Even the booming PC and telecommunications industries, which are the engines of nearly 35 percent of the growth in the US economy, are vulnerable. The upgrade scam carries the seeds of a consumer revolt: Eventually, we may refuse to buy into the next generation of "improvements." After decades of ineffectual investment, many businesses appear to be considering this option. Moreover, because the growth strategies of these companies are so closely interwoven, hardware and software could decline together, sucking the rest of the economy and an overvalued stock market down with it. At any rate, an information-technology recession could finally put the sector back into realistic perspective: It has improved productivity in certain limited applications, but overall, its impact has been modest. For example, e-commerce may become the norm in highly technical business-to-business transactions even if it isn't replacing consumer shopping malls yet. Finally, since we already know that "knowledge is power," the info-economy rhetoric may represent an insipid retread of familiar Machiavellian aphorisms. If there is a revolution in the cards, it lies somewhere in the future, that is, in the natural domain of techno-boosters.

Nonetheless, Thurow is a very good worrier. Sensing that something may be amiss in the economy, he returns with conviction to his familiar themes of education reform, the impact of social systems on economic well-being and the need for government investment strategies to create long-term advantages. Though more traditional economists disdain Thurow's willingness to plunge into messy subjects that transcend their basic algebra, it is here that he has the most to contribute to the national debate. That glittering eye on the greenback, he says, must be supported by a solid base in the "wealth pyramid"; that is, in order for any economic revolution to take hold, workers have to benefit as well. Unfortunately, this is not happening.

While American entrepreneurs and inventors appear to be pulling far ahead of their industrial rivals in Japan and Europe, Thurow argues that persistent weaknesses continue to threaten the future prosperity of America. First, he observes, US educational standards for the average worker--the foot soldier whose schooling stops before he obtains an undergraduate degree--are among the lowest in the developed world. This educational rift hinders them from learning and adapting quickly to new manufacturing methods and the growing number of computer-dependent jobs in the economy. As a consequence, many high-paying manufacturing jobs have been shipped overseas during the past twenty years, which forced the bottom two-thirds of the American labor force to move into the service sector, at an average pay cut of one-fifth of their real income. In contrast, across the divide of the first-rate graduate education available only in the United States, the upper third (the generals) is doing better than ever and apparently feels little loyalty toward lower-level employees. Thurow sees America becoming a two-tiered society, split between the highest-paid executives in the world and those forced to accept low wages; its shrinking middle class must work longer hours for lower pay, and more mothers must find jobs. In such an economy, he wonders, what are the real benefits?

Second, American spending patterns have shifted decisively toward consumption and away from investment in tools, that is, in factories, equipment, offices, houses and infrastructure. This means Americans have decided that it is better to live in the present, buying more and more consumer goods, directly at the expense of tools for future generations--deprived of up-to-date capital, our children's productivity, and hence their living standards, can rise only at the expense of someone else's in a zero-sum game. By contrast, Thurow observes that in Europe and Japan investments have been higher, which partially explains why their service sectors are equipped with more advanced technologies and their wages have fallen less; they have chosen a different balance, though in Europe it has contributed to record levels of unemployment. To his credit, Thurow makes the unfashionable argument that only government can mobilize the resources required, both in education and in tool creation. He writes, "What needs to be done doesn't get done if societies rely solely on private markets." Government needs not only to put down more money for these tools and for research and development but it must also mold the incentive system to do so through tax and intellectual property policy, to name a few measures. These thoughts, which deserve wider debate, are lost in the glare of America's current expansion.

The flaw in Thurow's logic is embedded in his assumption that some ill-defined "third industrial revolution" is propelling these troublesome developments. If this revolution is more about marginal gains in productivity than quantum leaps, as the evidence suggests, then something else must be happening. A less flashy explanation might emphasize corporate behavior rather than technology or the possession of knowledge: (1) Better communications and transportation technologies have helped employers relocate manufacturing facilities to cheaper locations in the Third World; (2) the rise of temporary workers in the service industry has allowed employers to refuse to pay for health insurance and other (costly) basic rights; (3) techno-hype has combined with the economic expansion of the nineties to create a speculative bubble on Wall Street, pushing up real estate prices to unsustainable levels and encouraging stock owners, who feel richer, to consume more. In other words, it is less the aftereffects of a technological revolution that are hammering down the living standards of most Americans than corporate greed and the forces driving globalization. Even worse, once stock prices deflate to more realistic levels, the great American boom of the nineties will reveal itself to have been a typical financial craze, the kind that inevitably leads to meltdown.

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