The Economy & You #42: The Future of the U.S. Economy – My view (Part II)
In my previous article, I wrote about the turmoil of our national economic downturn which has led policy makers to believe that a “new normal” exists due to the general weakness of our economy. I outlined a couple of reasons why I believe the U.S. has advantages that will help us to reassume the position as the world’s dominant global economic leader.
We must understand that the notion of inevitable slow growth is not the future fate of our nation. The data shows that the U.S. is seeing a rebound in manufacturing, an unrivaled reign in technological innovation, along with a continuous influx of foreign labor and capital. Add these factors to a strong increase in agricultural and energy production and the U.S. is poised to return stronger than ever.
Over the past 12 years, America has lost nearly a third of its manufacturing workforce, approximately 5.5 million jobs. What one must understand is that the manufacturing sector is fundamentally changing, not dying. Manufacturing is transforming from a low skilled, low tech, labor intensive industries to companies that are technology intensive, high productivity businesses that requires a highly skilled and educated labor force. It is this transformation that is crucial to our nation’s resurgence and continuous innovation.
Manufacturing is important because manufacturing production drives growth in other sectors of the economy. About one in six of all private sector jobs depend on the manufacturing sector. This sector also provides 66% of the funding for private research and development, as well as employing 64% of its scientists and engineers. One more thing to remember, the U.S. remains the largest manufacturer in the world, providing 20% of the world’s value added in manufacturing which is more than China, India, Brazil and Russia combined.
America continues its technical dominance even with criticism of America’s erosion of scientific talent. The computer software industry is a strong example. Of the world’s top software companies, nine out of ten are based in the United States; the German company SAP is the lone exception. Regarding the internet, there are no foreign rivals to companies like Amazon, Apple, Facebook, Google or Microsoft.
What could be argued as one of America’s strongest advantages regarding long term economic strength is immigration. Demographic data shows that the stagnation in population growth in developed economies will lead to slower growth, even decline. Between 2000 and 2050, the U.S. workforce is projected to increase by 37% will that of China will drop by 10%, the European Union will decrease by 21%, and Japan’s will fall by almost 40%. The lack of growth in population will affect the consumption of goods, growth of their economies, and the ability to support their retiring workers.
From an entrepreneurial perspective, American colleges and universities continue to attract the most foreign students. While many of these students return to their home countries, many do not. Many will remain in the U.S. to apply their skills in our economy as studies have shown that immigrants have become an increasing percentage of our nation’s entrepreneurs.
Still, the United States is not only benefitting from the importing of foreign skilled labor. The U.S. is also the favored destination of overseas investment and has been for many years. The data shows this trend does not seem to be changing. Foreign direct investment has been remaining constant or decreasing in countries like Germany, Japan, France and Korea. Investors place their money where they believe a profit can be made, and that continues to be the Unites States.
These positive indicators do not mean that our nation does not face obstacles. Many states face growing unfunded financial obligations (especially employee pensions) as well as addressing human and physical infrastructure issues. The federal government continues to increase the national debt with no comprehensive solution to address it. This is why economic growth is so important. Economic growth will provide governments with the revenues they need (even with lower taxes) to address the challenges that face our society. America has the tools and the resources to return to its place as the leading economic leader in the world. We must continue to use the inherent advantages we possess to strengthen our economy.