The 20th-century has been referred to as the “American Century”. At the end of the century, the United States (despite two world wars and the Great Depression) emerged as the world’s preeminent power, not only militarily but also economically. During the century, investors did quite well too. The 21st-century could be another period of significant opportunity for American business.
Despite the widely discussed and unsettling events that have marked the first few years of the 21st-century, including 9/11, two seemingly endless wars, and the possible collapse of the Euro Zone, American business has continued to prosper and the outlook for further growth remains positive. It is not by accident that the United States, with approximately 5% of the world’s population, accounts for some 25% of world GDP.
America benefits from an innovative and industrious population. We work harder, in terms of hours per week, than most other developed countries. Our innovations in medicine and technology are recognized and accepted throughout the world. If you are able to travel extensively, as I have had the good fortune to, the ubiquity of US brands becomes apparent. Nearly everywhere you go there are American fast food and beverage brands. The Ford blue oval and Chevy bow tie are common sights and it seems that everyone, everywhere is grafted to an iDevice.
Looking ahead, I believe that American business is well positioned to continue to prosper. Consider population. Many major modern and developing countries are seeing birth rates below the replacement level. The American fertility rate is nearly 2.1%, which, supplemented by immigration, suggests that the US population will continue to grow, providing increasing domestic market opportunities for a wide range of products and services.
Internationally, America’s competitive position continues to improve.
Labor costs are beginning to look attractive. Outsourcing is declining and some work that had been sent overseas is coming back as the total cost package of labor, transportation, quality, etc., make domestic manufacturing more attractive.
Energy cost and availability are also trending in the right direction. Recent developments in natural gas exploration and new oil finds and recovery techniques suggest that the United States could well be nearing a point of energy self-sufficiency, particularly if you include Canada and Mexico. A case can be made that the Western hemisphere is already energy self-sufficient.
The US dollar remains the currency of choice for a wide range of commercial activities and is considered one of the safest havens in a world full of financial insecurity.
Despite all of these positives, there is still room to mess up. Business needs certainty and reasonable regulation. Anyone that has ever played a sport understands the need for rules but also recognizes that the officials should not take over the game.
Thoughts and questions are welcome.
Walter J. Kirchberger, CFA