Japans Fifth Generation Computers: Threat to The Free Market?

Japanese leaders in government, industry, and the universities have mapped out a master plan for the next decade to catapult Japan into the forefront of the world economy of the 1990s. The Japanese plan calls for a $100 million, eight-year effort to capture the world lead in the field of “supercomputers,” the incredibly fast computers such as the Cray-1 manufactured by Cray Research of Minneapolis, capable of executing 100 million instructions per second. These super-fast machines perform vital functions in weather forecasting, industrial design, and in defense applications.

The Japanese also plan to spend $500 million in a ten-year effort to achieve world dominance in the strategic area of artificial intelligence, one of the most exciting fields in computer research today.

The Japanese have seen that in the new Information Age economy of the 1980s and 1990s, computer science holds the key to dominance in the world economy. American computer scientists such as Professor Edward Feigenbaum of Stanford are warning that unless decisive action is taken soon, America could easily find itself as knowledge-de- pendent on Japan in the 1990s as it was oil-dependent on the Middle East during the 1970s.^[2]

Japanese Lead in Marketing of 64K RAM Chips

The United States has already lost a preliminary skirmish in the global computer wars. The Japanese have now captured 70 per cent of the world market in 64K Random Access Memory chips, the microprocessing devices which are at the heart of the modern microcomputer. These chips were invented in America, by engineers at the Intel Corporation in California, and opened up an entire new world of information processing. They serve as the “brains” of countless devices ranging from microwave ovens to personal computers. With real justification, these silicon chips have been called the “crude oil of the 1980s”—so much new wealth and employment have they created.

Japanese leaders in industry and government were quick to respond to the new economic opportunities created by the microprocessing chip. The Japanese government provided $300 million for research and development, worked out a cooperative arrangement among five companies, and Japan proceeded to achieve dominance in the world market for 64K computer chips.^[3] Their chips had done to American industry what their digital watches had done to the Swiss watch industry.

Is it really the case that the Japanese “Fifth Generation” challenge represents a grave threat not only to the American economy in the 1980s and 1990s, but to the very viability of classical free-market economics itself?. How could this be the case? The dilemma arises because there are voices which are now calling for massive government initiative as the only way for America to successfully respond to the Japanese computer threat: Only if government takes the initiative, coordinates the planning, and sets the goals, and provides massive financ ing, can America’s economic survival be assured.

According to Prof. Feigenbaum, “America needs a national plan of action, a kind of space shuttle program for the knowledge systems of the future.”^[4] Are we really left with the dilemma of a choice between the classical free market and economic ruin, or massive government intervention and economic survival? The new realities of the Information Age do challenge classical free market principles, but before it can be seen how this threat has been exaggerated, it is important to appreciate more fully the new developments that are on the horizon in the “Fifth Generation” of computers.

The Promise of the Fifth Generation

The phrase “Fifth Generation” refers to stages in the evolution of computer technology. The first generation of computers was based on vacuum tube technology; the second, on the transistor; the third on the integrated circuit, which combined many transistors on a single circuit board; the fourth, on microprocessor chips with large-scale integration (LSI) and very large-scale integration (VLSI) of the components. Each “generation” saw an increase in speed and computing power, together with a reduction in size and cost.

Computers that in 1960 filled entire rooms and could only be afforded by government, industry and universities can now be matched by desk-top and portable models that are affordable to the consumer. Between the years 1946 and 1960, the number of computers increased from zero to ten thousand; between 1960 and 1980, the number of computers exploded from ten thousand to ten million, and continues to expand at a phenomenal rate.^[5]

The “Fifth Generation” will see the development of artificial intelligence, “computers that think.” This means not merely another quantitative improvement in computing technology, with all the economic implications which that has entailed, but a new qualitative leap for human civilization and the world economy.

Already computer scientists have developed such “expert systems” which mimic the reasoning processes of experts in medicine and engineering. The Caduceus system developed by scientists at the University of Pittsburgh assists doctors in performing intricate diagnoses in internal medicine, at times with a degree of accuracy surpassing even the most experienced human diagnosticians. The Dart system developed at Stanford can diagnose computer system malfunctions in the field, thus saving costly “down time.” The Programmer’s Apprentice developed at M.I.T. assists human operators in the design and debugging of complex computer programs.^[6]

These “expert systems,” and many others like them which are already in use or presently under development, combine vast stores of relevant information, together with detailed programs which mimic the reasoning processes used by experts in the field. These programs are constructed by “knowledge engineers” who interview the experts, “pick their brains” for their valuable knowledge, and translate this into a form that the computer scientist can use in writing a program that emulates the reasoning of the human expert.

The development of “computers that think”—in contrast to machines that merely respond to pre-programmed instructions—has vast implications for the world economy. It scarcely seems an exaggeration to predict that the widespread diffusion of artificial intelligence will have an impact on human society comparable to, if not greater than, the invention of the automobile or the printing press.

The Industrial Revolution magnified the power of human muscle with the introduction of the steam engine. The Fifth Generation will mean a new post-industrial revolution, where the power of the human mind itself will be magnified by the new computer technology. Just as the steam engine raised the standard of living in the industrialized nations, so the new generation of “thinking computers” promises a new plateau of economic well-being for those nations that are alert enough to seize the opportunities.

The Fifth Generation: No Real Threat to the Free Market

While the Japanese Fifth Generation project represents a real challenge to American leadership in the world economy, it by no means signals the end of classical free-market principles. Such alarmist predictions represent a misreading of the true situation, as well as a failure to recognize the true resilience and creativity of the American system.

The research and marketing strategies of the Intel Corporation are a good case in point. For the last several years the California computer-chip firm has been reeling under the impact of a recession and the fierce competition from Japanese manufacturers. Having lost the bat-tie for the 64K chip, Intel is not giving up and acquiescing to a place of permanent inferiority in the world of microelectronics. Even though its 1982 profits were down 25 per cent from the previous year, Intel is planning to invest $130 million in research and development and $150 million in new plants and equipment in an effort to regain its competitive edge.^[7] According to some estimates, Intel has succeeded in capturing 70 per cent of the market in the new 16-bit chip technology—a design that can process information more quickly than the eight-bit de signs that characterize most personal computers in use today.

According to industry sources, IBM, the giant of the world computer industry, has quietly formed a team of 25 scientists to counter the Japanese Fifth Generation project.^[8] Last year IBM’s gross income reached a record $34 billion dollars, and profits surged more than 20 per cent. After the Justice Department dropped a thirteen-year long antitrust suit in January of 1982, IBM executives began to map out an aggressive new strategy for leadership in every field of computer technology: biomedical systems, factory automation, educational systems, telecommunications, and artificial intelligence. As of 1982 IBM had increased its research and development budget to a massive $2.6 billion—numbers which far exceed the Japanese efforts. Even without government help, “Big Blue,” as IBM is known in the trade, would represent by itself a formidable threat to the Japanese plan. Any predictions of assured Japanese dominance would at this point be quite premature.

Suggestions that the government-subsidized Japanese computer challenge make free- market principles obsolete also overlook the new context of the globalized economy. International trade is nothing new, of course, but the growing extent of the interdependence and interpenetration of national economies does appear to be a genuinely new factor in the world scene. Ford’s new car, the Escort, is assembled in the United States, Britain, and Germany from parts manufactured in Japan, Brazil, Britain, Spain, and Italy. Volkswagen provides the engines for the Dodge Omni and Horizon cars, and Mitsubishi of Japan the engines for the Dodge Colt, the Plymouth Champ, the Dodge Challenger, and the Plymouth Sapporo. Volkswagen builds commercial vehicles with parts made in Brazil and Mexico.^[9]

The point here is that in the new globalized economy, many of the antitrust laws dating all the way back to the nineteenth century, and which focused on the problems of a national economy, need to be rethought in light of the new economic realities. A cooperative research venture such as the Microelectron-ics and Computer Technology Corporation does not eliminate competition; it is merely a rational response to the realities of international com petition.

As long as government does not unfairly favor or subsidize one corporation over another, such cooperative research ventures should be encouraged by government in order to keep American industry competitive. Neither is free cooperation between government, industry, and the universities inconsistent with free-market principles, so long as government does not favor or exclude some corporations at the expense of others. Such cooperation is essential in areas such as computer technology which affect both the United States’ economic future and its national security.

The Future Is Bright

The free-market tradition has nothing to fear from the revolutionary advances that are on the horizon in computer technology. The computer has opened a new frontier for entrepreneurship and personal creativity that promises to surpass the discovery of petroleum and the invention of the automobile in its potential for creating new forms of employment and higher standards of living for all.

Sirjang Tandon of India worked in restaurants as a busboy in order to pay for his American engineering education. After working for IBM and Memorex, Tandon decided to start his own computer-components business in his garage. Today the Tandon Corporation is one of the leading manufacturers of disk drives, the vital components which store information in a computer. The net worth of the Tandon Corporation is $1.5 billion, with sales projected at $270 million this year. Says Tandon, now an American citizen, “Every time I travel around the world, I like this country better.”^[10]

On the global level, the new computer technology presents a test of strength not merely of Japan vs. the United States, but even more broadly, a crucial test of controlled, socialistic economies and economies where the private sector remains the prime mover. Analysts such as Professor William Griffith of M.I.T. predict that in this race the Soviet Union will fall further and further behind the United States and Japan. The Soviet system is a system without free competition and a rational pricing system, and one which places apremium on political orthodoxy rather than technological efficiency. Consequently, the Soviet system is really an “anti-management system,” according to Griffith, “doomed to finish last.”^[11]

Rather than being a fatal threat to the free market system, the Fifth Generation of computer technology will, in the long run, demonstrate the superiority of the initiative, risk taking, and creativity characteristic of a free economy. The benefits will not be automatic, however; the United States, if it is to maintain its leadership in the global economy, must rise to this new challenge as it has met the challenges of the past.

1.   "The Race to Build a Supercomputer,” Newsweek, July 4, 1983, p. 61.

2.   Edward A. Feigenbaum and Pamela Mc-Corduck, The Fifth Generation: Artificial Intelligence and Japan’s Computer Challenge to the World (Reading, Mass.: Addison-Wesley, 1983), pp. 2, 3 and jacket.

3.   Bernard J. O’Keefe, “We Did It to Ourselves,” Boston Globe, July 5, 1983, p. 44.

4.   Feigenbaum, op. cit., p. 3.

5.   The Futurist, February 1983, p. 11.

6.   Feigenbaum, op. cit., pp. 244-50.

7.   Marilyn Chase, “The Chip Race,” Wall Street Journal, February 4, 1983, pp. 1, 13.

8.   "The Giant Takes Command,” Newsweek, July 11, 1983, p. 57.

9.   John Naisbitt, Megatrends (New York: Warner Books, 1982), p. 65.

10.   “Still the Land of Opportunity?” U.S. News & World Report, July 4, 1983, pp. 37, 38.

11.   William E. Griffith, “High-tech Charging Onto World Scene,” Boston Globe, June 27, 1983, p. 2.