All those who think the U.S. is declining for the next however-many-years should give Tyler Cowen’s latest TAI essay a close read. Writes Cowen:
American manufacturing employment has been badly hurt by the mobility of capital seeking lower production costs abroad, but the growing wealth of foreign populations in rising economies is creating new demand for imports, including imports U.S. workers can supply. As is well known, America was the world’s leading exporter virtually every year during the latter half of the 20th century, losing that title to Germany only in 2003, and later falling behind China. New circumstances thus prompt the question: Might we someday regain that honor? If so, how will this shape American foreign policy, jobs, education, politics and poverty? […]In the early stages of growth in developing nations, importers buy timber, copper, nickel and resources linked to construction and infrastructure development. Those have not been U.S. export specialties, and so a lot of the gains from these countries’ growth so far have gone to Canada, Australia and Chile. Usually American outputs are geared toward wealthier consumers and higher-quality outputs, which is what you would expect from the world’s wealthiest and most technologically advanced home market. To put it simply, the closer other nations come to our economic level, the more they will want to buy our stuff. Indeed most of those nations are growing rapidly, so we can expect their attentions to shift toward American exporters. The leading categories of American exports today—civilian aircraft, semiconductors, cars, pharmaceuticals, machinery and equipment, automobile accessories, and entertainment—are going to be in the sweet spot of growing demand in what we now call the developing world.Indeed, of the wealthy nations, the United States probably will do the best at capturing those growing markets. Japan already has moved to trade-deficit status for the first time in three decades. This status may not persist, but the country is no longer the export powerhouse it once was, and companies like Toyota and Sony are no longer global innovation leaders. As for Europe, significant parts of the common currency area may lose a decade or more as they sort out the current financial mess. Both Europe and Japan are shrinking in population, too, while that of the United States is growing.
Read the whole thing.