Pull-Up Not 'Trickle-Down'

...We are saving too little, innovating inadequately, managing shoddily, increasing illiteracy, deindustrializing, taxing inefficiently, spending wastefully, and practicing the disastrous macroeconomics of containing inflation with successively more expensive sacrifices in the form of manmade unemployment...

...that the safety net is a second-best policy to help those who nonetheless fall through the cracks...

...Thurow leaves redistribution on the shelf—the word is not even in the index...

...No, it does not mean central planning: Are you out of your mind...

...The Democrats need to dress him a bit more in Galbraith's clothes...

...They have imperiled the economy further, gratuitously causing a crisis within a crisis...

...His favorite phrase, recurring like a chorus refrain, is: "to ask the question is to answer it...

...The trouble with Thurow's program, though, is not so much his prescriptions as his diagnosis...

...The income tax offends similarly, by taxing the income from which you save and the income from your saving and associated investments (hence the IRAs you now have, in case you did not notice...

...If, at the margin, your dynamic, progressive, Schumpeterian firms are going overseas, forgetting them when analyzing technical change is to commit that most grievous of sins for social scientists: letting reality get too far ahead of theory...

...We hire and fire workers, middle managers and chief executive officers with amazing speed and disdain...

...The important work of Robert Solow and Edward Denison has amply borne this out, broadly construing technical change as including management and policymaking improvements, not merely engineering advances...

...Economists are notorious for their disagreements: They multiply by dividing...

...Thurow contends that the United States is going the way of (the erstwhile Great) Britain, where steady decline and the demise of Pax Britannica have now become painfully manifest...

...Increasing personal savings means drastically curtailing personal credit, the foundation of our traditional consumerism...

...But he is simply bringing us back to where we started...

...Reviewed by Jagdish N. Bhagwati Professor of Economics, Columbia University...

...Mauled by President Reagan, they have been in political and intellectual disarray...

...Gary Hart and Mario Cuomo will notice its chief advantage: It anchors itself squarely on excellence, efficiency and growth...

...As it happens, Democratic politicians, if not the economists, appear persuaded...

...My major worry is that Thurow and others focus on productivity measured for activity located geographically within the United States...

...The one question that races through my mind as I read all this, and agree with it, is: Have we changed to these ways, or have circumstances somehow changed, necessitating our abandoning what at one time enabled us to prosper and adopting new ways...

...affiliates are counted in...

...He beautifully destroys the red herrings raised by his opponents, mostly economists of every persuasion...

...Nevertheless, I remain skeptical...

...Ours is no exception...

...His central thesis is that the U. S. economy is in a secular decline, losing its competitiveness and confronting a lapse from its premier postwar status...

...ADemocrat-ic Agenda" would have been less clumsy and more to the point...

...It may simply be incompatible with our strongly pluralistic society...

...Magnus Blomstrom has computed corresponding results for Sweden...

...As it happens, bashing the Republicans is the easier task...

...In the same spirit, he adds a luminous silver lining to the black cloud he has painted: To diagnose America's slow but sure malaise is to define the agenda that will cure it...

...and that his program will provide growth and jobs with much greater effectiveness than the GOP laissez faire ideology...

...Thurow, of course, will not bow and scrape before the market...

...Or that the monetarists have it all wrong— itisnottheirmoneyindicators, M-l and M-2, which explain inflation, it is MX...

...Offshore" U.S...

...Or Galbraith's malicious glee that the misfortune of monetarism was that it was a theory that had been tried and failed...

...When the best of America are working on space weapons while the best of Germany are working on better cars," observes Thurow, "no one should be surprised that German cars are better than American ones...

...Evidently he has not walked down the hall to meet with Franco Mo-digliani, his MIT colleague and this year's Nobel Laureate for his seminal work on savings behavior...

...As in life, so in economics what not to do is more apparent than what should be done...

...of A. He is much like the Israeli who talked of his first son "building socialism in Rumania," and his second "building socialism in Bulgaria...

...After all, it was not too long ago that James Burnham and Galbraith made us sit up in wonder at the arrival of the Managerial Revolution in the modern corporation, where managers took the long view while shareholders were wedded to profits...

...Besides Adam Smith's principles of political economy, Reagan seems to be animated by the immediacy of his experience in Western films—where persona] fortunes reflected the time put into one's homestead rather than at the saloon, and social organization and government were critical only when the "injuns," the Soviets of yesteryear, appeared on the scene...

...He seriously believes we must learn to save much more...

...Much of the book spells out (his program and exhorts the Democrats to embrace it...

...In embracing a Thurow-like program, the Democrats will have to embed it in a wider framework that keeps America's commitments to the progress of the disadvantaged firmly in view...

...Do we then want a largely ad hoc, implicit industrial policy that is never consistent or coherent...

...As the globalization of the economy proceeds apace, this becomes an increasingly treacherous procedure...

...The key theme is that we have slipped into the "instant" culture, not just with Nescafe, but also in the area of profitmaking...

...But on his central themes, the inadequacy of our savings and the drop in our progressivi-ty, I am afraid even his friends are likely to desert him...

...Publish or perish" not only afflicts our scholarship, it affects our industry and our society: At the Catholic Boston College, across the Charles River from MIT, the slogan changes to "publish or parish...

...My sole fear is that Thurow's Japanese-inspired social compact-type solution may be politically infeasible, not because it is worse but precisely because it is better than what we have...

...Or would we prefer that some "strategic consensus" be explicitly obtained, with participation by business and labor, which provides the broad contours of our national economic future and defines the government's supportive role in it...

...How could Thurow pass up the splendidly self-incriminating remark attributed to Treasury Undersecretary Beryl Sprinkel, during our adamant refusal to work with our distraught allies on exchange rates because we wanted neither intervention nor policy coordination: "Let them worry about their exchange rates and we will worry about ours...

...Modigliani: Nonsense, complete nonsense...

...Conservatives, chiefly Feldstein and his army of associates, contend that Social Security has reduced the personal incentive to save...

...Thurow is then not treading on quicksand when he sighs over our falling pro-gressivity...

...He does this by marshaling an avalanche of facts and figures...

...Essentially, Thurow has grasped the point that the laissez faire theorists miss: Governments exist and will not self-destruct, no matter what Mikhail Bakunin and Milton Friedman advise...

...Thurow is masterly as he shifts to the Benthamite level and addresses the overall policy framework, arguing for an industrial policy...

...The Japanese saved thrice as much as Americans in 1982, he notes, and the wretched British succeeded in doing twice as well...

...But take one at random on our campuses and you will find an unhappy citizen worried that the Administration's neglect of the budget deficits, and of the international economy and its management, has put the nation at risk...

...Asked whether his third son at home was building socialism in Israel, he replied, "God forbid, Israel is our own country...

...Thurow's remedies go beyond the realm of conventional economics...

...No, industrial policy does not mean "picking winners": How could you...

...production of manufactures for sale to third markets is by now of the same order of magnitude as our "mainland" exports...

...Here is Mo-digliani talking with Kyle Crighton of the New York Times (November 3,1985): Crighton: There seems to be a popular assumption that the low savings rate is part of the United States' long-term economic decline...

...Indeed, Thurow's instant recall and ability to ferret out interesting, relevant statistics have dazzled us all on television ever since he achieved celebrity status with The Zero-Sum Economy that begot the present work...

...Certainly the author has the Democrats very much on his mind...

...It definitely runs afoul of the rugged individualism, the return to the market and the decapitation of the government that the President espouses...

...Better management, for example, means "constructing an efficient team," scotching the merger mania, providing long-term finance, introducing the bonus system, and reducing the role of lawyers and accountants in favor of engineers who will take the necessary " long view" to develop and implement new strategies...

...In striking and total contrast, the careful research of scholars such as Abram Bergson and Padma Desai has shown that Soviet growth has resulted primarily from "blood, sweat and tears" in the form of high savings rates, with the savings today producing steadily lower returns and intensifying Party chief Mikhail S. Gorbachev's difficulties...

...They badly need a new Suslov to fill John Kenneth Galbraith's outsized shoes, and in this book Lester Thurow stakes his claim...

...He does say many wise things on the neglect of our schools, the foolishness of cutting back student loans, and how defense spending hurts both through the dollar drain and because it removes our brightest people from civilian preoccupations and ambitions...

...Yet Thurow is convincing in his plea that we put it to that test...

...The fact is that the mainspring of our growth has always been technical change, not capital accumulation through enormous savings...

...If the Democrats are perceived as short on fairness, the allegiance of the minorities that flock to them at the polls could be lost...

...This is social engineering, not mere tinkering with fiscal incentives, & la the proposals that got former White House economic adviser Martin S. Feldstein in trouble...

...Yet this school is basically market-oriented and would be happy as a clam as long as the "distortions" were removed...

...No self-respecting American, striving as always to be second to none, should have to accept this...

...A lesser theme, contrapuntal and complementary, is that the policies of the (first) Reagan Administration have not merely been inadequate to the enormity of the challenge...

...Commitment yields to frenzy and myopia...

...that grants senescent industries protection without the quid pro quo of specified effort at self-improvement, or of assured and timely demise...

...Thurow would not wish that on anyone, least of all the U.S...

...Almost everyone, not just the Japanese, does it better...

...He thus engages Republicans on their own battleground—except his is the "pull-up" strategy, not the "trickle-down...

...Silvio Borner has written the cleverly titled Die Sechste Schweiz, documenting the shift in activity abroad by Switzerland's top 15 multinationals...

...The Japanese, whom Thurow unabashedly admires, would be laughing up their sleeve as they overtake us if they were not crying with hurt and quiet rage about the frenzied Japanophobia that has smitten Washington...

...America's real crisis remains untouched...

...I confess sheepishly to being persuaded...

...He argues forcefully that the Democrats' first choice should be, as always, to put Americans to work productively...

...Still, none of this detracts from Thurow's brilliant argument for altering the way we organize our economic activities: from shop floor incentives to management practices to financing institutions...

...Read together, his third and fourth chapters on our slow productivity growth, and the declining international competitiveness that presumably follows, define Thurow's case...

...Thurow, a self-described " emotional optimist," clearly does not...

...Warts and all, The Zero-Sum Solution is the only comprehensive, compelling economic agenda the party has to consider...

...author, "Essays in Development Economics" The Zero-Sum Solution carries the subtitle "Building a World-Class American Economy," suggesting an ad campaign for "the best beer...

...Whereas the U. S. share of world exports of manufactures has shrunk by almost half to about 12 per cent recently, Robert Lipsey's ongoing research suggests that the figure shoots up above 20 per cent once the "offshore" exports of U.S...

...If the personal savings rate rose from its 6 per cent low to a mere 7 per cent, that would be just dandy...

...The Administration's economic errors have been so outlandish, however, that sarcasm and wit would have been yet more killing weapons in his hands...

...But that strength could prove to be a weakness...

...Are we really saving too little...

...Thurow, whose immense talents are wholly unnecessary to uncovering the folly of these policies, deftly demolishes them...

...Thurow has inherited Galbraith's mantle...

...We are growing slowly and competing badly, since we are dong almost everything wrong...

...Treasury Secretary James Baker, seeing the obvious, has begun to pull us away from the abyss we cheerfully rode on to in the days of "malign neglect...