We've got problems.
The cornerstone of the American Dream—a home of your own—is under water. So are a lot of jobs. It's harder to get ahead than it used to be. The schools are broken. Kids would rather play on their iPods than learn, anyway. Washington is a shambles.
[See a collection of political cartoons on the European debt crisis.]
America might seem like a total mess, except for this redeeming fact: Nobody else is doing much better. In fact, if you look around the world, America seems like the worst country, to paraphrase Winston Churchill, except for all the others.
America's decline is a familiar theme by now, but there's a lot going on behind the headlines that looks like the beginning of an American revival. It won't happen overnight, and it won't eliminate the basic need for hard work, innovation, and persistence. Yet the nation's future may be a lot brighter than many believe. Here are six reasons why.
A self-renewing economy. We have a tough, Darwinian economy compared to those of other developed nations, especially those in Europe. It's easier for U.S. companies to lay off workers, for instance, and we have a thinner social safety net, especially for those who lack basic healthcare. But that forces people to adapt quickly, develop new skills, and move if it's necessary to go where there's more opportunity.
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This churn can be painful for a lot of people, but there are signs that America is reconfiguring itself for a more prosperous future. More people are moving to cities, for example, where there tend to be more jobs. Student debt is a growing problem, but it's causing students and their parents to become more shrewd about getting the best return on the money they invest in education. There's even been a notable increase in the number of students graduating with engineering degrees, a sign more people are gravitating toward industries with good jobs. Eventually, these trends will generate a more capable and prosperous workforce.
A surge of startups. America is still a great place to start a company, with ample capital and a culture that encourages risk and tolerates failure. The recent recession clearly constricted capital and dampened the fervor for startups, but the animal spirits are stirring again. Consulting firm PwC says the pace of initial public offerings so far this year shows "significant strength," along with the highest volume since 2007. That's great news, because rapidly growing companies are the ones that create most new jobs.
Wall Street analyst and commentator Barry Ritholtz spent some time recently with entrepreneurs and their funders, and wrote this on his blog: "If you want to grasp why we are not doomed, then you MUST spend some time with entrepreneurs like these. Their creativity, business acumen, and technological insights are uplifting, energizing, empowering. We have a fertile crescent of ideas, not just in Silicon Valley but in pockets throughout the United States." That doesn't sound like an economy in permanent decline.
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A manufacturing revival. You know the saying: We don't make anything in America anymore. It's a convenient myth. The U.S. manufacturing sector is still roughly the size of China's—and much more efficient. Boston Consulting Group predicts an upturn in manufacturing that will create 2 million to 3 million new jobs by 2020 and bring several industries that have migrated overseas back home to America. That's not because of policies from Washington. It's mostly because of market forces such as a narrowing wage gap between U.S. and foreign producers, technical innovations, and buoyant American consumers worth locating production facilities near. If Washington could get its act together and come up with ways to boost manufacturing, it would build on a trend that's already underway.
A domestic energy boom. Surprise, surprise. America has long been a net importer of energy, but the mini boom in domestic oil drilling and a bigger boom in natural-gas production is providing an economic lift few experts foresaw just a couple of years ago. Energy jobs, which tend to pay well, are helping reinvigorate rust-belt economies like those in Ohio and Pennsylvania while keeping unemployment low in traditional energy states like Texas, Oklahoma, and North Dakota. Cheap and abundant natural gas is also a big advantage for U.S. manufacturers, especially against competitors in Europe and Asia that are far more dependent on imported energy. The energy boom is also boosting demand for the heavy equipment needed to drill, much of it made here in America.
Upbeat millennials. The turbulent economy has made many Americans dyspeptic, and heavily eroded trust in institutions, with one notable exception—the "millennial" generation, those who are roughly between the ages of 10 and 30. They might still be living with parents, facing a lousy job market and a mound of student debt, but America's future leaders remain optimistic. "The millennials will be very good at reconstituting and reviving America's civic institutions," says economists and historian Neil Howe, author of several books on American generations. "The problem as they see it is that old people are argumentative and uncooperative. There are huge voids of authority. No one's in charge. The millennials will get a lot more done together. If any generation could rebuild and strengthen America's middle class, this will be it."
Leadership by default. Polls show that many Americans think China is a bigger economic power than the United States. They're misinformed. China's model of state-run capitalism has some profound weaknesses, including an inclination to steal rather than innovate and a corrupt class of ruling elites. The mushrooming scandal over disgraced power broker Bo Xilai is a revealing glimpse into a society that is outgrowing the fetters of communism but is still ruled by oligarchs who benefit from the old, outdated system. It could still take decades for China to evolve into a first-rate economic power.
Twenty years ago, Japan looked like it was poised to dominate the world economy. Then it imploded, and hasn't been heard from since. The euro zone is the world's biggest economic zone, yet it still hasn't solved the problem of fiscal unity that Alexander Hamilton got straightened out in the United States some 200 years ago. That makes Europe more likely to drag the world economy into another recession than to lead it anywhere. Yeah, things are tough here in America. The rest of the world would be lucky to have our problems.
Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.
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