America-The Superpower

Fareed Zakaria’s book ‘The Post-American World’ has a chapter on ‘American Power’. It is interesting to know about some statistics about the power of America. It may serve a roadmap for the other prospective emerging economies to firm up its road map to reach the so-craved super power status.

The US economy has been the world’s largest since the middle of 1880s, and it remains so today.

The US has accounted for roughly a quarter of world output for over a century (32% in 1913, 26% in 1960, 22% in 1980, 27%in 2000, and 26% in 2007), while in the late 1940s and 1950s, America’s share rose to 50%.

The American military spends more than the next fourteen countries put together, accounting for almost 50 % of global defense spending.

The US spends more on defense research and development than the rest of the world put together.

GDP growth, the bottom line, has averaged over 3% for 25 years, significantly higher than Europe (Japan averaged 2.3%).

Productivity growth, the elixir of modern economics, has been over 2.5% for a decade now, again a full percentage point more than the European average.

The US is currently ranked as the most competitive economy in the world by the World Economic Forum and has remained constant since 1979, the year the ranking started.

The US has issued more patents for nano-technology than the rest of the world combined, highlighting America’s unusual strength in turning abstract theory into practical products. A full 85% of the venture capital investments in nano-technology went to US companies.

In biotechnology, American companies performed similarly and excelled at turning ideas into marketable and lucrative products. US biotech revenues approached $50 billion in 2005, five times greater than those in Europe and representing 76% of global revenues.

Even in manufacturing, for many branded products, USA gets the maximum share of the price that the consumers pay, though some of the activities including the actual manufacturing might have been outside the country. For instance, iPod is manufactured mostly outside the US, but Apple, Inc. in California captures the majority of value-added. Apple made $80 in gross profit on a 30-gigabyte video iPod retailed for $299 in late 2007. Its gross profit was 36% of the estimated wholesale price of $224. The total cost of parts was $144, and Chinese manufacturers, by contrast have margins of a few percent on their products.

Higher education is America’s best industry. With 5% of the world’s population, the US absolutely dominates higher education having about half or more of the world’s top fifty universities. US invests 2.5% of its GDP in higher education that is more than Europe (1.2%) and Japan (1.1%). A list of where the world’s 1,000 best computer scientists were educated shows that the top ten schools are all American. US spending on R&D remains higher than Europe’s, and its collaborations between business and educational institutions are unmatched anywhere in the world. For instance, in India, universities graduate between 35 and 50 Ph.D.’s in computer science each year; in America, the figure is 1,000.

Chinese are racing fast to go ahead of US. It is to be seen how soon China does it. Many Indians as well as India sympathizers do also consider India to be on the road of becoming a superpower.

However, India will have to transform or upgrade the standard of its politicians who decide the destiny of the country. It will be difficult to be a super power with disruptive politics such as one observed recently against setting up of the Nano project in Singur. Even petty politicians and activists are holding up many huge projects that could have brought prosperity in many regions of the most backward states such as Orissa and Jharkhand. The protest and agitation in name of democratic rights are proving to be test of perseverance for many entrepreneurs. India will have to establish hundreds and thousands of manufacturing units for creating employment.

India has another route of knowledge sector to excel globally. And every day, I see a ray of hope when I read news of one or the other company from developed countries opening an R&D center in India in my Google alert. The increasing number of institutes of higher professional education is also the inspiring feature of the country’s economic strength. However, India is to sustain the growth. The recent turmoil in financial market and prospect of slowdown raise doubt about the sustainability.

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