It may be that the best long-term hope for the American economy will be the growth of China and India. Just as America was the world's engine of growth in the 1980s, these two, and other emerging economies, are projected to be engines of growth during the next couple of decades. They are already growing quickly.
Thus, even if America does not solve its own internal economic problems, it could continue to muddle through as a trading partner of economies that are actually doing well.
However, since the American economy is still about twice as big as the second largest economy in the world (China), it would still be a pretty tough job for any other combination of trading partners to pull us out of a serious ditch if we were to slide back into one. Thus it would be best if we could solve our own problems and resume a leadership role.
Thursday, November 18, 2010
Long-term trends
1. Asian growth rates faster than Western growth rates
2. Decline of the dollar as the defacto international currency.
3. Population trends:
The United States is the only major developed country in the world that has a birth rate plus immigration rate sufficient to generate population growth. Western Europe and Japan are faced with a growing burden of elderly and retired people and with population declines down the road. In those countries the shrinking percentage of working-age people will have to support a growing percentage of retired people. Even China is facing that problem. For many years the Chinese government has imposed a limit of one child per family. Now it looks as though that policy is working to curb population growth. In fact the projection for China is population decline.
It is strange to think, after so many decades of hearing about the dangers of population growth, that the success of efforts to curb that growth could turn out to be a problem. The United States could turn out to be lucky that its population is growing, because that growth could turn out to be a solution to the problem of supporting so many Baby Boomers on Social Security. (Probably not a real solution, but perhaps an amelioration.) If we have more people entering the work force, that's more people paying into the Social Security pot. If we have enough growth, we might not go broke quite so fast. Theoretically enough growth, coupled with some reforms, could even result in our survival.
The people who are campaigning against letting more people into our country are really not doing us any favors. We need more willing and able workers. We need them not just to fund our Social Security checks. We need more dreamers of the American Dream, or simply more people with a practical conviction that they can do better here than elsewhere.
It may feel like there are too many people in the world, but that is more of an opinion than a fact. There are benefits to a growing population, not the least of which is that the alternative to growth is decline.
The supposed negative impact of immigration on the social welfare system may be exaggerated, especially in light of the potential positive impact on the Social Security equation. But in the areas in which the social welfare system is negatively impacted, the better solution would be to cut back on government-sponsored social warfare programs, not to cut immigration. If we made the availability of work (and freedom and opportunity) the main incentives for people to come here, we would obviously still get plenty of people. These things really already are the main incentives, but we could make it more so.
Our best days could still be ahead of us, not behind us.
2. Decline of the dollar as the defacto international currency.
3. Population trends:
The United States is the only major developed country in the world that has a birth rate plus immigration rate sufficient to generate population growth. Western Europe and Japan are faced with a growing burden of elderly and retired people and with population declines down the road. In those countries the shrinking percentage of working-age people will have to support a growing percentage of retired people. Even China is facing that problem. For many years the Chinese government has imposed a limit of one child per family. Now it looks as though that policy is working to curb population growth. In fact the projection for China is population decline.
It is strange to think, after so many decades of hearing about the dangers of population growth, that the success of efforts to curb that growth could turn out to be a problem. The United States could turn out to be lucky that its population is growing, because that growth could turn out to be a solution to the problem of supporting so many Baby Boomers on Social Security. (Probably not a real solution, but perhaps an amelioration.) If we have more people entering the work force, that's more people paying into the Social Security pot. If we have enough growth, we might not go broke quite so fast. Theoretically enough growth, coupled with some reforms, could even result in our survival.
The people who are campaigning against letting more people into our country are really not doing us any favors. We need more willing and able workers. We need them not just to fund our Social Security checks. We need more dreamers of the American Dream, or simply more people with a practical conviction that they can do better here than elsewhere.
It may feel like there are too many people in the world, but that is more of an opinion than a fact. There are benefits to a growing population, not the least of which is that the alternative to growth is decline.
The supposed negative impact of immigration on the social welfare system may be exaggerated, especially in light of the potential positive impact on the Social Security equation. But in the areas in which the social welfare system is negatively impacted, the better solution would be to cut back on government-sponsored social warfare programs, not to cut immigration. If we made the availability of work (and freedom and opportunity) the main incentives for people to come here, we would obviously still get plenty of people. These things really already are the main incentives, but we could make it more so.
Our best days could still be ahead of us, not behind us.
Thursday, November 11, 2010
Cross-Currents
There are a lot of things going on in the world economy these days. China on the rise, currency ups and downs, European bond crises, etc. It is tough to see a path forward through all this.
The US economy remains sluggish, and the recent decision by the Federal Reserve to do more "quantitative easing," has not met with universal approval amongst its trading partners. The Fed would probably appreciate some sensible help from Congress, but lacking that, it is probably doing the best it can.
Congress itself is in a bit of a bind. First of all, it is composed mainly of lawyers, an occupation that does not specifically prepare its members to deal with matters of economics, business or finance (except for the legal aspects of those fields).
Secondly, it is somewhat at the mercy of the various passions and fears of the general populace. E.g., we can't have too many foreign people coming into the country, because they would take jobs away from Americans.
A lot of things going on, a lot of mud to wade through...
The US economy remains sluggish, and the recent decision by the Federal Reserve to do more "quantitative easing," has not met with universal approval amongst its trading partners. The Fed would probably appreciate some sensible help from Congress, but lacking that, it is probably doing the best it can.
Congress itself is in a bit of a bind. First of all, it is composed mainly of lawyers, an occupation that does not specifically prepare its members to deal with matters of economics, business or finance (except for the legal aspects of those fields).
Secondly, it is somewhat at the mercy of the various passions and fears of the general populace. E.g., we can't have too many foreign people coming into the country, because they would take jobs away from Americans.
A lot of things going on, a lot of mud to wade through...
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