Asia’s rise is enormously important to America and to the world, but that doesn’t mean that Asia’s economies will soon loom over the US. On one side, American innovation in both energy and high-tech manufacturing will keep the American economy vital for years to come, and on the other, there are good reasons to question the sustainability of China’s high rates of growth.In a recently-released report, UBS senior economic advisor George Magnus highlights some of these key points (h/t FT Alphaville). In particular, many of the factors that have led to the Asian growth miracle are about to change:
. . . as countries become middle income, many catch-up benefits diminish and disappear. . . . The rural labour surplus wanes, pushing up wages and eroding competitiveness. The productivity surge arising from the reallocation from agriculture to manufacturing, and the associated technological catch up and exploitation of existing technologies runs out of steam. The key to the next phase of development lies in innovation- and efficiency-led productivity enhancement, which is essentially about robust institutions, as well as smart people.
Meanwhile, the US stands to benefit greatly from the ongoing energy revolution, advances in automation and hi-tech manufacturing, and new localized custom manufacturing techniques like 3-d printing. Over time, these will make Asia’s economies of scale less relevant and pull high-tech manufacturing back home, as companies look to shorten supply chains and move closer to the centers of hi-tech knowledge in the West.Read the whole post here.