral. The consequences of a continued lack of realism and competitiveness will be further decline, they predict, with the eventual result that, in Mr. Garten's words, ''Either Japan or Germany, or both, could exercise real leverage over us -- as creditors, as suppliers of vital technology, as hard-to-please partners in endeavors that Washington finds exceptionally important.''

Neither author believes American problems are insoluble. Neither sees the relative decline in the U.S. economic position as inexorable or irreversible. They are not declinists.

Both believe an important part of the difficulties the U.S. finds itself in derive from some distinctive characteristics of American capitalism, which is more purely market-driven than that of Japan, Germany or most other major industrial states. The latter emphasize more organization, more cooperation among business, labor and government, and more self-conscious planning than the U.S. system. The result is a U.S. performance that seems, and perhaps is, less coherent than that of Germany or Japan.

It is not necessary to be an economist to note that the problems on which Messrs. Thurow and Garten focus do, in fact, exist. Opinion polls demonstrate that most Americans understand this today. It is also not necessary to be an economist to understand that the various palliatives adopted so far have had little effect on the problems that afflict the U.S. economy. Again, polls show that almost everyone knows this.

It is less certain that a national industrial policy would solve problems not resolved through the market and through GATT.

Will the adoption of such a policy merely return us to the kind of central economic planning and regulation so thoroughly discredited in the world's various socialist and semi-socialist experiences? Will an industrial policy actually work? Or does it merely seem more ''rational'' because it relies on comprehensive, centralized solutions? Does the organization of the Japanese and German economies account for their economic success, or does that success reflect other cultural and social factors?

Clearly, we are involved in a new struggle for economic success, if not economic supremacy. Nonetheless, the American economy remains exceedingly strong, if not as strong relative to Japan and Germany as we wish it were. Surely, however, predictions of American failure are premature.

Jeane Kirkpatrick writes a syndicated column.

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