The elegy for the myriad other systems of human and economic organisation has barely begun to fade. And here comes an extremely persuasive and exceptionally well-crafted book on the future of capitalism itself. Aptly titled The Future of Capitalism by Lester Thurow, the book opens with an argument that in the contest between individual and social values, the former have clearly won. But, in an era in which the quality of human capital will decide the ultimate winners of tomorrow, capitalism by its own internal logic is going to find the going tough.
Simply because human capital investments typically involve long time horizons which militate against the essential grain of capitalism—quick returns. As Thurow puts it, "Capitalism desperately needs what its own internal logic says it does not have to do.... In the 20th century this ideological conflict between the egalitarian foundations of democracy and the inegali-tarian reality of capitalism has been fin-essed by the grafting of social investments and the social welfare state onto capitalism and democracy."
Using illustrations as diverse as the res publica in the Roman Empire to the "double forty whammy" syndrome afflicting the US, Thurow argues that while it is possible to have an Age of Contentment for the upper classes, the middle and lower classes would have to be content with facing an Age of Diminishing Expectations, because of the unstable mix of technology and ideology that the world now floats on.
The book makes absolutely riveting reading, but it does not tell us how large parts of the globe would achieve more and less of government at once. In other words, how would the world achieve the minimal visible hand of government in the allocation of economic decisions and yet get some kind of political accountability, at the same time. He concedes in the book that the two principal ideologies on which the modern world is founded—democracy and capitalism—are essentially incompatible. One believes in equal distribution of power, the other preaches survival of the fittest and thus that the economically unfit must be driven out by the economically fit. If so, how does one reduce political interference and yet have more of political accountability at once?
How does one guard against the Dutch Disease—that is, growth built on shaky and unsustainable foundations? The case of Japan is fresh in memory. Mere investment in brain-power industries alone, as Thurow calls them, is only half the solution. With millions of dollars in pension funds floating freely across the world, financial discipline is hard to come by. The book, while underlying the forces of the future, provides no answers.
There is another weak link. He does not explain why democracies usually act well in a crisis alone. The book proffers status quoist arguments about how conservative majorities are to abandon their old well-hooved paths even if that means a benefit to society. One-issue minority groups hold sway, especially during close elections. But Thurow could have well gone into the flip side, when democracy degenerates into a mobocracy and creates problems for its capitalistic economy also.
The Future of Capitalism convinces you that the future capitalist would have to have the ideology of a builder rather than that of a consumptionist. Indeed, growth is not something which comes out of a Harrod-Domar type vending machine but is a complex web of dynamic, unstable forces that need to be oriented towards human good. And indeed stagnation, not collapse, is its principal opponent. As the new rules of the game get written to pick the winners and losers of tomorrow, Thurow's book offers a draft of the possible contours these can assume.
