http://blogs.timesofindia.indiatimes.com/toi-edit-page/what-makes-america-great-american-exceptionalism-is-less-about-google-and-stanford-more-about-babies-and-immigrants/
What makes America great: American exceptionalism is less about Google and Stanford, more about babies and immigrants May 8, 2017, 2:00 AM IST Ruchir Sharma in TOI Edit Page What makes America great? The standard answers to this question point to qualities that the United States is said to have in greater abundance than its peers in Europe and Japan. There are the innovations that pour out of Silicon Valley companies and Ivy League schools, the flexibility of a work force relatively unconstrained by unions, the dynamism of entrepreneurs less hamstrung by an oversize welfare state, a mobile population willing to move to cities where cutting edge jobs are mushrooming. In short, the standard flexibility theory of American exceptionalism is all about qualities that make workers more productive. Today, nearly all the discussion about how to make America great again focusses on ways – like cutting red tape and taxes – to revive flagging productivity growth. Though this discussion remains critically important, it downplays a big shift. The underlying growth potential of any economy is shaped not only by productivity, or output per worker, but also by the number of workers entering the labour force. The growth of the labour force is in turn determined mainly by the number of working age people and of immigrants entering the country. Over the last two decades, the US advantage in productivity growth has narrowed sharply, while its population advantages, compared to Europe and Japan, have held steady. What makes America great is, therefore, less and less about productivity than population, less about Google and Stanford than about babies and immigrants. The growing importance of the population race will be hard for any politician to accept. Every nation prefers to think of itself as productive, in the sense of hard working and smart, not just fertile. But population is where the real action is. I found, comparing six of the leading developed countries – the US, Germany, Japan, Canada, Australia and the UK – that in recent decades productivity growth has not only been slowing across the board, but that the gaps in productivity growth between these rich nations are also narrowing sharply. Before 2010, productivity was growing much faster in the US than in Germany or Japan, but that advantage has largely disappeared since. The reasons for this convergence are complex, including the rapid spread of technology across borders, but the trend spans the developed world. This should raise doubts about how any one country can regain a distinct economic advantage by focussing only on reviving productivity. Like productivity, population growth has been slowing worldwide, the big difference being that the gaps between rich nations are widening. In the 1960s the US population growth rate (including migration) was 50% higher than Europe’s and about the same as Japan’s. By the end of that decade, population growth peaked worldwide, but it has slowed very unevenly. Since 2005, America’s population growth rate has been eight times higher than Europe’s, and Japan’s population has not grown at all. Increasingly, then, the underlying difference between the fast and slow growing economies is explained more by the differences in population growth than productivity. In fact, since 2005, per capita GDP has grown on average by 0.6% a year in the US, exactly the same rate as in Japan and virtually the same as the Eurozone. In other words, if it weren’t for the boost from babies and immigrants, the US economy would look much like those supposed laggards, Europe and Japan. Moreover, breaking down population growth, immigrants have a surprisingly big impact. In the US, immigrants have accounted for a third to a half of population growth for decades. In other Anglo-Saxon countries – Canada, Australia and Britain – immigrants have accounted for more than half of population growth over the past decade. Those economies have also been growing faster than their counterparts in the rest of Europe or Japan. But much of that advantage would also have disappeared without their population advantage. Politically, the irony of this moment is stark. Population growth is increasingly important as an economic force and is increasingly driven by immigration. Yet now, along comes a new breed of nationalists, rising on promises to limit immigration. And they have been especially successful in countries where immigration has been especially important to the economy, including the US and Britain. History is littered with examples of emerging nations that have failed to generate enough jobs for a booming young population. But virtually no nation has ever sustained rapid economic growth without strong population growth. Today, when every major country including the US faces continued decline in population growth, workers are an increasingly precious source of national economic strength. Consider this: if, over the last two decades, the population of the US had been growing as slowly as Japan’s, US share of the global economy would be just 15%, not the 25% it holds today. It would be unrealistic to imagine that hard economic logic will turn the anti-global, anti-foreign tide any time soon. The likely result is that the US and Britain will go ahead and limit immigration. To the extent they do – and their rivals do not – they will undermine their key economic edge, and cede much of the growth advantage they have enjoyed over Europe and Japan. The writer is an author and global investor. He is also chief global strategist at Morgan Stanley Investment Management. © 2017 The New York Times (distributed by The New York Times Syndicate) -- Peace Is Doable -- You received this message because you are subscribed to the Google Groups "Green Youth Movement" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. To post to this group, send an email to [email protected]. Visit this group at https://groups.google.com/group/greenyouth. For more options, visit https://groups.google.com/d/optout.
