JITE v34n3 - Under Review - The Future of Capitalism

Volume 34, Number 3
Spring 1997

Thurow, L. C. (1996). The Future of Capitalism. New York: William Morrow and Company, Inc., $25.00, 327 pp. (ISBN 0-688-12969-2).

John M. Kenny
Pennsylvania State University
Wendy L. Gilpin
Pennsylvania State University

Rarely does a day pass when we are not inundated by yet another story describing the lack of qualified workers, the ever-widening wage gap, or another example of corporate downsizing. What these stories describe are the symptoms of a much larger problem, a problem that requires definition before a solution can be applied. In the book The Future of Capitalism, Lester Thurow (a) describes how we arrived at this situation in today's workforce, (b) identifies the underlying problems, and (c) suggests some adjustments to our economic policies that may help us recover from this dilemma.

Thurow proclaims that we have entered a period of punctuated equilibrium, which is a period characterized by rapid changes to the environment, the extinction of the dominant species, and the natural selection of those who are most equipped to deal with the new environment. He believes that the rapidity of these changes present many opportunities for both massive failures and successes. Using an analogy of comparing these economic changes to the shifting of the tectonic plates, he predicts that the (a) changes are unavoidable, (b) paths are unalterable, and (c) consequences of the inevitable collisions between the plates will be dramatic.

Our current environment is defined by three economic characteristics. First, there is a widening inequality of wages. The rich are getting richer and the poor are getting poorer at accelerating rates. The middle class is experiencing real wage reductions. Second, corporate downsizing is no longer an anomaly. Downsizing is the way that business will continue to be conducted. Job insecurity is directly proportional to the lack of skills. And third, and most applicable to the field of workforce education, there is a growing segment of the population who are unemployable. Thurow calls them the lumpen proletariat. As capitalism demands an increase in job skills, the size of the lumpen proletariat also increases.

These characteristics are apparently palatable at present, but, based on their current trends, will soon result in an untenable situation, a critical mass. Although the middle class is not scared yet, Thurow contends that they certainly should be.

Thurow identified five economic trends (tectonic plates) that drive the economic future. Those plates are:

The End Of Communism. With the collapse of the Soviet Union, democracy became the oldest example of a workable form of government. Communism gave us an adversary that helped focus our economic interests and policies. The loss of communism has deprived the capitalistic economy of the United States (and the rest of the noncommunist world) of a focal point. A lack of the threat of communism equates to a lack of economic controls and policies that are favorable to capitalism.

A Shift To Brainpower Industries. Location and access to natural resources are no longer the primary sources of economic advantage. Skill and knowledge are the sources of comparative advantage and will become even more dominant in the future. Wages will be based on skills and not location. This shift has dramatic implications for the workforce education professional.

Changing Demographics. Population growth has stabilized in first and second world countries, but the third world population is exploding. This explosion is sending shock waves into the economies of first world countries in the form of large third world migrations of low-skilled people. Further aggravating this problem is the increasing percentage of first world populations who are elderly, retired, receiving massive welfare payments, and making inconsequential economic contributions.

Global Economy. While technology has allowed us to become a global economy, there are no economic controls or rules that are observed by the global economy. In addition, the global economy is dominated by regional trading blocks. Unfortunately, regional trading blocks, because of trade restrictions to nations outside of the region, have constipated the global economy.

No Dominant Power - No World Leader. The U.S. trade deficit is bad and getting worse. This trade deficit has diminished the United States' ability to dominate the global economy. Furthermore, the trade deficit is floating the entire Pacific Rim economy. Even if the United States had the economic credentials to act as a global leader, recent isolationist leanings would most likely prevent such action. No other nation is in a position to assume the mantle of economic leadership and a global economy cannot operate in a leadership vacuum.

Thurow projects a bleak picture. We lack focus. We lack skills. We are politically dominated by a large voting block composed of individuals (the elderly) with selfish short-term interests. We are not capable of coping with a global economy. We lack economic leadership.

To complete his argument, Thurow accurately illustrates that recent policy attempts to level the economic playing field have been aimed at the wrong target of controlling inflation. He claims that inflation controls have actually retarded the economy. Unless economic policies address the real drivers of the economy, he predicts financial shocks will be stronger and more frequent.

His most frightening observation is our need to blame someone or something when we are unhappy. Declining wages have made the middle class unhappy. The targets of their resentment are not the five economic trends described above. Instead, recent outbreaks of ethnic violence and a return to religious fundamentalism have been fueled by the middle class's fear of decreasing wages and declining lifestyles. The question is what does the profession of workforce education offer to improve this picture?

Of the five trends, the one that is of the most immediate interest to the workforce education professional is the shift to brainpower industries. There is an obvious need to promote workforce development as well as individual opportunity.

Of the remaining four trends, workforce education obviously did not impact the end of communism but does have tangential impact on the other three. The education of low-skill, third world immigrants is part of the shift to brainpower industries and workforce education must be the tool used to upgrade their skills. In the unlikely event that there are policy changes that delay the retirement age or reduce the social security benefits, there will be a large influx of elderly rejoining the workforce who will require training. If the United States reduces the trade deficit and makes a significant investment to improve the skills of its workforce, it may once again become the economic global leader and from that leadership position provide the economic controls designed to stimulate a true global economy.

Is there a future for the workforce education professional? Do Thurow's predictions contain opportunities for workforce education? The educated observer's answers to both of these important questions is yes.

It is obvious that the new economic environment demands increased job skills. The shift to brainpower industries, where knowledge provides the market advantage, requires a robust training program to remain competitive. Skills training is needed to increase the productivity and contributions of low-skill third world immigrants.

What is not obvious is when and where will this skills training occur? And of crucial importance, who will finance this training? The economics associated with funding education, the related public policy issues, and a lack of short-term planning horizons will have a significant effect on the ability to train the right people with the right skills at the right point in their educational process.

In the short term, the problem of making effective policy changes eliminates the public education system from having any immediate impact on preparing people for employment in brainpower industries. The creative and collaborative skills required by those industries exceed the teaching and testing capabilities of the public education system.

Capitalism, and its underpinnings of survival of the fittest, will provide the earliest and largest opportunities for the workforce training professional. Successful capitalists have made the connection between increased skills and increased competitiveness. They recognize that the competitive market will not wait (and has never waited) for the public education system to provide the appropriately trained employee. Aggressive capitalists will take advantage of the rapidly changing economic environment by making the investment to train their workforce and utilizing the training skills of professionals.

In summary, it is unlikely that all of Thurow's predictions for the economic future will be accurate. However, he does pinpoint those trends that educators should carefully track. The shift to brainpower industries and the recognition that human capital and knowledge now provide the comparative advantage have long been recognized within our profession. Thurow's insights validate our beliefs in the importance of promoting learning and facilitating the transition to work and improving productivity. The upcoming period of punctuated equilibrium is a period of great opportunity for the workforce professional.

The challenge for us will be to convince others that the investment in skills training is essential to the success of capitalism and to the economy of the U.S.

Reference Citation: Kenny, J. M., & Gilpin, W. L. (1997). Review of The Future of Capitalism. Journal of Industrial Teacher Education, 34(2), 95-98.

Tracy Gilmore