While we often hear about the doom and gloom facing the United States, if we put aside our biases and look deeper, there are actually a number of structural, powerful forces at play that suggest the US is well-positioned to maintain and grow its economic might in the coming century.
This time on Financial Sense, we look back on a 2014 interview with Joel Kurtzman to discuss his book, Unleashing the Second American Century: Four Forces for Economic Dominance. As we were coming out of the Great Recession, Kurtzman pointed to four powerful forces — creativity, energy, manufacturing prowess, and capital market strength — as a reason for long-term optimism in the United States.
Our unbridled creativity is fueling the new American century, Kurtzman stated. America's innovation corridor, ranging from Boston and Austin to Silicon Valley is unparalleled anywhere else in the world.
From Cambridge, Massachusetts, to MIT and beyond, America’s higher education system produces some of the most innovative companies in the world, Kurtzman added. China, Europe, and others have tried to invest to catch up, but so far they haven’t produced the intellectual capital available in the United States.
The unique culture of the US is very different and powerful with regard to the kinds of innovation and the practicality of our innovations, Kurtzman added, along with our ability to mix academic research at the highest levels with that of the private sector.
“Any country in the world would love to have Cambridge or the equivalent in its borders, but we have more than just Cambridge,” Kurtzman said. “We have San Diego, we have Stanford and San Francisco. We have research, we have the I-5 corridor, we have Minneapolis and Seattle. We have some tremendous resources in terms of research that doesn't exist anywhere else in the world.”
Energy to Spare
The United States is the largest oil consumer in the world, Kurtzman noted. But what’s most remarkable is that we’ve gone from being the world’s largest oil exporter to the largest oil importer, and back again.
This is unprecedented in terms of global capacity, he noted. We went from essentially importing more than 60 percent of our oil to importing only 32 percent of it in December 2013. The reason for this is entrepreneurs took massive risks to develop the fracking technology.
North Dakota has gone from producing almost no energy at all a decade ago to being the second largest energy producer in the country after Texas, Kurtzman noted. This energy boom has led to a huge growth in jobs and fracking technology, which has changed the entire energy landscape.
“This kind of turnaround never happens,” Kurtzman said. “There is no other example in the world of a country that has gone from first in terms of energy production as we were in the 1950s to importing more energy than any other country in the world and then turning around to again become the world's largest energy producer.”
A manufacturing exodus took place in the United States, with techniques migrating overseas to Asia and elsewhere because of cheaper labor. Now, we’re seeing a smarter form of manufacturing return to the US.
“Manufacturing went to college,” Kurtzman said. “It's so much smarter. We have robots that are very efficient. … They are coming back and they will be creating jobs. This is real. We're seeing it in terms of tens of billions of dollars being invested in the auto industry in the United States.”
Advanced robotics is transforming manufacturing within the United States, he added, and this isn’t killing jobs here.
“You hear that all the time at cocktail parties, in bar discussions, wherever you go, you hear people saying, we don't make things here anymore, but it's absolutely untrue,” Kurtzman said. “The United States is still the world's largest manufacturing country. We make more than anyone else and China has caught up in some years, but we are pulling ahead again.”
Capital Market Depth
The Great Recession was what Kurtzman called the Rich Man's Depression, and it had the beneficial effect of essentially doing away with a huge amount of consumer debt.
Consumers are now in the best shape they've been in 35 years, with tremendous spending power. On top of that, Kurtzman sees consumers behaving very prudently and saving more now.
Corporations are also flush with cash, and since the interview with Kurtzman, we’ve seen corporate tax reform potentially return a large amount of capital to the United States, something which Kurtzman noted would act as a large beneficial force when it comes to available investment capital.
“It’s a huge advantage,” Kurtzman said. “We have somewhere between .5 and trillion in cash within the bank accounts of our largest companies. That's a massive amount of money. It's undeployed and it's ready to be invested.”
America’s savings rate is now returning to international levels, he added. In general, he’s seeing healthier habits among consumers as well.
The cleansing effect of the Great Recession set the stage for a renewed period of growth, Kurtzman noted. Combined with all of the other factors Kurtzman mentioned, the United States is poised to take on the rest of the century from a position of strength.
“We are the only country in the world that has all four of those forces working in our favor,” he said. “There are countries that have strong manufacturing capacity; there are innovative countries; there are raw material producing countries; energy producing countries. But only the United States has those four forces of creativity, capital, manufacturing depth and energy working all at once.”