Time - Man of the Year/Time_Man_of_the_Year_Compact_Publishing_3YX-Disc-1_Compact_Publishing_1993.iso/moy/101592/10159913.000

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                                                                                SPECIAL ISSUE: MILLENNIUM -- BEYOND THE YEAR 2000 

THE CENTURY AHEAD, Page 36

How the World Will Look in 50 Years


In the coming economic struggles, Japan will weaken, Europe will
triumph, and the U.S. will swallow some bitter cures

BY BRUCE W. NELAN - With reporting by Ratu Kamlani and
Katherine L. Mihok/New York


    Just as wars -- two World Wars and, equally important, the
cold war -- dominated the geopolitical map of the 20th century,
economics will rule over the 21st. All the big questions
confronting the world in the century ahead are basically
economic. Is the U.S. in an irreversible decline as the world's
premier power? Will Japan continue its competitive conquest of
international markets? Can Europe manage to hold together the
world's largest trade bloc in the face of strong centrifugal
forces? And does the future hold any hope at all for the
poverty-stricken Third World?

    This concentration on economics will be made possible by the
prospect of general peace in the 21st century, heralded by the
lifting of the nuclear arms threat in the 1990s. In the century
ahead, the world will contain more democracies than ever before,
and they will dominate in Europe, the Americas and the countries
of the Pacific Rim. Since it is a truism that democratic states
do not make war on one another, warfare should become
essentially irrelevant for these nations, most of which will
reduce their armed forces to the minimum necessary for
individual or collective defense. "We're not going to see
nation-states bullying one another as they have in the past,"
predicts senior analyst Carl Builder of the Rand Corp.

    New realities will also curb the old acquisitive impetus
toward imperialism. Raw materials of all sorts, for example,
will lose much of their importance because the manufacture of
21st century products will use fewer and fewer of them. Even
the need for oil, now the most vital of interests in the West,
will fall from the strategic agenda as it is replaced by solar
power and controlled nuclear fusion. The end of the petroleum
age will make the Arab states of the Middle East poorer and
less stable but of declining interest to the West. The Islamic
world, powerfully resistant to modernization, will tend to
isolate itself.

    Unfortunately, the lifting of the nuclear threat in the
1990s will continue to create opportunities for mischief among
some nationalist ideologues and local despots. In the decades
ahead, the major powers will ignore most petty tyrants and the
brutal but small-bore wars that they foment -- unless they
seriously endanger their neighbors or threaten their own people
with genocide. When that occurs, the United Nations will, in
most cases, authorize joint armed intervention. When it does
not, the U.S. and other states that share its views will act on
their own.

    But cooperation with the U.N. will be the norm, in both
warlike and peaceful pursuits. The world will have to utilize
the powers of the U.N. to solve other overreaching problems,
such as environmental pollution, global warming and damage to
the ozone layer, that cannot be approached piecemeal. John
Steinbruner, director of foreign policy studies at the
Brookings Institution in Washington, foresees "a much more
advanced form of international politics, involving more
sophisticated coordination and more consequential decisions made
at the international level."

    The U.S. will remain the one reigning military superpower in
this less heavily armed world. Its forces will shrink
considerably to enable it to concentrate more of its energies on
economic and social advances, but it will continue to provide
global outreach with state-of-the-art weapons and an
invulnerable nuclear arsenal. The U.S. will have to preserve
this role because the technical know-how to build nuclear
weapons cannot be abolished no matter how carefully
arms-control treaties are drafted. Truly determined governments,
among them many smaller nations that covet prestige and power,
cannot be prevented from buying or building nuclear arms. The
U.S. will have to be prepared to deter nuclear-armed dictators,
and to intervene against them if necessary, in order to protect
its friends and head off nuclear blackmail.

    The competition that is normal and inevitable among nations
will increasingly be played out in the 21st century not in
aggression or war but in the economic sphere. The weapons used
will be those of commerce: growth rates, investments, trade
blocs, imports and exports. "The move to multinational trade
blocs around the world has suppressed nationalism," says
Gregory Schmidt of the Institute for the Future in Menlo Park,
California. "Economics will eventually win out in the 21st
century."

    In his new best seller Head to Head, M.I.T. economist Lester
Thurow writes, "World trade in the next half-century is apt to
grow even faster that it did in the last half-century. Any
decline in trade between the blocks will be more than offset by
more trade within the blocks."

    The big winner will be Europe. At the opening of the 21st
century, the European Community will comprise an integrated
market of 20 countries, newly including such advanced economies
as Switzerland, Sweden, Norway, Finland and Austria. By the
middle of the century, it will have added the Czech republic,
Hungary and Poland, and its members' population will total more
than 400 million. By then, Ukraine, Russia and most of the rest
of Eastern Europe will have achieved associate membership in
the Community.

    That last stage of Europe's growth will demand a lot of
work. Eastern Europe's conversion from communist central
planning to democratic market economies is one of the most
difficult undertakings imaginable. As the Carnegie Endowment's
National Commission referred to it in a report last July, "You
can make fish soup out of an aquarium, but you can't make an
aquarium out of fish soup."

    What exists in Eastern Europe -- mostly antiquated
factories, worthless currency and a socialist hangover -- will
have to be replaced. What does not exist -- a commercial
banking system, marketing networks, cost accounting -- will have
to be created from scratch. The biggest hope for the future of
the old socialist world is its very well-educated work force and
a high level of science and technology.

    Another major plus for the emergent democracies will be the
eagerness of governments in the West to do everything necessary
to build prosperity in the East in order to keep waves of
economic migrants from rolling over Germany, Italy, France and
their neighbors. As Western investments and technical assistance
take hold, the East will forge ahead. East Europeans will drop
their most extreme nationalist and ethnic preoccupations in
order to qualify for the economic payoffs they expect from
association with the E.C. Of course, some countries, including
Romania, Bulgaria and Albania, will simply not be able to
transform themselves.

    On the other side of the world, the astonishing Asians will
continue their success story, but with more diversity and less
coordination than Europeans. Japan will not have things so much
its own way in the next century. Its ultramodern and finely
calibrated economy will not falter, but several factors will
impose limits on its once seemingly boundless growth.

    To begin with, Japan's special sort of samurai work ethic
will be under assault. Coming generations of young "salary men"
will be less willing to work such grueling hours. They will
want more leisure time, larger apartments, shorter commutes.
Japanese men and women alike, no longer content to be poor
people in a rich country, as they describe themselves, will
demand a larger share of the national wealth they create. The
resulting higher consumption at home will inevitably mean more
imports and a reduction in Japan's trade surpluses.

    Problems for Japan are already building up in the Pacific
Rim and are bound to intensify. Tokyo's long-range plan for
growth is to bring in the raw materials it needs from Russia
and steadily increase its sales of manufactured products to what
it envisions as a vast market in China. But things will not
work out quite that way. Communism will collapse in China,
clearing the way for the powerhouse of Taiwan to join Hong Kong
as a special economic zone of the Chinese motherland.

    Even with their help, however, China cannot grow into an
industrial giant in the 21st century. Its population is too
large and its gross domestic product too small (it is expected
to reach only $900 per capita by the year 2000). China's
economy seems to be growing at 7% in 1992, but, as the former
Soviet Union and East Germany once did, Beijing cranks out
phony statistics. Moreover, China's growth projections are
based essentially on light industry.

    China will have a potential alternative supplier in Korea,
where communism will be abolished in the North. The merged
Koreas will prove to be a strong competitor to Japan. Right
now, all Asia's "little tigers" -- South Korea, Taiwan, Hong
Kong, Singapore -- run considerable deficits in their trade
with Japan. In the 21st century, they will be as much Japan's
rivals as its trading partners. Like the rest of the world, they
will be less willing to buy from a Japan that does not buy much
from them.

    The hard laws of economic life also decree that in the 21st
century, the rich will generally get richer and the poor poorer.
In order to rise to a level of prosperity, a developing country
must achieve decades of high growth rates while simultaneously
holding its population stable. Few will be able to manage that
trick successfully. India in 2025, for example, will have 1.4
billion people. By 2050 the world's population is likely to have
surged from the present 5.5 billion to 11 billion, and its
production of goods and services will have quadrupled. But
almost all the population increase is projected for the
less-developed countries, while most of the increased output
will occur in the industrial democracies.

    Moreover, developed countries are already buying less from
the Third World and more from one another. Even now, trading by
the three main economic regions -- Europe, North America and
the Pacific Rim -- accounts for 75% of the world's total. Over
the past decade, 20 of the world's 24 largest industrial powers
have signed bilateral agreements that regulate their trade and
set up new barriers to imports.

    If the dynamics of the 21st century produce a gloomy outlook
for the poorest countries, the most bothersome question facing
much of the world is about the fate of the U.S. There is no
doubt, of course, that America will be a major player on the
world scene. Its military power, its 20% share of the world's
gross national product and its mastery of such cutting-edge
fields as biotechnology, microprocessors and information
technologies guarantee that. It will bestride the North
American Free Trade Agreement like a colossus.

    But serious worries shadow the U.S. future. The country has
run a $1 trillion trade deficit over the past 10 years, and its
national debt is more than $4 trillion. One day the U.S. will
have to pay those bills. And the only way it can do so is to
stop devouring the products of other nations, put more of its
wealth into investment at home and greatly expand its exports.

    Aside from the skewed balance sheets, there are serious
doubts about the country's intrinsic health. Its educational
system is in crisis, its industries faltering, its investment in
itself too meager. "In a world whose workers require ever more
basic education, technological savvy and specialized skill,"
Marvin Cetron and Owen Davies write in their book Crystal Globe,
"America's schools are the least successful in the Western
world." Says Brookings' Steinbruner: "There's no way of
overcoming disparity in economic fortune without overcoming the
disparity in education." U.S. spending on civilian research and
development is 10th in the world, a level that M.I.T.'s Thurow
estimates will "eventually lead to a secondary position for
American science and engineering and lower rates of growth in
productivity."

    Will the U.S. be able to diagnose its ills and swallow cures
that are certain to be bitter? Probably. The country is good at
rising to occasions, once it recognizes them. The end of the
cold war has released immense resources and millions of talented
people who can now turn to the repair of America's damage.
Because the U.S. is, among other things, an evenhanded
superpower and a vast market, most of the world has a stake in
its continued success. But if the U.S. is to be counted among
the winners in the next century, it will have to make gravely
important decisions -- and act on them -- before the end of
this one.