The Second American Century

Posted: Apr 14, 2014 9:00 AM

Don't let the naysayers get you down. In the April issue of Townhall Magazine, John Ransom discusses four reasons why America is going to dominate the next century.

In February, Bloomberg TV pointed to a depressing statistic that they contend is an indicator that all is well with the American economy: Divorce rates.

Yes divorces have been on the rise since 2009, says Peter Cook of Bloomberg, and that’s a good sign.

“The logic here,” says Cook, “is that all of a sudden you have two households, maybe someone going back to the workforce, more spending there.”

So let’s just agree that we’re really far down the progressive path when divorce is cited as a leading economic indicator.

“The number of Americans getting divorced rose for the third year in a row,” reported Bloomberg, “to about 2.4 million in 2012, after plunging in the 18-month recession that ended June 2009, accord- ing to U.S. Census Bureau data.”

“Whatever the social and emotional impact, the broad economic effects of the increase are clear,” Bloomberg continued, “It is contributing to the formation of new households, boosting demand for housing, appliances and furnishings and spurring the economy. Divorces are also prompting more women to enter the labor force.”

While I agree that America’s economy still has a fighting shot at owning the 21st century, there are better, healthier stats that say things are looking up.

After all, it’s not in the American DNA to give up. So says, Joel Kurtzman, senior fellow at the Milken Institute. He spoke to me about the strengths rather than weakness of the U.S. economy vis- a-vis the other great powers, as his new book “Unleashing the Second American Century” went on sale in February.

Kurtzman points to four economic indicators that make the United States a pretty good bet. I think he’s right and for the right reasons.

“America is a tremendous transformational force in the world,” says Kurtzman.

“And it’s not just because of politics; it’s not just because of social issues. It’s be- cause of our economy and our economy is set to grow, I think, like mad.”

The author says that no country has ever done what we have done in the last six years: “To go from energy importing, to in the next few years, to a major energy exporting nation. We are now the largest producer of energy in the world.”

We produce more energy than Russia; we produce more energy than Saudi Arabia.

“That’s monumental,” he concludes. But there is more than just that at work. “In the U.S. an individual can own the

mineral rights underneath the ground,” he says. “You can’t do that in other countries.” And that interest in property gives creative impetus to discovering new ways of taking advantage of resources.

Kurtzman points out on his blog at the Harvard Business Review that the United States produces 20 percent of the manufacturing in the world, more than even China.

And what America makes, comes with very high margins.

“[W]e make jet turbines, helicopters, sophisticated airliners and business jets, electric generators, radar, chemicals and plastics, satellites, and all kinds of weapons,” says Kurtzman.

China on the other hand makes widgets: “China leads the world in low-margin electronics assembly, textiles, and some types of machinery.”

Kurtzman also points out that while much of the debate about debt has centered around public debt, private debt is in good shape. Thanks to easy money policies, and balance sheet discipline, corporate cash has never been higher. That means that if you have a good idea, companies have the cash to put it to work.

“Although estimates vary,” says Kurtzman, “American companies have between $4 and $5 trillion in liquid assets, a sum greater than the size of the German economy.

And household debt in the U.S., he points out, has been coming down as well.

But paramount among the reasons why the senior fellow at the Milken In- stitute and Wharton business school is enthused about the next American century, is the creative force of the country.

He points to research hubs in Massachusetts, Texas, and California, as among the reasons why American creative power is better harnessed than other countries.

“Other countries would love to have a cluster of research institutions like those located in Cambridge,” he says. “And the fact is, Cambridge is just one of several such clusters in the United States.”

China he says is coming of age at the tail end of the industrial revolution where the impetus has moved from brute numbers, into subtle workforce skills that America has.

“China’s coming of age, so to speak, is coming exactly at the wrong time,” Kurtzman says of his thesis on American 21st century dominance. “They’re coming of age as a manufacturing power and that’s what they want to be and they want to bring 200 million people per decade into the rural areas to the cities to work in manufacturing.”

At the same time the world is transforming itself using American technology into a service oriented economy, where value is created by what companies can do for people, not what they make.

I’ve been of the opinion for some time that most of our problems are political, not economic. As Cato economist Dan Mitchell has pointed out, demographics can often be destiny, as in the failed social security scheme. But it doesn’t have to be that way.

There’s nothing wrong with America that 10 million jobs can’t fix.

We just have to wait a second for the politicians to catch up to the 21st century. •