"Will Rising Asia Spell
Decline for America?

The Competitive Challenges of the 21st Century

Kent Hughes
Bethesda, MD
July 14, 2005

Editor's Note: Kent is currently Director of the Project on Science, Technology, America and the Global Economy at the Woodrow Wilson International Center for Scholars. Most of his career has been spent in Washington D.C., including serving as President of the Council on Competitiveness and as Associate Deputy Secretary of Commerce. His recently published book is titled "Building the Next American Century - The Past and Future of Economic Competitiveness."

In the 1970s, America faced a series of economic challenges — periodic bouts of inflation, stagnating productivity growth and rising international competition. Germany's return to industrial prominence was not a surprise. It had been a power in chemicals, pharmaceuticals, and heavy industry before World War II. Japan was a different story. It was newer as a competitive force and was growing rapidly while violating what Americans thought were the key rules of economic success. Japan was protectionist, the government intervened in the economy and was free with its administration guidance economy, and there was enough interaction between government and their private companies to lend considerable truth to the phrase "Japan, Inc."

One book — actually one book title — caught the imagination of the public and the policy world — Ezra F. Vogel's 1979 edition of Japan as No. 1: Lessons for America. Not everyone read the book, but almost everyone remembered the title.

In the early 21st Century the tragic attacks of September 11, 2001, the wars in Afghanistan and Iraq, and terrorist incidents that spread from Bali to Madrid and now London, have deflected attention from a new set of economic challenges. To some extent the fiscal and current account deficits that worry business leaders and most economists have actually made life easier in the here and now. The stock market bubble has been followed by a sharp rise in housing prices that have helped sustain consumer confidence and spending. The record trade and current account deficits have allowed the country to have more guns and a rising stock of butter at the same time.

In 2005, however, there are signs of at least the beginning of a serious conversation about the economic future even as relatively good economic times (unemployment at 5% in June 2005), the war on terror, and the ongoing culture wars continue to dominate the headlines.

If we look back in ten years to pick out a single title that played an Ezra Vogel-like role in the early 21st century, it will Thomas L. Friedman's The World is Flat: A Brief History of the Twenty-First Century. As a well-known columnist for the New York Times, Friedman has been both a booster and a Boswell for late 20th century globalization. In his Lexus and the Olive Tree, he described the tensions between the lure of the global opportunity and the pull of tradition symbolized by the olive tree.

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