by Jack Welch
Originally published in Business Week
magazine on July 2, 2007
from
KurzweilAI Website
|
Straight-line extrapolation
shows that China and India, with their faster growth rates, will
eventually catch up to the U.S. in terms of pure economic size. But
America has a final competitive advantage: its confluence of bright,
hungry entrepreneurs and flush, eager investors; and its stable,
highly adaptable system. |
We’re neither economic forecasters nor political prognosticators by trade,
but you don’t have to be either to see that right now the U.S. holds a
robust lead in the race for hegemony.
Our economy is five times as large as China’s
and 15 times larger than India’s, with about one-fourth the population of
either nation. That gives the U.S. a real advantage in providing education,
health care, and national security—plus all the other stuff that makes a
country thrive.
But “right now” doesn’t mean forever. All you need is a ruler to draw the
straight-line extrapolation showing that China and India, with their faster
growth rates, will eventually catch up to the U.S. in terms of pure economic
size. For China, that would occur as early as 2045; for India, the date
would be some 20 years later. Which is why you so often hear experts
predicting that, by mid-century, the U.S. will be trailing the two new world
superpowers.
We'd say: Not so fast. Straight-line calculations about the U.S., China, and
India are just that.
They assume all three national will enjoy smooth
upward rides. No recessions, no banking breakdowns, not political crisis, no
disruptive social uprisings. Unlikely? For sure!
With China's massive experiment combining
communism and capitalism, India's entrenched bureaucracy and corruption, and
America's long term entitlement obligations, it is far more probable that
growth trajectories will zig and zag more than zoom.
Further, straight-line calculations do not take
into account relationships with other parts of the world, such as the Middle
East, where changing alliances could have economic repercussions.
Given that reality, then, what general scenario would you bet on for the
next 50 years? Would it be America’s 3% annual growth or China and India at
8%? We’d take the U.S. for a simple yet incontrovertible reason. Its
system—the sum of all its parts—works, and when it breaks, it bounces back
fast. Don’t worry; we’re not breaking into The Star-Spangled Banner.
We just believe U.S. economic dominance isn’t a
function of how long the nation has been leading the pack.
It’s about how America operates as a country. We’re talking, mainly, about
freedom and stability. Political parties disagree, often vehemently, but the
government never stops running. Generally speaking, the U.S. justice system
is fair, and health care, while inconsistent in delivery, is widely
available. And even though secondary education in America gets roundly
knocked, we have without doubt the best system of higher education, turning
out the world’s most skilled, innovative science and engineering PhDs.
America has a final competitive advantage as powerful as it is unique: its
confluence of bright, hungry entrepreneurs and flush, eager investors. Yes,
China and India have ambitious people who dream of building their own
companies, and, increasingly, more are getting the chance. (The U.S. venture
firm Kleiner Perkins Caufield & Byers just opened offices in Shanghai and
Beijing.)
But neither China nor India comes close to the
U.S. in terms of this “killer app,” and it will take years of venture
capital flowing in before the Chinese let go of a rote approach to work and
truly embrace entrepreneurial innovation.
China has other challenges as well. Aside from its risky social experiment,
it has an economy in which less than a quarter of its people truly
participate, and its one-child policy is exacerbating the problems of an
already aging population. India, meanwhile, will continue to struggle with
its overwhelming number of have-nots and its aforementioned corruption.
True, India is a democracy, but a democracy muddled by a profusion of
divergent political parties.
Now, we’re not saying the U.S. system is perfect or its economy
invulnerable. If not dealt with, entitlements like Social Security,
Medicare, and Medicaid will create a budget deficit that will explode over
the next 20 years.
How America handles that problem via tax and
spending policies will determine the strength of its growth engine.
Fortunately, our stable, highly adaptable system has conquered enough major
problems—from the Depression to the Cold War—in the past that there is more
reason for optimism than despair.
In the end, we’d make the case that American economic leadership will be
with us for most, if not all, of the century. It will by no means “rule,” as
it did at the turn of the 21st century. But it will remain ahead until other
nations develop a total economic and social system that works as well.
There’s a lot more to the world’s economic
future than a straight-line extrapolation can tell you.