Posted on 08/29/2005 10:58:59 AM PDT by SirLinksalot
In 2020, America Will Still Dominate Global Economy
A new study by the Deutsche Bank Group holds good news for the United States, with the latest forecasts showing that America will continue as the key driver of the global economy, its currency will remain the most trusted, and its demographics will be the envy of the world. But for Europe, the prognosis is not so promising, explains the president of Deutsche Bank France in this op-ed from French newspaper LeFigaro.
By Jacques-Henri David*
August 25, 2005
Le Figaro - Home Page (French)
What will the world’s economy look like in 2020? What will the power relationships be amongst the United States, the European countries, China and India? Where will the largest areas of growth be? These questions call to us today, as society engages in a vast debate on globalization and its consequences.
I would like to add my contribution to this discussion, beginning with the results of a recent study by the Deutsche Bank Group, which analyzes the macroeconomic evolution of the major continents over the next fifteen years.
Combining the theories of growth and analyzing the evolution of development in the 34 principal countries in the world, this study apprehends the principal factors affecting growth and the trends at work today. It draws up a probability chart of the economic situation for the world in 2020, and the results of these projections are fascinating.
In 2020, the United States will remain the world superpower, with a total GNP of approximately $17 trillion to $18 trillion. Thanks to its dynamic demographics (1% annual population growth), a productivity and a competitiveness amongst the best in the world (currently second in the world and far out in front of Germany (13th) or France (26th) according to statistics from the World Economic Forum), and thanks also to its constant drive to create and innovate, and with flexibility due to the mobility of its labor force, the United States will maintain a clear advantage over China and India and will widen the gap with Europe. With average per capita salaries of approximately $55,000, the income of the average American in 2020 will be 1.5 to 2 times greater than that of a European; five times higher than that of a Chinese and nine times more than that of an Indian (approximately $6,000 per capita).
China will indisputably be the world’s second greatest economic power, with a GNP of some $14 trillion, or three times higher than today.
That of course assumes that beyond the inevitable short-term risks, no major social crisis interrupts the long-term dynamics: a progressive opening to the outside, an increase in domestic consumption, strong growth - in particular in foreign investment, and the rapid improvement in the qualifications of China’s working population (China already has the same number of engineers and technicians as the West, and more than any of the large European countries). Even more than today, China in 2020 will be the industrial workshop of the world.
Paradoxically, one of its handicaps will be an aging population, due to the delayed impact of its "one child policy." By 2020, the median age in China will be approximately 40 years, which will be higher than in the United States.
The world’s third greatest economic power will be India, but far behind the first two, with a GNP of about $7 trillion.
India should be the uncontested champion in terms of growth, due its demographics, its highly qualified labor force, the ease with which it can be integrated into the global economic system thanks to the wide use of English throughout its population, and thanks also to its mastery of communications technologies, especially the Internet. If China can be held out as the world’s future industrial workshop, India will undoubtedly be one of the great service societies.
In Europe, Germany, France, along with Italy and the United Kingdom, should lose ground in the world competition with a GNP per country of about $2 to 2.5 trillion.
European Per Capita Income as of 2002 [UNDP]
While European countries will remain rich in terms of per capita income (about $32,500), their relative weight will decline with their demographics and weaker growth (on average, almost half as much as the United States). Countries like Spain or Ireland will experience a higher level of development than the European average, thanks to a wider opening of their economies to the outside, the dynamism of their investments, good population growth forecasts and effective immigration policies.
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The Democrats are deeply saddened.
Can't happen. The Buchanan Kool Aid Cavaliers say so.
Well, that must mean we won the war on terror, got rid of illegals and closed the border so our nation could thrive.
Interesting thank you for posting
In other news, sun rises in the East.
bttt
Actually this is a warning to all those Americans who are trying to heed the siren call of Democrats who want the USA to be more like Europe with its inflexible Labor unions, socialized health care, forced 35 hour work weeks, and high taxation.
That is interesting... I had not thought ahead about how the " one child policy" would effect the aging population. Their economy may boom but it will be upside down in a few decades with a huge number of old people and a small number of the young trying to support it.
Sounds like the Germans have a defeatist attitude.
(We must do everything to reverse current tendencies by mobilizing our assets: our infrastructure, our capacity to undertake research and development, our "rules of law," the depth and effectiveness of our financial markets, and the importance of saving levels ... We must develop all of these elements to the maximum in order to compensate for our handicaps: stagnant demographics and a lack of flexibility in our social structures.)
It's noteworthy that the author does not recommend what is urgently needed: change in the socialist model. Instead, he treats "lack of flexibility in our social structures" as a handicap that nothing can be done about. As such, you can be sure that Europe will not fix its problems. Worse, the recommendation is to "mobilize our assets". This is code word for the French dirigist socialist model. It has served them so well so far!
Except for one thing - the analysis on China is wrong. I fully believe they will experience a Japan-style collapse of the banking system. Same ole, same ole asian style economics - focus on cash flow, cheap loans and market share instead of profit. What happened to Japan ? "They were going to buy the whole US... etc etc". What were they actually doing ? Buying hard (secure) assets in order to whether the storm that's still going 10 years later, with their deflationary cycle. They have 0% interest rates and all the economy could do is to eke out 1% growth!
By some estimates Chinese banks have as much as 30% of their loan portfolio as non-performing - ie, BAD. And - the foreign investment in China is drying up (certainly from the US and EU, where the *real* smart money is). Their current foreign investment's coming from the rest of Asia. And look what happened to the other economies. It's slowing and the bubble will pop relatively soon. Then look out - the Commies have broken their compact with the people, and base their right to rule only on continued economic prosperity. When the down cycle comes (and it will, it always does), it'll make for some interesting watching.
Now that's an interesting little tidbit. Haven't seen that anywhere else but I'll dig around a little. The implications are extremely interesting. They still should have plenty of raw numbers to support a manufacturing economy, but I don't see them trending toward a service economy in that time, as other aging populations have done. Their social services aren't on a European level but it will still be interesting to see how they cope. I wonder if Logan's Run was translated into Chinese?
The FairTax is promoted as a tax plan that will lead to stronger economic growth for the U.S. economy than under existing tax policy. That is definitely true. The elimination of taxes on business income (some of which is taxed two or three times) will definitely lead to stronger economic growth. It will also encourage investors from other countries to increase investments in this country. Economists can argue about the magnitude of the increase in economic growth, but there is little dispute that the economy would grow faster.
The FairTax is not the only tax reform plan that would produce stronger economic growth. President Bush’s plan to completely eliminate the double taxation of dividend income would produce stronger economic growth. Eliminating the corporate income tax completely without changing other portions of the federal tax system would also give a strong boost to the economy. Eliminating estate taxes could be done under the current tax system. Other major tax reform plans that are consumption-based income tax systems, such as the inflow-outflow tax system, would not tax savings and investments and would result in stronger economic growth.
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