The United States’ BRIC-like Potential
Although it has become fashionable over the past couple of years (basically since the US went into recession in 2007) to talk about the United States’ economic decline, I believe the case is overstated, as I mentioned on this space in November 2008. In that article, I mainly discussed the geopolitical dimension. Today, I will address some of the long-term economic factors.
Many of these centre on the USA’s favourable demographic position vis-à-vis its competitors, especially China, Japan, and the EU. The US’ population is rising and being reinvigorated by immigration, especially from Latin America. An article in today’s Financial Times discusses how US consumption patterns are being transformed, with a special emphasis on the importance of Hispanic Americans. The article notes:
With 83 per cent of US population growth coming in the past decade from ethnic minority groups, according to Washington think-tank the Brookings Institution, and minority groups’ purchasing power now exceeding $2,000bn, a new American consumer is emerging. Attractive because they are young and culturally influential, they are also challenging because they are so different from the old mainstream…
…Economically, the impact of the three largest groups the industry terms “multicultural” is in little doubt, however. According to the Selig Center at the University of Georgia, Hispanics’ buying power hit $951bn in 2008; African-Americans’ $913bn; and Asian consumers’ $269bn. Their combined purchasing power rose by $1,000bn between 2000 and 2008, and is set to grow by another $1,000bn by 2013. In each case, the growth rate far outstrips that of the non-Hispanic white majority…
…The 50m Hispanics expected to be counted in the 2010 census, up 40 per cent on 2000, now offer the same growth dynamics for multinational brands as an emerging market, says Fernando Madeira, chief executive of Terra Latin America, an internet portal aimed at Hispanics across the Americas. “You have seen the same buying power increases in the last 10 years among US Hispanics as you have in Latin America,” he notes…
True, some of the above may have been hyped up for journalistic purposes. And it is also true that Hispanic Americans are not necessarily a unified market, since it comprises Mexicans, Cubans, Central Americans, etc. However, they are undoubtedly a key factor in future US economic performance. There is no real equivalent group in Europe’s economies (in proportion to individual countries’ populations), and certainly not in Japan, which is 99% Japanese.
US 2010 Census Should Provide Further Clues
A better understanding of the USA’s population dynamics will become available once the results of the recently concluded 2010 census are published, sometime next year.
At present, the United Nations Population Division forecasts a US population of 404mn in 2050, which dovetails almost exactly with what the US Census Bureau predicted in 2000. That same series predicted the US population rising to 571mn by 2100. Even more extravagant predictions envisage the total reaching one billion by the end of the century.
By comparison, the UN forecasts Brazil’s population peaking in 2040 (at 220mn), and China’s in 2030 (at 1.46bn). India’s population will continue rising beyond 2050 (possibly nearing two billion (!) by 2100), but Russia, the other BRIC, is likely to see its population decline steadily (to 116mn by 2050).
Of course, I’d be the first to admit that demographic projections could be wildly wrong, and in any case, demography is not necessarily destiny. Nonetheless, if China’s population does start shrinking after 2030 while America’s expands for the remainder of this century, this would suggest that even if China surpasses the USA’s GDP by the late 2020s, as Goldman Sachs and other big banks suggest, there is a real possibility that America could reclaim top spot at some stage thereafter.
US Population: How Much Is Too Much?
A key question going forward is how far the US population ‘should’ be allowed to increase. This is an impossible question to answer, but below are calculations on how many people the contiguous 48 US states would have with the listed countries’ present population densities:
United Kingdom: 2.06 billion
China: 1.13 billion
Japan: 2.72 billion
Brazil: 186 million
In other words, the US has substantial scope for population increase without becoming an overcrowded Hell-hole (unless you would describe the UK and Japan as such – which I don’t!). While the notion that a United States with one billion might leave many Americans aghast, it would probably not be unbearably crowded. The bigger question is whether such a heavily populated USA would be environmentally sustainable, given the huge strain this would place on water resources and energy.
Other Factors Beyond Demographics
Demographics are not the only reason why I believe that the US can retain considerable advantages vis-à-vis the BRICs. America has a more sophisticated technological-industrial base, considerable manufacturing (despite the popular belief that it does not), and a very dynamic society that has a consistent ability to renew itself after past episodes of self-doubt. Of course the US has its fair share of political problems, but these are relatively manageable when compared to uncertainty about whether China can make a smooth transition to democracy, India’s chronic governance problems, Brazil’s huge wealth gap, and the shaky foundations of Russia’s revival.
September 8th, 2010 at 4:51 pm
Interesting.
However, a growing Asian/Latino population does not necessarily translate into an increasingly wealthy Asian/Latino US population. I would venture to say that Hispanic Americans (and undocumented workers) are probably overrepresented in sectors boasting far too much capacity – construction, food production and service etc – which will hurt employment levels, earnings and spending power.
Ultimately, the FT is telling us that companies need to focus on a different type of US consumer, which is a plain statement of the obvious. The FT is not telling us that Latino/Asian consumption is growing strongly enough to help the US maintain a multi-decade economic model premised on personal leverage, ever-rising asset prices and unsustainable levels of consumption.
Yes, the US boast ample space for continued population growth, albeit in decrepit Midwestern industrial towns and cities or unihabitable badlands in the Dakotas. Southwest, Southeast and Mountain states are popular, which is putting a strain on insolvent state and municipal budgets and infrastructure. Americans, new and old, appear unmoved by the housing bargains on offer in Flint and Sandusky, choosing instead the warmer, economically vibrant communities to the South and West.
Sincerely,
William