As many economists will tell you (often with more than a hint of largely inappropriate glee), the U.S. economy had some deep structural problems that were apparent long before the financial crisis and Great Recession hit. Many will also say that many of those flaws are still largely there, and the U.S. economy is simply too broken to grow the way it has in decades past; we're in for years of lacklustre growth until the economy can reinvent itself.
But others are already seeing the phoenixes rising from the ashes. They see new economic engines already emerging that can propel the U.S. economy to a new age of prosperity, even if the old ones continue to sputter.
A new report by the McKinsey Global Institute, titled Game changers: Five opportunities for US growth and renewal, outlines five key areas that its authors (Susan Lund, James Manyika, Scott Nyquist, Lenny Mendonca and Sreenivas Ramaswamy) believe are capable of combining to drive an economic renaissance in the United States. They argue that these five "catalysts" could boost productivity, "add hundreds of billions of dollars to annual GDP and create millions of new jobs by 2020 – and as such should be targeted by government policy to encourage investment and development.
"To identify these catalysts, MGI looked for developments that are poised to achieve scale immediately and could accelerate growth across multiple sectors by 2020," they wrote. "We also focused on areas with an immediate window for action."
"By narrowing down a larger universe of ideas, identifying a set of critical and mutually reinforcing opportunities, and then sizing their potential impact, we hope to spark a discussion across government, the private sector, and civil society about national economic priorities and a path forward," they said.
The report estimated the five economic catalysts – which it identified as energy, trade, big data, infrastructure and talent – could add roughly $1-trillion (U.S.) to $2-trillion to U.S. gross domestic product by 2020.
Here's a summary of McKinsey's five "game changers":
Shale oil and gas production
The boom in shale production could add as much as $690-billion of annual GDP contribution and create as many as 1.7 million jobs by 2020, the authors estimated. Perhaps even more importantly, it could make the U.S. energy self-sufficient – "but only if it can successfully address the associated environmental risks."
Trade competitiveness in knowledge-intensive goods
"The United States is one of the few advanced economies running a trade deficit in knowledge-intensive industries," they wrote. "But changing factor costs, a rebound in demand, and currency shifts are creating an opening to increase U.S. production and exports of knowledge-intensive goods, such as automobiles, commercial airliners, medical devices and petrochemicals." They estimated that improved competitiveness in these areas could add up to $590-billion to annual GDP and up to 1.8 million jobs by 2020.
Big-data analytics as a productivity tool
Wider use of big-data analytics – the information contained in billions of worldwide electronic transactions, Internet activities, communications transmissions, etc. – by U.S. retail and manufacturing could deliver up to $325-billion in additional annual GDP by 2020. It could also save up to $285-billion a year in the cost of health care and government services. "Advances in computing and analytics can transform this sea of data into insights that create operational efficiencies."
Increased investment in infrastructure
"The United States must increase its annual infrastructure investment by one percentage point of GDP to erase this competitive disadvantage," the authors wrote. "By 2020, that could create up to 1.8 million jobs and boost annual GDP by up to $320-billion. The impact could grow to $600-billion annually by 2030 if the selection, delivery and operation of infrastructure investments improve."
A more effective U.S. system of talent development
This element of the report's recommendations is all about restoring the U.S.'s historical competitive advantage in education – something the authors argue could deliver up to $265-billion in additional annual GDP by 2020, with much bigger dividends of as much as $1.7-trillion annually by 2030. "At the postsecondary level, expanding industry-specific training and increasing the number of graduates in the fields of science, technology, engineering, and math could build a more competitive workforce," they said.