An Optimist About The U.S. Has Thorny Questions
There is increasing global competition for jobs and workers, a looming crisis in healthcare and pensions, and a more immediate threat from a housing slowdown - yet one of the most recognized figures in the financial services industry advises people not to bet against America.
"Let me be clear up front: optimism about the U.S. economy is the way to go. It always bounces back from any crisis."
That was the message from Geoffrey Colvin, senior editor of Fortune, and former co-anchor of the "Wall $treet Week with Fortune" television show, which appeared on PBS until last year. Colvin gave the opening keynote address at WesCorp's Future Forum conference here.
The important question, he added, is: "At what point are we willing to make sacrifices today for a better tomorrow?"
Colvin is keeping his eyes on three major trends: globalization, pensions and healthcare, and housing. He said the change in competition often is phrased as: "Can America compete?" which misses the point. Colvin has no doubt well-managed American companies will see globalization as much as opportunity as trouble. The real question he said is: Can Americans compete?
"At the moment, many clearly cannot," he said. "It is a trend that won't turn around any time soon. This is the first ever global labor market."
The labor market has changed for three reasons, Colvin continued. First, the nature of "work" is becoming more service and information-based, and people process and move information around while sitting at a desk with a computer and a telephone. Second, the cost of processing and moving information is dropping to "essentially free" as computing power and connectivity increase. Third, countries such as China, India, Brazil and the Philippines are graduating many more young people with the ability to handle those information-era jobs.
"They are making the theory that work can be done anywhere a reality," Colvin said of the third point. "It is not America that is losing manufacturing jobs; the planet is losing manufacturing jobs. We are getting very good at producing more stuff with fewer people."
The problem comes when higher-paying occupations also leave the U.S., he said. Software writing, coding, computer chip making-all high value-added jobs-are moving overseas. Colvin said people should ask themselves if what they do can be done by someone on the other side of the world, just as well, for not much money. And if not, how much longer will it last?
One issue that particularly worries Colvin is the state of education in the U.S. compared to some developing countries. He argued the source of economic dominance-dating back to the Industrial Revolution-is technological dominance. China and India are graduating many more engineering students than the U.S. If this continues, Colvin warned, America's standard of living could move to that of China and India.
"It doesn't have to, but it could," he said. "Education is the key, but it is a terribly difficult problem to deal with. Even if we fixed the problem overnight, it would be 10 years before the improved product came out of high school, and 10 years is an eternity in today's economy."
Other points made by Colvin:
* Pensions and healthcare are two issues that will affect us "much more than we know," Colvin warned. In 2012 or 2013, Social Security will become cash flow negative, which he said will be superceded as a crisis in 2018 or 2019, when Medicare goes cash flow negative."
* Colvin acknowledged the housing market might be the most pressing problem credit unions will deal with. He said the interest rates on 22% of mortgages in America will reset higher this year.
"The real danger is a housing slowdown starts a downward spiral," he assessed. "Everyone is hoping for a 'soft landing,' but if the slowdown is drastic, the consumer sector could contract.
* "The iPod was not a technological breakthrough; MP3 players had existed for years. It was a design and marketing breakthrough. Apple made an elegant-looking device with an easy-to-use interface, and, through a marketing campaign, imbued it with 'cool.' That might be the future. The U.S. can find solutions, but will we? It is all a question of how we respond: business, government and culture."