The Bright Side of America

By Carl Delfeld

There is a lot of talk amongst pundits about America following the Japan model with a toxic brew of low growth, high debt and deflation. The Carnegie Foundation has come out with a study showing that Japan’s fundamentals had seriously declined well before the real estate bubble burst in 1989.

Meanwhile, the study highlighted that America’s economic fundamentals, the growth in the labor force, productivity, investment and GDP all have stayed fairly consistent. This bodes well for a return to growth.

In his book, “The Next Hundred Million: America in 2050,” Joel Kotkin notes that over the next 40 years, demographers estimate that the U.S. population will surge by an additional 100 million people, to 400 million. In addition, by 2050, only a quarter of Americans will be over 60, compared with 31 percent in China and 41 percent in Japan.

Part of this growth will be fueled by continued openness to immigrants. About half of the world’s skilled immigrants come to the U.S. and, between 1990 and 2005, immigrants started a quarter of the new venture-backed public companies.

World Vision, a Seattle-based Christian organization has a low profile but leaves a giant charitable footprint in America and around the world. The organization now has 40,000 staff members in nearly 100 countries. That’s more staff than CARE, Save the Children and the United States Agency for International Development (USAID) – all put together!

Nathan Myhrvold’s Intellectual Ventures is a $5 billion investment firm that has accumulated up to 30,000 patents, with the goal of making sure that inventors get compensated if a company uses their technology. His company has 650 employees include scientists and engineers, and it has an in-house invention effort and lab that last year applied for 450 patents. To date, the company has paid $315 million to individual inventors.

As consumers and hopefully government spending pull back, exports will need to be a key driver of the U.S. economy and the Export-Import Bank, authorized $4.36 billion in 2,540 transactions to support small business exports in fiscal year 2009. There is plenty of room to grow since less than 1 percent of the nation’s nearly 26 million small businesses are exporters, according the U.S. Senate Small business committee. Those 240,000 businesses, however, account for 29 percent of the United States’ export volume.

The focus on smaller companies is smart. Research done by the Kauffman Foundation - which is dedicated to the cause of entrepreneurship in America – shows 80% of jobs, in good times and bad, are created by firms started in the last five years.

We all know the numbers: just 71 percent of students graduate from high school within four years. And the numbers for minorities are worse: 58 percent for Hispanics and 55 percent for African-Americans. But here is the good news. The current focus on teacher quality combined with astute use of classroom technology will spark a sharp turnaround. A teacher in the top quartile of effectiveness can raise a student from the lowest quartile of the national achievement distribution to the highest quartile, an increase of 50 percentiles, in just three years. This theme is nicely outlined in a new book called “Liberating Learning: Technology, Politics, and the Future of American Education” by Terry M. Moe and John E. Chubb.

We all hear about the need for America to grow with emerging markets but many American companies are already doing so. Today, sales from developing markets represent 32 percent of Procter & Gambles’ $78 billion in annual revenue, up from 23 percent four years ago. Sales coming from emerging market countries are doubling every four years. There are ample opportunities for American firms to grow with emerging market consumers. Americans spend about $110 a year per capita on P&G’s products. The worldwide per-capita figure is $12. In Mexico, the number is $20; it’s less than $3 in China and less than $1 in India.

While debating health care debate, perhaps we should take a cue from the Swiss model. It does not ration care, cuts out intermediaries and controls spending by regulating drug prices and fees for lab tests and medical devices. It also requires patients to share some costs so they have an incentive to avoid unnecessary treatments. The Swiss government provides direct cash subsidies to people if health insurance equals more than 8 percent of personal income.

Keep looking on the sunny side of America and see you next week.

The opinions expressed in the weekly column: "The Bright Side" are the opinions of the author alone and do not reflect the views of the sponsors.

Carl Delfeld is managing director of Chartwell Partners, columnist with Forbes Asia, author of Red White & Bold: The New American Century. He previously served with U.S. Treasury, U.S. Congress and represented the U.S. on the Board of Directors of the Asian Development Bank. Carl can be reached at Carl@ETFpassport.com