Prediction time: who's going the be better off in 10 years time?

[Winner]

Both sides of the Atlantic seem to be in turmoil right now. America suffers of extreme political polarization, a dysfunctional political system, stalling economy, crumbling infrastructure, and a growing mountain of debt. Europe faces a crisis of confidence, an unproductive southern wing that's being overwhelmed by debt, disunity and disagreement on how to reform the Eurozone, ageing population and rising costs of the social-market economic model Europeans take for granted, as well as a new wave of radical euroscepticism that threatens to undo decades of European integration.

In your qualified opinion, who do you think will have better dealt with their problems in 10 years time? Will America return to fast growth, efficient government, and consensual politics? Will Europe restore confidence in its single currency, reform its southern wing, and usher a brave new era of the European project? Will both succeed or both fail? What do you think is the most likely scenario and why?

Note1: I am not asking for the rest of the world. Do not bring it up, it doesn't exist as far as this thread is concerned.
Note2: What I mean by America is the United States; by Europe I mean the EU plus non-EU states which have full access to the single market (Switzerland, Norway, Iceland).
Note3: I am posting this in the Chamber because I expect intelligent responses. Please do not disappoint.

 

[Terxpahseyton]

America, primarily for demographics. More young people means growth, growth means prospect of capital returns, prospect of capital returns means investing in the "real" economy, such investing means growth etcetera.
Secondary for the overall better potential of the American economy as compared to the overall European economy. It is more richer/better developed.
At last, America also will continue to have the asset of its abundance of useful land.

That doesn't necessarily mean though that it will be the better place to live.

 

[Kyriakos]

I wish i could be optimistic. However the numbers seem to deter that.

Remember that when the debt crisis started to be an issue, Greece's debt was at 120% of the GNP. After the great "help" it rose in a couple of years to 170%. Now it is being said that the goal is to return the debt to 120%. See a problem there?

Also, the whole euro deal in regards to supposedly helping the countries now in problem was a farse, or utterly failed (take your pick). This shows one of two things. Either the Euro mechanism (and by extention the troika) are incapable of doing any good due to their own severe lacking. Or it was not the intention to help.
Obviously the latter is termed a "conspiracy theory". I do not like conspiracy theories, but do you honestly think the people in charge are so moronic that they made a double mess of the original situation?

Also another thing this crisis has shown is that there is little positive emotions by some countries towards others in the Eurozone, the heart of the EU.

As for America: i read that any debt above 100% GNP is not sustainable. So it spells massive issues there too.

 

[Winner]

America, primarily for demographics. More young people means growth, growth means prospect of capital returns, prospect of capital returns means investing in the "real" economy, such investing means growth etcetera.

... provided that you can put them to work. Which is what makes this crisis so difficult for America. Its population keeps growing, but job creation barely keeps up with it. Of course the fact that the US education system is underperforming doesn't help matters as the US has traditionally derived its advantage from having the best educated workforce.

Secondary for the overall better potential of the American economy as compared to the overall European economy. It is more richer/better developed.

In what way?

At last, America also will continue to have the asset of its abundance of useful land.

I thought we've dropped this whole "lebensraum" idea a long time ago.

 

[Terxpahseyton]

... provided that you can put them to work. Which is what makes this crisis so difficult for America. It's population keeps growing, but job creation barely keeps up with it. Of course the fact that the US education system is underperforming doesn't help matters as the US traditionally derived its advantage from having the best educated workforce.

I am skeptical that America really has an inherent and special problem with job creation in comparison to Europe. On what do you base this?

In what way?

Well start with GDP as an indicator. I have no explicit ways to offer (and I think it would be hard to offer such without hurting the correctness of an overall impression for the complexity of modern economies). Rather just an overall impression.

I thought we've dropped this whole "lebensraum" idea a long time ago.

We certainly didn't drop the "natural resources" idea. That is what "lebensraum" entails. And in America's case, it overall is a quit decent lebensraum.

 

[kronic]

The next 10 years are going to be brutal for both economic zones. I think America will do a little bit better, at least when headline figures are concerned. Politically, American decline will be worse, mostly because the US starts from a much higher level.

 

[strijder20]

I think Europe will be slightly worse off relatively. We've, as you've already pointed out, a gigantic aging problem coming our way thanks to the baby boomers retiring. Raising retirement age may solve it partially though.

But I think America will disappoint more. From what I've seen, many people think America's future is optimistic. I don't think it's going to hold it's top dog position for much longer (which makes sense too historically).

 

[Winner]

I am skeptical that America really has an inherent and special problem with job creation in comparison to Europe. On what do you base this?

It's what the data shows - the US economy keeps creating new jobs, but it's not enough to absorb the population increase. That's why unemployment remains uncharacteristically (for the US) high.

Young people's unemployment is of course a problem in Europe as well, but since our population is in general growing much slower, we are not in this endless race to create lots of new jobs.

We certainly didn't drop the "natural resources" idea. That is what "lebensraum" entails. And in America's case, it overall is a quit decent lebensraum.

I just don't see it as something decisive. I could well counter that Europe can get its natural resources from Russia, where mining is cheaper due to a low-wage environment. And Russia is far bigger than the US.

 

[ParkCungHee]

You know, if America is really going to face a huge younger generation that finds employment difficult, and Europe is going to face an older population that needs the support of a well-trained workforce, anyone else seeing transatlantic migration trends reversed?

 

[GoodSarmatian]

I don't think population works in America's favor. Without a strong economy and a good public education system more people will just mean more unemployed. If the current trend towards lower taxes and spending holds on the standard of living in the US will decline and there won't be a middle class to speak of.

You know, if America is really going to face a huge younger generation that finds employment difficult, and Europe is going to face an older population that needs the support of a well-trained workforce, anyone else seeing transatlantic migration trends reversed?

That would actually be disastrous for the USA. Immigration into the EU is very difficult. Should there ever be large scale migration from America to Europe it will mean significant brain drain.

 

[Cato the Elder]

You know, if America is really going to face a huge younger generation that finds employment difficult, and Europe is going to face an older population that needs the support of a well-trained workforce, anyone else seeing transatlantic migration trends reversed?

The ironic thing is that young Europeans are having as much or more difficulty finding jobs themselves. The entire economical system of Europe is entrenched and rusting, and I would be sincerely surprised if we had universal underemployment in 10-20 years' time.

I voted both will get screwed over more, both economically and politically. I get the impression that Europe's economical problems are bigger than its political, while in America I get the opposite feeling, but in all cases both parts of the world will be hit hard. This entire adventure is far from over, and to be honest I'm getting more pessimistic each day.

 

[Winner]

That would actually be disastrous for the USA. Immigration into the EU is very difficult. Should there ever be large scale migration from America to Europe it will mean significant brain drain.

Is it? EU is getting huge numbers of immigrants, like America. It is just much harder to get a citizenship here and more difficult to get here (Mediterranean is a pretty deep water moat). However, I doubt it's that hard for people from "civilized" countries to immigrate.

But you are of course correct, if there ever was a huge migration wave from the US to Europe, it would only happen because the US was in a huge trouble.

 

[GoodSarmatian]

Is it? EU is getting huge numbers of immigrants, like America. It is just much harder to get a citizenship here and more difficult to get here (Mediterranean is a pretty deep water moat). However, I doubt it's that hard for people from "civilized" countries to immigrate.

But you are of course correct, if there ever was a huge migration wave from the US to Europe, it would only happen because the US was in a huge trouble.

It might not be that hard to get into Europe if you are a trained professional with a college degree and/or a lot of work experience who already has a job offer inside the EU (or if you're an asylum seker). A US citizen who's unemployed and can't get a job in America won't be able to get anything more than a travel visa.

 

[NickyJ]

downtown America will be quite prosperous in ten years.

 

[Joecoolyo]

Extrapolating current trends during the recovery from a recession isn't going to get you anywhere. Once the recession is over (and yes, it will end, recessions don't last forever), you're going to see both sides bounce back.

But, I'm going with America being better off, because unless European's someone manage to unify themselves in this period of time, America will always have the upper hand in terms of economic strength and ability to do stuff.

 

[Monsterzuma]

almost all relevant indications I have access to make the US look more favorable.

I have to point out that demographics are a bit of a false scare story, though:

The Return of the Demographic Crisis

http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/the-return-of-the-demographic-crisis

Suppose that we do get to a point where economies are again at full employment, it’s still difficult to see why a shortage of workers will pose a serious problem. The 130 million jobs in the U.S. economy carry varying degrees of importance. Some, like nurses, teachers and firefighters, are very important to the economy and society. Others, like the midnight shift at a convenience store are considerably less important.

If we get to a situation in which labor is in high demand then the wages of nurses, teachers, and firefighters will rise relative to the wages of people working the midnight shift at convenience stores. The result will be that convenience stores may not be able to find workers for the midnight shift and therefore may have to close down from midnight until 5:00 a.m.

There are in fact tens of millions of jobs like the midnight shift in the convenience store. If we get a tight labor market then we might see hotels that only clean guest rooms every other day. We may see more cafeterias and less sit-down restaurants. Fewer clerks would be available to provide service in department stores. Cabs will become harder to find in major cities. Fewer hotels and restaurants would offer valet parking. Are you scared yet?

This is what happens as an economy grows. Workers move from less-productive jobs to more-productive jobs. This is the reason that we have relatively few people employed in agriculture. Workers are more productive in manufacturing or the service sector, so they left the agricultural sector.

As workers’ productivity increases they can easily support a large population of retirees. Fifty years ago there were five workers for every retiree, today the ratio is less than three to one. Yet on average we enjoy far higher living standards today than we did 50 years ago. This is due to the fact that productivity is more than 2.5 times as high as was 50 years ago. This is likely to be the same story going forward.

 

[downtown]

Yeah, I've been kicking the tires of moving to the EU myself actually, and even as an educated, skilled immigrant, I've been told it'll basically be impossible unless I can find a huge company to sponsor me.

I think this is an interesting question...I think things look a little better for the US, but not by a whole lot. In my view, the US's biggest problem is a dysfunctional political system, caused in part by an inability to get anything done. By 2014 at the latest, I don't think this will be an issue. One way or another, one party is going to control the presidency, and both houses. If the Republicans control all of them (most likely), those policies may suck, but at least we'll have them.

The US doesn't have significant questions about sovereignty. Our currency is stable. Our educational system, which gets poopooed, is really not substantially worse than a lot of other countries, and our universities are far better. I think that problems in Europe will obviously hurt things in the states, but our bigger problems are more likely to be corrected in the short term.

 

[emzie]

Immigration into the EU is very difficult. Should there ever be large scale migration from America to Europe it will mean significant brain drain.

There's always ways in based on jus sanguinis principals of many European countries. I imagine there's a lot of Americans of partial Italian decent that could claim Italian citizenship. And when you have that, the EU is open. Hell, I have a UK passport for no other reason than my mother was born in England and moved to the US at 6 months old.

Further, as downtown relates, even if you can't slip in through your ancestry, you can get in based on your skill set. If older Europeans are retiring in droves, then companies will start headhunting at American universities. That's more or less a mirror of how my mom ended up the US in the first place -- DuPont recruited my granddad.

 

[luiz]

Winner, the unemployment problem is actually considerably worse in much of the EU than in the US. Also, the less flexible labor market makes it harder for employment to pick up even after the crisis is over (think France or Spain, two major EU countries).

While both sides of the Atlantic will probably have a rough decade, as Monsterzuma said pretty much all relevant indicators point to the US in a more favorable light. GDP is expected to grow faster, unemployment to fall faster and there is no demographic problem. Not only that, but the US also has far more natural resources and stands to profit as commodities keep getting more expensive, while (most of) Europe only stands to lose. The US is right now experiencing a natural gas boom, and the US alone has 62% of the world's reserves of oil shale.

Politically, with all its flaws, the US is also more stable than the EU. Nobody talks of an American state leaving the dollar. No American state is facing a bank run.

I'd be curious to hear good arguments of why the EU could outperform the US in the coming decade, I honestly can't think of any.

For what it's worth (not much), here's the IMF's prediction:

 

[luiz]

It should be noted though that as kronic said, the sentiment of "perceived decadence" will be stronger in the US in the next 10 years, because it will lose its spot as the number one economy and will have less and less power relative to the rest of the world. Europe has already come to terms with its secondary position.