Thursday, January 27, 2011

If The New York Times Can Do It...So Can I...

The New York Times has a really miserable article imagining the World Economic Forum in 2020.  As the attendees swelter due to Global Warming, China gloats as it overtakes the US in economic power.  It's depressing reading and fits with the mood of the era, but I can't say I agree with it.  (Read the whole gloomy thing here)

Too gloomy for me....
If I had to predict the WEF of 2020, it might look more like this:

  • China will overtake the US in total economic size, but the leadership there won't feel in a celebratory mood.  Growth will be slowing and like many economies in Asia, China will be facing a big challenge: how to make the transition from middle-income manufacturing-based economy to innovation-driven service economy.
I predict in a decade we'll be talking about the Asian Growth Plateau - the flat space that many tigers seems to hit as they mature.  They remain great places to manufacture stuff, but they are unable to grow a big, innovation economy and consequently seem stuck at GDP per capita levels of between 60-75% of the US.

  • India will finally be seeing the torrential growth rates that China has long enjoyed.  As a democracy, economic reforms will be slow and come in fits and starts, but India will keep accelerating from 5-6% growth to consistent 10-12% growth.
  • We'll be seeing our first African Tigers - perhaps Nigeria or Kenya will start to show serious, significant, and sustainable year-on-year growth and begin to attract serious foreign investment in basic manufacturing industries - always the first step on the path to long term prosperity.
  • America will still be a mess, but a very successful mess.  Social security, medicare, and entitlements will all be unsolved, but panic about America's position in the world will have receded.  The American economy will keep surprising everyone with how quickly it keeps growing, driven by technology-based productivity and high levels of innovation.  Growth, ultimately, will overwhelm tax policies and spending cuts to close the fiscal gap.  The budget won't be balanced, but it might be pretty close.
  • People will again be wondering if states really can go bankrupt.  In Europe, Greece will look like it's heading for another collapse, something German voters won't fund, and in Asia, Japan will be in financial melt-down, trapped an ugly cycle of debt, aging demographics with a dose of paralyzed politics.

For a lot of reasons, it's hard for me to get too pessimistic about America.  We have our up and down cycles, but competitive market capitalism and democracy are self-correcting systems of government and economics and overall US openness to immigration means a much more modest impact from an aging population.

The early 1990s seemed bleak for the US - hardly a taste of the bubble to come.

No comments:

Post a Comment