Business: No Progress Without Pain

M.I. T.'s Lester Thurow offers some hard economic choices

A major issue in this year's presidential campaign is the poor performance of the American economy. Carter, Reagan and Anderson have all offered vote-catching solutions for the problems of inflation, unemployment, energy shortages and declining productivity. Will the results match the rhetoric? "Not a chance," says M.I.T. Economist Lester C. Thurow. "Everybody is looking for a magic button, and there isn't one."

In one of the most provocative economic books of the year, The Zero-Sum Society (Basic Books; $12.95), Thurow, 42, analyzes the present U.S. economic paralysis. Instead of magic buttons, he offers stringent challenges: lower levels of personal consumption, some higher taxes and less Government aid to failing companies. Thurow's solutions for the nation's ills are based on a concept borrowed from games' theory called the zero-sum game: if someone wins, someone else will have to lose. Poker, for example, is a zero-sum game. If builders beat inflation by using low-cost foreign steel, some American steelworkers will lose their jobs. Higher oil prices will encourage Exxon to explore for new domestic energy sources, but motorists will have to pay more for gasoline. In short, America's economic problems can be solved, but not without hurting some group in society.

An organization of Texas businessmen a few weeks ago invited Thurow to speak to them, but first asked whether he was a liberal or a conservative. The answer: A little of both. An adviser to Democratic Senator George McGovern during the 1972 presidential campaign, Thurow believes in such traditional liberal remedies as stiff inheritance taxes and large public works programs. At the same time, he favors less government regulation. Said Thurow last week: "It's not a simple world. The economy needs less government in some areas and more in others."

In Thurow's analysis, the Government is largely responsible for the economic malaise because it cannot or will not resist growing demands by Americans for a risk-free society. Workers want guaranteed jobs with high salaries, and bosses want certain profits. Argues Thurow: "We have tried to combine economic progress with economic security. Everyone wants both, but everyone cannot have both." The result has been an undynamic economy with sluggish growth and chronically high inflation.

Thurow deplores the Federal Government's efforts to bail out ailing firms like Chrysler. Rather than prop up inefficient companies, Thurow believes, Government funds should flow into fields where the U.S. has a competitive advantage over such countries as Japan and West Germany. Examples: computer chips and agriculture. At the same time, Congress should give generous assistance in retraining and relocating displaced workers in older industries like steel. Says he: "We must strengthen the economic safety net for individuals, but pull it out from under companies."