The World in 2020

The singular strengths of the U.S. and Chinese economies, combined with their sheer size, will set much of the course of globalization for the next ten to 15 years — and with that, the economic path of many other countries.

Now and for the next generation, globalization will have an eastern and western pole, akin to the earth’s North and South poles.

The eastern pole is unequivocally China — the world’s leading platform for manufacturing, the world’s largest source of personal savings used in global capital markets and — within a few years — the world’s second-largest market for everything produced nearly everywhere.

America’s position as globalization’s western pole is equally secure for at least the next decade. The United States is — and will continue to be — the world’s largest source of new products, especially those employing and produced by advanced technologies.

It will also be the leading source of the advanced business and financial services tied to these technologies — and which everyone needs to engage in the global economy. The United States will remain the center of world capital markets, and the single largest buyer of everything produced domestically in China and most other places.

At first glance, the U.S.-China pairing may seem to closely resemble the pairing of Great Britain and the United States from 1880 to 1900, when America’s share of global manufacturing rose from less than 15% to almost 24% — and Britain’s fell from nearly 23% to 18.5%.

But China’s rise does not presage America’s decline. For one, China’s expanding share of worldwide production will come mainly from other developing nations.

For its part, America’s share of global production has been remarkably stable for more than a century — nearly 23% in 2003, compared to just under 24% a century earlier — even as substantial shares have moved offshore.

Moreover, its shares of both high-tech manufacturing and advanced services — both in growing global demand — have been rising steadily.

There’s another critical difference between America’s rise over a century ago and China’s in this period. While U.S. industries in the late 19th century developed behind high protectionist walls and so were almost entirely homegrown, China today owes about half of its share of global manufacturing to foreign, rather than native, companies — including most of its high-end and high-technology production.

China’s domestic producers mostly serve its own domestic market — and with some exceptions, the native Chinese companies competing successfully today for consumers in other countries produce food, apparel, toys and other relatively low-value-added goods.

By all accounts, young Chinese managers and MBAs are quickly learning the best practices of the Western companies now operating in their country — and they surely will adapt them to the next generation of native businesses.

With another decade of practice and investment, Chinese auto, electronics and machinery producers may be competitive in world markets with Western companies also producing in China or in other low-wage, developing countries.

With all these problems, and inevitably more, the United States still has powerful economic advantages that should solidify its preeminence among advanced economies for the next ten to 15 years. Unlike Europe and Japan, America’s labor force will continue to expand, mainly because it attracts and accepts millions more workers from other countries.

The U.S. workforce — alone among the large, advanced countries — is itself increasingly globalized, now including millions of highly skilled and educated workers born in Europe and Asia.

Sergey Brin, one of Google’s two cofounders, was born in Moscow and emigrated to the United States with his parents in 1979. He is only one of the thousands of spectacularly successful American technology entrepreneurs born somewhere else.

Moreover, as China’s rising preeminence in most areas of basic manufacturing leaves more advanced economies more dependent on their businesses’ capacity to innovate — and their workers’ ability to operate effectively in technologically advanced workplaces — America’s edge in these areas is likely to become even greater.

One reason is that despite the countless studies documenting the real deficiencies of American education, a larger share of Americans are college educated — and U.S. workers on average have completed two to three more years of schooling than the average European or Japanese worker.

Finally, America’s political conditions produce other advantages in globalization that seem secure for the foreseeable future.

Assuming that the widespread hostility in Europe and much of Asia to the Bush Administration’s foreign policies recedes with the election of his successor in 2008, the United States will be able to use its unrivalled superpower status to extract special consideration for U.S. companies and their particular interests in many foreign markets.

Even if pressures on U.S. jobs and wages produce a leftward tilt in American domestic politics, the United States will continue to take a more conservative approach than most other advanced countries — especially regarding regulation and taxes. The nearly inescapable economic result is that America’s economy will continue to be more efficient.

These differences have made European societies more equal and socially compassionate, and will continue to do so — but they also will make the American economy even stronger than today.

America’s status as the other indispensable country in globalization is as secure as China’s.

Editor’s Note: This feature is adapted from “Futurecast: How Superpowers, Populations and Globalization Will Change the Way You Live and Work” by Robert J. Shapiro. Copyright 2008. Published by St. Martin’s Press. Reprinted with the permission of the publisher.