(FORTUNE Magazine) – BUSINESS PEOPLE OF THE YEAR

20 INTRODUCTION In a year of tribulation, a baker's dozen of remarkable individuals changed the world of commerce.

22 DONALD PETERSEN A humble hero has made Ford the world's most profitable carmaker.

25 YOSHIHISA TABUCHI He led Nomura around the globe.

26 ELAINE GARZARELLI She predicted a 600- to 700-point drop a week before Black Monday.

28 JOHN REED He's the ''banker of the decade.''

30 LELAND, O'BRIEN, & RUBINSTEIN These are the guys who brought you portfolio insurance.

32 REGINALD LEWIS Meet the newest star of LBOs.

34 MARGARET THATCHER The Iron Lady wins again.

36 JOHN SCULLEY He's rescuing Apple.

38 JAMES A. BAKER III No one affected the economy more.

39 GEORG BEDNORZ & ALEX MULLER Their superconducting breakthrough may change the world.

COMPETITION

44 America's Competitive Revival Widespread perceptions to the contrary, many U.S. industries are already more competitive than their rivals in West Germany and Japan. The declining dollar helped, but it wasn't the whole story. by Sylvia Nasar

54 The Mills Roar Back to Life After years of decline, some of America's most basic industries are turning blast-furnace hot.(A picture portfolio)

CORPORATE PERFORMANCE

61 Companies to Watch

POLITICS & POLICY

64 The Death of Socialism For most of the postwar era, smart money has bet on centralized socialism to expand and perhaps prevail. No more. Socialists are losing the faith, and a zest for capitalism is sweeping the globe. by Richard I. Kirkland Jr.

MANAGING

74 FORTUNE BOOK EXCERPT: How Companies Pick New CEOs Baton passes. Horse races. Plane crashes. Harvard professor Richard F. Vancil ) reveals the many ways America's corporations choose the chief.

4 The Editor's Desk

8 News/Trends Living with the stock market bear, Shearson and Hutton, winners and losers from the Canadian free-trade agreement, and more.

14 Follow-Up

17 Letters to Fortune

81 Fortune People MCI's McGowan thrives on a new heart, the Chicago Merc's fantasy man, a spymaster goes home, power handwriting, and more laws from Augustine. by Nancy J. Perry

82 On the Rise

85 Personal Investing Strategies for a spooked and uncertain market. by John J. Curran

Tootsie Roll Industries may be a sugar-plum of a buy. After a great 1987, international bond funds still look good.

Portfolio Talk: William Manning of Manning & Napier.

89 Keeping Up Welfare and other frauds, back to the third grade, cutting up in Australia, and other matters. by Daniel Seligman

92 Books & Ideas Donald Trump puts himself on fascinating display and reveals more than he planned to. by Gary Belis

Cover: Donald Petersen, CEO of Ford Motor Co., photographed at Ford headquarters in Dearborn, Michigan, by Hans Neleman.