It's been five years since the height of the Great Recession, yet America, in many ways, is still trying to regain its footing. Americans are searching for a vision to rise above what has become a divided and dysfunctional government that doesn't seem capable of addressing our challenges and giving us confidence in our future. All is not lost.
Our past is replete with examples of leaders who articulated a bigger vision that moved us forward. JFK did it when he challenged the country to send a man to the moon in a decade. Reagan did it when he challenged Gorbachev at the Brandenburg Gate. In both instances, these men injected the country with confidence to reach a goal.
The most recent leader to articulate a vision is not in the U.S., but rather in Japan, our strongest ally in the Pacific. Prime Minister Shinzo Abe, who won a ringing parliamentary majority this weekend, is reversing more than a decade of deflation and decline in his country by abandoning that country's incremental approach and instead calling for a strong dose of new fiscal and monetary policies.
Maintaining our position as the globe's largest and most dynamic economy requires the same sort of go-big approach.
Balancing the budget or reducing student loan interest rates are important policies but they will do little to galvanize public opinion in a meaningful way. We are confronted now -- as a country -- with an array of obstacles that can only be overcome if we address them together.
Although structural fissures have long been evident in the U.S. economy, America is now facing historic economic problems that far exceed any standard cyclical fluctuations. We have two million fewer jobs than we did when the Great Recession began five years ago. Labor-force participation -- which dropped from 67.3 percent in 2000 to 63.4 percent in May 2013 -- is at a 34-year low. Anemic investment, seismic demographic shifts, and a near-halt in productivity growth are like water in the fuel tank of our once-mighty engine of economic growth.
The old economy is gone. So, if we aren't content to simply manage our decline -- passively watching as we fall further and farther behind our international competitors, and our standard of living continues to regress -- and I sure hope we are not, then our political class should embrace a "new economy," one that features deep structural changes to accommodate our need to rely further upon innovation and higher value goods and services. And, we should demand they lead us there.
The McKinsey Global Institute (MGI), the business and economics research division of McKinsey & Company, has just released a study -- Game Changers: Five Opportunities for U.S. Growth and Renewal -- that offers a smart and detailed plan for achieving sustained growth -- a blueprint, if you will, for "that vision thing."
Any politician willing to reject the petty, narrow focus so dominant in Washington these days could swiftly demonstrate seriousness and the courage to "go big" simply by adopting these five pillars upon which a new American economy could grow and prosper:
1) Embrace an energy plan that continues to aggressively utilize shale and natural gas production. Thanks to technological advances in horizontal drilling and hydraulic fracturing, the production of domestic shale gas and oil has grown 51 percent annually since 2007. The result has been lower prices, more jobs, higher wages -- and often for those who lack a college degree -- economic growth not only for the oil and gas industry, but also for the businesses that rely upon it, and, renewed investment in geographic regions of America that haven't had any in a long time. McKinsey estimates that natural gas development could add as much as $690 billion a year to our GDP, create as many as 1.7 million jobs across the economy by 2020, and potentially reduce net energy imports to zero.
2) Augment trade competitiveness in "knowledge-intensive goods," like cars, commercial airliners, medical devises, electronics, chemicals, and pharmaceuticals. Despite having once been the undisputed world leader in technological innovation and scientific research, the U.S. is now "one of the only advanced economies in the world that runs a trade deficit" in this sector. Our political leaders need to commit to ensuring that America is once again the "best place to do business." Reinvigorated streams of Foreign Direct Investment (FDI) will follow, and, McKinsey estimates, so will $590 billion in annual GDP growth and 1.8 million new jobs by 2020.
3) Utilize "big-data analytics" as a productivity tool. We now live in an overwhelmingly "wired" world where every commercial transaction, medical procedure, legal encounter, Internet journey, and social media interaction generates an enormous, and permanent, data record. And, of course, we have cameras, sensors, bar codes, microchips and transmitters embedded within the entire fabric of our life-scenery. Major advances in computing and analytics can "transform this sea of data into insights that create operational efficiencies," says, McKinsey. They will also result in an increase in annual GDP by up to $325 billion and "save as much as $285 billion in the cost of health care and government services" by 2020.
We've seen how the Internet has transformed our economy over the past couple of decades. This is large part because of the light regulatory touch that the Clinton Administration had during the Internet's formative years that unleashed private investment and innovation. That's something we need to continue -- just last week, the Progressive Policy Institute released a paper that outlined the importance of making sure regulation doesn't get in the way of progress on the Internet to make sure we get everyone connected and maximize the Internet's societal benefits in areas like health care, education and sustainability.
4) Investing In Infrastructure Now Will Pay Future Dividends for Decades. This was a common refrain during the last election, but has achieved very little attention since. The backlog of maintenance and upgrades for America's roads, highways, bridges, transit and water systems is "reaching critical levels." McKinsey estimates we must increase our annual infrastructure investment by one percentage point of GDP to "erase this competitive disadvantage." By 2020, that could mean more than 1.8 million jobs, and a boost to annual GDP by up to $320 billion. That impact could grow to "$600 billion annually by 2030 if the selection, delivery, and operation of infrastructure investments improve."
5) Commit to developing more home-grown talent. We can no longer accept the decades-decline of our educational system, and the loss of our skill advantages. We should expand "industry-specific training," and produce more graduates in science, technology, engineering, and math to create a more competitive workforce. These measures, and others devoted to enhancing the K-12 experience, could raise GDP by as much as $265 billion by 2020 -- and "achieve a dramatic 'liftoff' effect by 2030," with an addition $1.7 trillion added to annual GDP.
McKinsey concludes that by 2030, the "economic impact of these five game changers could approach $2 trillion," and that immediate, as well as longer-term positive economic impact will result. This plan can get us going now, and increase our competitiveness and productivity "well beyond 2020."
Famed Notre Dame President Fr. Theodore Hesberg once said that when it comes to leadership and vision, "You can't blow an uncertain trumpet." We face a pivotal moment and the American people are ready to respond to a clarion call from our elected officials marshal resources in the new economy. The question now is are our leaders ready?
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