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... With respect to ageing demographics, Thurow focuses in on America where this phenomenon is most prevalent. He states that the ageing population and its dependence on the welfare state is draining America's potential for future economic development. One can be sure that Thurow is not an advocate of the American welfare system. The aged extract six times more funds from social security during their retirement than they contributed during their working lives.
This places an unfair burden on the young who must contribute more to make-up the deficiency. Since the young are the poorest in society and the old are the wealthiest, social security amounts to a tax on the poor. An aging population also has the effect of lowering an already low savings rate. Naturally, the aged are disinclined to save for the future and so actually dis-save the older they get.
This increased propensity to consume leads to a lack of investment in future generations who will be needed to maintain the system of cross-generational transfers envisaged in social security. Thurow asserts that the lack of investment caused by an ageing population will have adverse effects on the standard of living and productivity of future generations. This problem will only get worse as the baby boomer generation reaches retirement and medical costs continue to spiral upwards out of control. The penultimate analogous plate is that of the global economy. With the advent of truly global corporations, a disconnect has occurred between industry (with global interests) and national governments (that focus on their home voters). Thurow declares that this difference in interests will be a catalyst for change in world economics; he cites the European Union and N.
A. F. T. A. as examples of nations catering to the interests of the multinational corporations. Such unions / agreements will increase the wealth of those in the club but be extremely detrimental to those countries left out in the cold.
With regard to the E. U. , Thurow takes the case of Britain (presently on the periphery of E. U. integration) and says that Britain has no economic future outside the E. U. If Britain were to adopt the Euro and forfeit monetary controls to Brussels, it would be at the mercy of a European central bank that has its own agenda.
The fact is, Europe will never work like the United States because it does not share the same cultural homogeneity. Europe's cultural diversity will prevent it from acting as a cohesive economic block for many years to come; there is insufficient labor mobility to justify a central bank for the whole of Europe. Labor will not move from depressed regions to booming regions because cultural differences (e. g. language) prohibit it. The result will be fiscal policies that are good for some member states but disastrous for others.
Thurow takes a simplistic view of Britain's E. U. policy. He fails to note that the majority of British exports (capital and trade) are to American markets and not European; Europe needs Britain (currently the world's 4 th largest economy) a lot more than Britain needs Europe. For this reason, Britain has an economic future with or without E. U.
currency convergence. The final plate represents the increasing world multi polarity and subsequent lack of a dominant global force. Here Thurow argues the world needs a dominant ideology or nation to maintain the current geopolitical system. It is said that without a common bonding force such as anticommunism in the 1980 's there is no motivation for a nation to develop a leadership role. In the late 1990 's America was the only nation with the military, economic and political strength to assume such a role; but with the end of communism and no new (perceivable) outside threat, it was not willing to do so. America's foreign policy was becoming increasingly isolationist; George W.
Bush received almost 50 % of the electoral vote while touting such a policy. Thurow compares the situation in the late 1990 's to that between World War I and World War II: the British Empire had come to an end and there was no one to fill its shoes as 'world policeman' - chaos pursued. With the benefit of hindsight, one can see that Thurow was correct to surmise that a missing dominant force leads to chaos but false to say that America is not willing to fulfill this role. Recent history tells us quite the contrary - America is very willing to police the world, for her own security if nothing else; George W. Bush's foreign policy took a 180 o about turn. By this logic, America's search for world stability (resulting in increased security) will lead to stronger nationalism and less division along ethnic lines...
only time will tell. 'The Future of Capitalism' concludes with chapters discussing the outcomes of plate interactions. In general, Thurow identifies two main results: the spreading out of wages and a rise in religious fundamentalism. The spreading out of wages are caused by plates one, three, and four. The rich get richer because they are able to make the poor poorer. Increasing wage inequality is facilitated by the globalization of business where companies can relocate production to regions with low labor costs. Unskilled American workers cannot command the old wages because there are millions of others who will do the work just as well and for a lot less.
Capitalism has no nationalism; it chases the greatest profits wherever they may be. One cannot disagree with Thurow's analysis; his arguments are supported with empirical data that match his strong intuitive reasoning. Thurow says that religious fundamentalism is predominantly a result of plates three and four. A proponent of Huntingdon, Thurow makes the connection between cultural identity crises and globalization.
Through the proliferation of technology and the globalization of business western culture is permeating the world, changing cultures that have remained unchanged for millennia. For these countries, the 'western way' is a formidable threat that must be thwarted at all costs. When a country's culture is synonymous with its religion, a threat to that culture leads to a rise in religious fundamentalism with often-violent consequences. Sadly, Thurow's prediction of rising religious fundamentalism rings true today. Thurow's book is a rational, well-communicated analysis of world economics.
His arguments are based upon sound intuitive reasoning supported with the appropriate empirical analysis. Thurow's use of analogy to communicate his subject is the most impressive aspect of his book. The use of 'plate tectonics' accurately reflects the inner workings of world economics; the drivers of change are not obvious to the average bystander. Thurow's book should be mandatory reading for those politicians with an adversity to looking beneath the surface; too many policies target the effect and not the cause. 'The Future of Capitalism's tand's out because it motivates the reader to look beneath the surface; it provokes a new way of thinking about the world in which we live.
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