The American economy will continue to outpace the world over the next 10 years, while Europe, China and Russia will fall further behind, according to the 2005-2015 Decade Forecast by a research firm called Strategic Forecasting. The United States is set for a decade of high investment and high productivity growth, Stratfor says, in part because the US has the youngest -- and fastest-growing -- population among all the world's major economies. (Related article: How to bring economic prosperity to America?)
At the same time, as the huge and wealthy baby-boom generation nears retirement, its savings and investments will make available "an abundance of capital" that will lower borrowing costs, enabling American industry to increase efficiency by more rapidly replacing old industrial plants and equipment. (Related article: Strategies for fast growth companies)
This is a very bold forecast and will definitely cheer up many of us who have been discouraged by higher unemployment and falling incomes in the United States. Indeed, last few years have been generally very good for US companies - approximately 10% increase in revenues, but only 2% increase in costs, leading to high profits. Unfortunately, companies have chosen not to invest that money in the United States. Overseas investments have definitely helped American companies by increasing their cost competitiveness and this trend is likely to continue as companies continue to source globally and develop the most optimal sourcing models.
"The net result is that the US investment boom of the 1995- 2005 decade is not only replicable, but repeatedly replicable," Stratfor says. "This means that many fears about collapsing housing prices or social security based on existing demographics are inherently flawed." What we will need for this to happen is to ensure further liberalization of markets and freer flow of capital and human resources. The center of gravity of growth has definitely shifted in recent years from the US (and the western hemisphere at large) to the east, and only policies that attract the brightest brains to the US can bring back high-value growth in the United States. (Related article: Economic indicators point to maturing of US economy)
This argument is also echoed by Cisco Senior Vice President Howard Charney, who says that five distinct technology revolutions over the past 230 years have transformed the ways we work, live, play, and learn. The Russian economist Nikolai Kondratiev was one of the first to discern a pattern of economic cycles that lasted some 50 to 60 years each during that time. More recently, Venezuelan researcher Carlota Perez correlated those economic cycles with specific technology breakthroughs. Charney (who will build on this theme as a keynote speaker at TieCon East conference in April 2005) says that a breakthrough technology (e.g. the Internet or steam engines or railroads) sets in motion a process that disrupts whole economies and fundamentally changes society. The first four technology revolutions each included a frenzied "bubble" period, followed by 20 to 30 years of sustained growth and build-out. In his opinion, we are now at the dawn of a similar period of sustained growth around the world, during which the maturing Internet will drive increased productivity and GDP. (Related article: Driving economic growth in America)
In my opinion the Stratfor forecast is over-optimistic about the US economy and too bearish on other countries. I tend to agree more with Charney that fruits of the latest technology breakthrough (the Internet) will percolate to many corners of the globe, and not just to the United States, as we are already seeing. No doubt though that some countries will still screw up because they are not prepared to take advantage of the opportunity.
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Resource: Stratfor