In two weeks, I will shift gears from a 2% economy here in the United States to a 7.8% economy, India. In a recent article in Time, columnist Rana Foroohar says the next five years in America are tough. Foroohar adds that half of all Americans can’t find $2,000 in 30 days without selling their stuff. Sounds grim, right?
The truth is, yes. Unless the housing crisis gets fixed, job creation will be at a standstill and based on a report from McKinsey Global Institute, it will take five years for the U.S. to have a normal unemployment picture (5% from the current9.1%). There are a half billion middle class outside the United States that can do the jobs being done here. Brazil, India and China are churning out 70 million new middle class workers and consumers every year. A recent report from rating agency Crisil says India has 62,000 super-rich households with a combined wealth of $1 trillion. In five years, this is expected to grow to $5.3 trillion. This is more than double the $2 trillion sitting in the balance sheets of American companies now. Very few of them are investing locally. Instead, they prefer investing where they can find adequate talent and consumers.
The way out of this mess is not easy and Foroohar like others says education is the only way out. She says four-year liberal arts colleges are becoming more irrelevant to what the economy needs todayand there should be greater emphasis on science and technology.
She also suggests that the U.S. needs to create a concrete industrial policy that can bring different sides together to solve this problem, something similar to what the Germans have.