"But with the fifth edition (1961), although expressing some skepticism of Soviet statistics, he [Samuelson] stated that economists "seem to agree that her recent growth rates have been considerably greater than ours as a percentage per year," though less than West Germany, Japan, Italy and France (5:829). The fifth through the eleventh editions showed a graph indicating the gap between the United States and the USSR narrowing and possibly even disappearing (for example, 5:830). The twelfth edition replaced the graph with a table declaring that between 1928 and 1983, the Soviet Union had grown at a remarkable 4.9 percent annual growth rate, higher than did the United States, the United Kingdom, or even Germany and Japan (12:776). By the thirteenth edition (1989), Samuelson and Nordhaus declared, "the Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive" (13:837). Samuelson and Nordhaus were not alone in their optimistic views about Soviet central planning; other popular textbooks were also generous in their descriptions of economic life under communism prior to the collapse of the Soviet Union.
"By the next edition, the fourteenth, published during the demise of the Soviet Union, Samuelson and Nordhaus dropped the word "thrive" and placed question marks next to the Soviet statistics, adding "the Soviet data are questioned by many experts" (14:389). The fifteenth edition (1995) has no chart at all, declaring Soviet Communism "the failed model" (15:714–8)."
"After the collapse of Soviet-style communism, the “Japan, Inc.” economic model stood as the world’s only real alternative to Western free-market capitalism. Its leading American supporters—who became known as “revisionists”—argued in the late 1980s and early 1990s that the United States could not compete with Japan’s unique form of state-directed insider capitalism. Unless Washington adopted Japanese-style policies and abandoned free markets in favor of “managed trade,” they said, America would become an economic colony of Japan. ...
"Four figures in particular stand out: political scientist Chalmers Johnson, whose 1982 book MITI and the Japanese Miracle laid much of the intellectual groundwork for later writers; former Reagan administration trade negotiator Clyde Prestowitz, who authored Trading Places: How We Are Giving Our Future to Japan and How to Reclaim It and later founded the Economic Strategy Institute to advance the revisionist viewpoint; former U.S. News & World Report editor James Fallows, whose 1989 article “Containing Japan” in the Atlantic Monthly cast U.S.-Japan relations in Cold War terms; and Dutch journalist Karel van Wolferen, author of The Enigma of Japanese Power. These men influenced many others—including novelist Michael Crichton, whose 1992 jingoistic thriller Rising Sun became a number-one bestseller.
"The revisionists asserted that, in contrast to the open-market capitalism of the “Anglo-American” model, Japan practiced a unique form of state-directed insider capitalism. Under that model, close relationships among business executives, bankers, and government officials strongly influence economic outcomes. By strategically allocating capital through a tightly controlled banking system, they argued, Japan would drive foreign competitors out of sector after sector, leading eventually to world economic domination.
"Revisionists also maintained that because Japan was not playing by the normal rules of Western capitalism, it was useless to employ rules-based trade negotiations to open the Japanese market. Instead, they advocated “results-based” or “managed trade” agreements as the only realistic way to reduce the U.S.-Japan trade imbalance. Beyond that, they proposed elements of a Japanese-style industrial policy as a means of improving U.S. economic performance."I was working as a newspaper editorial writer for the San Jose Mercury News in the mid-1980s, in the heart of Silicon Valley, so I heard lots about the Japanese threat. I remember a lot of anguish about Japan's "Fifth Generation Computer Project," which was going to assure Japanese dominance of computing, and the a Japanese program to take the lead in high-definition televisions--a program built on analog rather than digital technology. But again, the overall story was that Japan had high levels of investment that it would focus on key technology areas, and thus would surely outstrip the US level. The fears of Japan as an economic colossus turned out to be considerably overblown, too.
"But China’s rapid growth has been driven mostly by technology catch-up and investment. ... China’s gains still come largely from adoption of Western technology, and in some cases, appropriation of intellectual property. ... In the economy of the twenty-first century, other factors, including rule of law, as well as access to energy, arable land, and clean water may also become increasingly important. China is following its own path and may yet prove that centralized systems can push development further and faster than anyone had imagined, far beyond simply being a growing middle-income country. But China’s global dominance is hardly the predetermined certainty that so many experts seem to assume."The US economy has its full share of challenges and difficulties, many of which have been chronicled on the blog repeatedly in the last few years. But the fear that the US economy will soon be overtaken by a country using a recipe consisting of state-directed high investment levels and unfair trading practices has not worked in the past. Perhaps the energies of US eocnomic policymakers should be less focused on worries about outside threats, and more focused on how to strengthen US productivity and competitiveness.