Monday, February 21, 2011

"Japan would have to be considered the betting favourite to win the economic honours of owning the 21st century"

That's from Lester Thurow, a famous economist and former dean of the MIT Sloan School of Management, published in a 1992 best-seller. The quote, and many others, come from Dan Gardner in Future Babble (emphasis mine):
In Agents of Influence, Pat Choate warned that Japan had achieved "effective political domination over the United States." In 1988, the former American trade representative Clyde Prestowitz worried that the United States and Japan were "trading places," as the title of his book put it. "The power of the United States and the quality of American life is diminishing in every respect," Prestowitz wrote.
Meanwhile, American debt was piling up as fast as predictions of American economic decline; in 1992, a terrifying book called Bankruptcy 1995 spent nine months on the New York Times best-sellers list. American growth was slow, employment and productivity were down, and investment and research were stagnant. 
Put it all together and the trend lines revealed the future - the Japanese economy would pass the American and the victors of the Second World War would be defeated in the economic war. "November, 2004,"' begins the bleak opening chapter of Daniel Burstein's Yen!, a 1988 best-seller. "America, battered by astronomical debts and reeling from prolonged economic decline, is gripped by a new and grave economic crisis." Japanese banks hold America·s debt. Japanese corporations have bought out American corporations and assets. Japanese manufacturers look on American workers as cheap overseas labour. And then things get really bad. By the finish of Burstein's dramatic opening, the United States is feeble and ragged while Japan is no longer "simply the richest country in the word." It is the strongest. 
Less excitable thinkers didn't see Japan's rise in quite such martial terms but they did agree that Japan was a giant rapidly becoming a titan, In the 1990 book Millennium, Jacques Attali, the former adviser to French president Francois Mitterrand, described an early twenty-first century in which both the Soviet Union and the United States ceased to be superpowers, leaving Japan contending with Europe for the economic leadership of the world, Moscow would fall into orbit around Brussels, Attali predicted, Washington D.C. would revolve around Tokyo, Lester Thurow sketched a similar vision in his influential best-seller Head to Head, published in 1992. The recent collapse of the Soviet Union meant the coming years would see a global economic war between Japan, Europe, and the United States, wrote Thurow, a famous economist and former dean of the MIT Sloan School of Management. Thurow examined each of the "three relatively equal contenders" like a punter at the races, "If one looks at the last 20 years, Japan would have to be considered the betting favourite to win the economic honours of owning the 21st century," Thurow wrote. But Europe was also expanding smartly, and Thurow decided it had the edge, future historians will record that the 21st century belonged to the House of Europa!" And the United States? It's the weakest of the three, Thurow wrote, Americans should learn to speak Japanese or German.
Read only the bolded parts and replace "Japan" with "China." You could drop those statements into any recent article on China and no one would be able to tell that anything was amiss. The same theme permeates any discussion of China today that permeated discussion of Japan twenty years ago: the U.S. will be overtaken as the world's leading superpower very soon, and this new leading superpower will dominate the next century.

It's clear that these predictions about Japan, coming from highly respected authorities in their respective fields and widely read by the general public, did not come to pass.

The point here isn't that the U.S. won't be overtaken or that China will sputter. Rather, it's that one should be intensely skeptical of so-called "experts" who say they can predict the future. More next week.

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