The growing pressures of China’s rapid development and India’s amazing tech job growth on the U.S. economy are a hot
topic. We have grown accustomed to living in the “Asian Century”, in which the world economy will be propelled
by the overwhelming progress of the coming Asian superpowers. This is anything but hype. The growth rates and improvements in
education, infra- structure, jobs, and incomes countries such as India and China have achieved over recent years are simply
astounding. As a result, their growing prosperity makes them attractive not only as sources of blue- and white-collar labor, but
also as huge emerging consumer markets. In the long haul, their economies are bound to leave the United States in the dust.
Or are they?
Challenging Economics
The U.S. economy is still nine times larger than China’s and
almost twenty times the size of India’s. In absolute terms, it grew three times as much in 2004, by about $450B (+4%)
versus China’s $135B (+9.5%) or India’s $50B (+8.5%). Yet, it is predicted that China will pass the United States
by 2050. That assumes that on average, China’s GDP will continue to grow at an annual rate of 8 percent, versus only 3
percent in the States, for the next 45 years(!).
There is no historic precedent for this in the annals of modern
economy. Many economists find it hard to believe. However, there is little doubt that China’s rise as the
world’s manufacturing powerhouse and India’s ascent as a provider of technology and services, combined with both
countries’ increasing investments in education and infrastructure, will ultimately make them into economic forces to be
reckoned with.
This is neither reason to panic nor to relax. Asia’s
giants still face equally giant challenges. China has its hands full to adjust its political, social, and economic rule sets,
while battling to expand the infrastructure, use its resources more efficiently, and fix numerous environmental issues.
India’s biggest problem may well be the disparity of its cities and regions, together with the enormous population growth and
dismal infrastructure outside of the Indian technology centers.
The key question is how the United States can leverage its own
strengths to moderate the risks of the global shifts and participate in the opportunities they represent. Two points
appear most important.
The U.S. must strengthen, or revive, its role as the
world’s innovation powerhouse.
America’s core assets are the values and passions of its
people. Few others around the world are as happy to take on new challenges and risks, as confident that they can make anything
happen if they really want to, or as impatient when it comes to bringing plans to life. These traits continue to equip
Americans with what it takes to remain among the greatest innovators in the world.
Its worst enemy may well be the country itself. Its
education crisis is real. Whether at the high school or the graduate level, American schools rarely score well in
international competitions. Prospects look dim should the U.S. fail to make up some lost ground in this field.
Next, the country must continue to nurture entrepreneurial
spirits, albeit in a changing environment. With business going global across most industries, U.S. entrepreneurs and
business leaders need to learn what it takes to be successful internationally – without losing any of their creativity,
drive, or passion.
America must cope with the realities of the 21st century.
Make no mistake: all those manufacturing jobs the U.S. lost
in recent years are gone and will not come back. Those that still exist will likely also go to cheap-labor countries around
the world. Attempts like the recent U.S. embargo of Chinese textiles only shift the work from China to countries like Vietnam,
Indonesia, and others.
Rather than fighting losing battles, the U.S. must leverage its
world leadership role to remain “the place to be.” The country’s lifeblood, its ability to attract the
world’s sharpest minds, is threatened by the post-9/11 decline in immigration and college admissions of foreign students.
If the United States fails to attract the best of the best around the world as it has for decades, it is bound to fall back into
mediocrity.
Little is lost at this point. The global economy presents
huge opportunities for those nimble enough to seize them, and the U.S. can be one of those who do. Yet, there remains a
lot of work to be done for the country to maintain its leadership position, allowing it to thrive in the “Asian Century.”
