Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Report on Business

Economy Lab

Delving into the forces that shape our living standards
Best Business Blog, EPPY awards, 2011 and 2012

Entry archive:

Economy Lab has moved

Only Globe Unlimited members will now have access to a wide range of insightful commentary
and analysis on the economy and markets previously offered on this page.


Globe Unlimited subscribers will be able to read these columns,
written by some of Canada’s most deeply respected economists,
such as Christopher Ragan, Sheryl King, Andrew Jackson, and Clement Gignac,
as part of our ROB INSIGHT section.


All of our readers will still be able to browse the Economy Lab archives and read our
broader coverage of economic data and news by accessing their 10 free articles a month.


Learn more about Globe Unlimited and how to subscribe.

A worker walks through a new Wal-Mart store in Chicago on this photo from January. (JOHN GRESS/JOHN GRESS/REUTERS)
A worker walks through a new Wal-Mart store in Chicago on this photo from January. (JOHN GRESS/JOHN GRESS/REUTERS)

Economy Lab

Why you shouldn't write off the U.S. economy just yet Add to ...

Plenty of bearish analysts see a long, hard slog for the United States, with several more years of lacklustre growth, high unemployment, flat housing, weakened financial institutions and worsening public finances. Some economy watchers draw comparisons to Japan and its two decades of stagnant growth, sideways stock market, high debt levels and bouts of deflation.

More related to this story

But if you believe, as I do, that the resilient U.S. economy is fully capable of finding a path to full recovery and decent, if not great, growth, you will get plenty of support from Ruchir Sharma, author of Breakout Nations, about the rising new stars of the global economy.

As head of emerging markets with Morgan Stanley Investment Management, Mr. Sharma may seem like an odd source to consult about prospects for the world’s major industrial economy. But in a recent interview, he was more upbeat about the U.S. outlook than many of the people who keep close tabs on U.S. developments. Indeed, a recent poll showed that a majority of Americans already think China has the world’s strongest economy, when, in fact, it is still firmly in a group of upper middle-income countries like Argentina, Mexico, Botswana and Kazakhstan.

Mr. Sharma dismisses comparisons with Japan’s lost decades. “The U.S. is beginning to distance itself from that parallel,” he says emphatically. His reasons include:

- A weaker U.S. currency against those of its major trading partners, making U.S. exports more competitive than they have been in years.

- Huge spending on research and development. U.S.-based R&D still accounts for nearly 40 per cent of the global total. Japan spends a lot too, but much of it is geared to the domestic market, while U.S. companies focus on the global opportunities opened by advances in the likes of mobile phone applications, social networking and cloud computing.

- Favourable demographics. A growing population of young people, which Japan, much of Europe, Russia and even China can only envy.

- A manufacturing recovery, as overseas production and transportation costs rise, and the U.S. energy supply and cost advantage widens.

Now, all they have to do is figure out how to make their dysfunctional political system work and rein in runaway deficits.

In the know

Most popular videos »

Highlights

More from The Globe and Mail

Most popular