China, India and U S ECONOMIC DOMINANCE

Were neither economic forecasters nor political prognosticators by trade. But you dont need to be either to see that, right now, the United States certainly holds a robust lead In the race for hegemony. Our economy is about five times as large as Chinas and nearly 15 times larger than Indias, yet we have about a quarter of the population or either of those nations. That can only give the United States a real advantage In providing education, health care and national security plus all the other stuff that makes a country thrive. But right now doesnt mean forever. All you need is a ruler to draw the straight-line extrapolation that shows China and India, with their faster growth rates, will eventually catch up to the United States In terms of pure economic size. For China, that would occur as early as 2045, and for India, the date would be some 20 years later. Which is why you so often hear experts predicting that by mid-century, the United States will be trailing the two new world superpowers. Wed say, not so fast. Straight-line calculations about the United States, China and India are just that. They assume that all three countries will enjoy smooth upward rides: no recessions, no banking breakdowns, no political crises, no disruptive social uprisings. Unlikely? For sure! With Chinas massive experiment combining communism and capitalism, Indias entrenched bureaucracy and corruption, and Americas long-term entitlement obligations, it is far more probable that growth trajectories will zig and zag more than zoom. Further, straight-line calculations do not take into account relationships with other parts of the world, like the Middle East, where tie ups and friendships with one country or another could very well change over the next few decades. Given that reality, then, what broad-brush scenario would you bet on for the next 50 years? Would it be Amencas 3 percent annual growth or China and India at 8 percent? Wed take America for a simple yet incontrovertible reason. Its system -- the sum of all its parts -- works. And when it breaks, it bounces back fast. Now, dont worry; were not going to start singing the Star Spangled Banner. We just believe U.S. economic dominance Isnt a function of how

long it has been leading the pack. Its about how America operates as a country. Were talking, mainly, about freedom and stability. U.S. political parties disagree, often vehemently, hut the government never stops running. Generally speaking, the U.S. justice system is fair. Health care, while inconsistent in delivery, is widely available. And even though secondary education in America gets roundly knocked, we have without doubt the best system of higher education in the world, turning out the worlds most skilled, innovative science and engineering Ph.D.s. The United States has a final competitive advantage that is as powerful as It is unique: its confluence of bright, hungry entrepreneurs and flush, eager investors. Yes, China and India have ambitious people who dream of building their own companies, and, Increasingly, more are getting the chance. (The U.S. venture firm Kleiner Perkins Caufield & Byers, for instance, just opened offices in Shanghai and Beijing.) But neither China nor India comes close to the United States In terms of this killer app, and it will take years of venture capital flowing In before the Chinese finally let go of their rote approach to work and embrace innovation with true entrepreneurial spirit. China has other challenges as well. Aside from its risky social experiment, it has an economy in which less than a quarter of its people truly participate. Its one-child policy is exacerbating the problem of its rapidly aging population. India, meanwhile, will continue to struggle with its overwhelming number of have-nots and its aforementioned corruption problem. True, India Is a democracy. But a democracy muddied by a profusion of divergent political parties. Now, were not saying the American system is perfect or its economy invulnerable. If you get out your ruler and straight-line extrapolate again, you see a budget deficit that explodes over the next 20 years. How the United States handles that problem with a combination of tax and spending policies will determine the strength of its growth engine. Fortunately, Americas stable, highly adaptable system has conquered enough major problems -- from the Depression to the Cold War -- in the past that there is more reason for optimism than despair. In the end. Wed make the case that American economic leadership will be with us for most, if not all, of the century. It will no means rule, as it did at the turn of the century.

But It will remain ahead until other nations develop a total economic and social system that works as well. Theres a lot more to t worlds economic future than a straight-hr extrapolation can tell you.