April 22nd, 2012
09:58 AM ET

Sharma: Three things America has going for it

Sunday on GPS, I interviewed Ruchir Sharma, author of the terrific new book Breakout Nations: In Pursuit of the Next Economic Miracles.  The following is a web-extra portion of our interview where Sharma lays out three reasons he's still confident in America's growth. Here's the transcript:

Fareed Zakaria: You don't deal with America, but you're also saying that in this new landscape, you're pretty comfortable with the United States?

Ruchir Sharma: Yes. I think that the U.S., as I talk about here, has three things going for it.

One, I think, is the exchange rate, that a dollar today, when adjusted for all inflation against its trade-weighted partners, is the most competitive that it's ever been in history.

Fareed Zakaria: Which means American manufacturers and exporters have a huge advantage, because their goods will be cheaper?

Ruchir Sharma: Yes. It's very cheap. We are seeing some signs of a manufacturing renaissance where jobs are coming back to America. It's a slow process. It's slow healing. It takes a while. But that's happening. So that's one very positive factor.

Two is that the wage growth differential is closing, if it hasn't closed. Americans' wages are much higher, but it's closing.

Fareed Zakaria: Because the Chinese wages are going up. Indian wages are going up. Brazilian wages are going up?

Ruchir Sharma: Yes. So if Chinese wages are compounding at 15 percent a year and American wages are - are total cost of compounding at a measly, you know, 2, 3, 4 percent, you know, that obviously leads to a lot of sort of tension at home.

But eventually, there's an equilibrium process which works. The jobs start coming back and that sort of pushes it up.

And the third factor, I think, is technology. And this is where I find that emerging markets and why many emerging markets remain only emerging, which is that the lead that America has in technology is just getting bigger and even more significant, because the world of technology has moved much more toward software and that's where America's competitive advantage lies. And even today, America spends more than one third of global R&D. It is in America.

So America makes like all the big innovative products. And the factories are in Asia, which obviously sort of leads to this distortion as far as the jobs picture is concerned. But it's something which is really a competitive point about America.

I think these three factors and technology is also helping the oil industry, as well, the whole energy complex, in terms of what's happening there in shale gas and other sort of oil resources.

So this is a big change which I think is going on.

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Topics: Economy • Global • United States

soundoff (44 Responses)
  1. Rz

    Should we be expected any of these miracles to actually occur in our life time ?

    April 22, 2012 at 10:18 am | Reply
    • gleong

      want to see the change in your lifetime, then change yourself for the change u want to see.
      lets be energy savvy, productively hardworking, engage minimal wage, plant your own food, save a dime for every dime u spend, then u will see the chage in your lifetime.

      April 23, 2012 at 9:54 pm | Reply
  2. Marv

    Sullivan as most gays do, make themselves victims. The american Indian has been the victims of discriminatory practices since 1492 (seperating man and women, spouses is just one of those). We accept gays as people but with the preference of them having rights over everyone else, real minorities seeing thier prefential treatment are frustrated with the double standards..

    April 22, 2012 at 11:00 am | Reply
  3. j. von hettlingen

    Indeed the U.S. is still leading in technology and possesses a big portion of innovative dynamics – the trump card to economic growth.

    April 22, 2012 at 11:07 am | Reply
    • ✠ RZ ✠

      Yep, and (1) it's dollar is still the standard for world currencies, (2) it's still has the worlds largest economy, (3) it's the world's biggest gas guzzler, (4) it's military spending is second to none, and (5) it's federal debt is about $16 trillion.
      Let's see where things are at in next 4 to 5 years.

      April 22, 2012 at 11:27 am | Reply
    • TellItLikeItIs

      USA Economy –
      [1] Unfunded liabilities are $120 Trillion
      [2] All Federal revenue from both Income ans SS taxes is less than $2.4 Trillion a year
      [$120 T / $2.4 T = 50x. That means that to get back to even every US tax payer would have to pay 50 YEARS taxes
      TODAY !]
      [3] USA has 100% bebt to GDP ratio – and going up 10% per year with $1.2 T deficits [immediate problem]
      [4] 60% of Public debt matures in less than 3 years
      [5] That means astronomical money supply growth [printing money]
      [6] THAT means the coming loss of of the $US status as the world's reserve currency

      Funny how none of these "experts" understands this, eh?

      April 24, 2012 at 1:29 pm | Reply
  4. ERIK SAGER

    ON MEXICO. STOP BLAMEING MEXICOS PROBLEMS ON THE USA. THE USA IS 300 MILLION PEOPLE. CANADA IS ONLY 40 MILLION OF COURSE THEIR IS A HIGHER DEMAND FOR DRUGS IN THE USA THEN OTHER COUNTRIES. THE USA GIVES MORE MONY TO MEXICO THEN ANY OTHER COUNTY. LET MEXICO TAKE RESPONSABILY FOR ITS OWN PROBLEMS INSTEAD OF USING THE USA AS A SCAPEGOAT.

    April 22, 2012 at 11:09 am | Reply
  5. Michael D'Angelo

    Students "should study American History in particular, so they can plan the future," according to Woodrow Wilson, the young President of Princeton University in his 1902 inaugural address.

    Contemplate the opportunity to plan America's future at Life among the Ordinary, a site dedicated to the trials, tribulations and progress of ordinary people:

    http://lifeamongtheordinary.blogspot.com/2012/04/opportunity-to-plan-americas-future.html

    Tx.

    April 22, 2012 at 11:52 am | Reply
  6. Joseph McCarthy

    Here goes another right-wing fanatic belly-hooing "our great future". The reality is, is that America has already past it's heyday and unless our policies change and we somehow,break the stranglehold that the M.I.C. has on this government, our decline will only continue!

    April 22, 2012 at 2:24 pm | Reply
    • ✠ RZ ✠

      Yep. I guess you just have to admire this guy's optimism, but that's about the size of it.

      April 22, 2012 at 2:39 pm | Reply
    • catnapp

      May the odds be ever in your favor...

      April 23, 2012 at 8:15 pm | Reply
  7. JAL

    My mentality is pretty simple these days. It makes the most sense to me to conduct myself, as if I am in a prison yard: Head down, little engagement, and don’t expect help. Opposite of any of these things could land me in the hospital or a morgue.

    April 22, 2012 at 2:47 pm | Reply
    • ✠ RZ ✠

      Almost true Jal, the world is certainly not at the level we'd all like to see it, and there is too much fear, stress, and difficulty for many trying to just make ends meet (and we're just talking about places where human atrocities are not prevalent). But a little respect, courtesy and kindness will still usually go a long way.

      April 22, 2012 at 7:54 pm | Reply
      • live_long_and_prosper

        A little respect, courtesy and kindness will still usually go a long way – well that is a nice comment to see. Let's see if nations can deal with each other in this way. What is happening in Syria in terms of the ceasefire is a silver lining in a clouded world.

        Economic power is a goal that the world can pursue, but not military power. The two are linked, however, and I can't help feeling best friends would not deal with each other countries do. Maybe friendship between countries is the best thing.

        April 22, 2012 at 9:53 pm |
      • JAL

        I agree. However, I am still weary. Assertion is therapy for anxiety. Assertion can be enabled by kindness and respect.

        April 23, 2012 at 9:07 am |
  8. Rabbi

    #4....

    Its relationship to Israel.

    The only ally in the middle east.

    What stupid Americans seem not to understand, is that Jews are chosen people.

    We will reap the rewards of our faithful service to Yahweh.

    The goyim of this world should be happy to fight over the scraps that we Jews throw from table.

    Israel will reign supreme over earth, and anybody challenging that assertion will be conquered, with the help of US military.

    You people may not like us Jews, but you WILL learn to fear us.

    If a few of you must die to save a few of us....that's a bargain I can live with. Your own nations agree with me on this.

    Your sacrafices are necessary to ensure the survival of the only democracy in the middle east.

    April 23, 2012 at 1:08 am | Reply
    • ✠ RZ ✠

      Oh Lord, please forgive me and keep all Thy good people of this Earth which I always endeavor to be part of....but I cannot help thinking that this "Rabbi" is a DISGRACE TO HIS RACE. And if I be mistaken of this in any manner whatsoever that can be spoken, by Thine Own Hand may you strike me down at this very moment.

      April 23, 2012 at 10:34 am | Reply
    • TellItLikeItIs

      You are no more a Jew than I am Angelina Jolie! Muppet.

      April 24, 2012 at 1:20 pm | Reply
  9. .

    Zakaria is a European Socialist. He's full of crap.

    April 23, 2012 at 6:59 am | Reply
  10. Muin

    You know more about America than this guy. Former president clinton said that both democrats and republicans decided on their path after his fight with Gingrich. Republicans chose tax cut, deregulation and democrats chose investing in people and other stuff. In reality, democrats enabled republicans to deregulate banks and helped cut taxes to increase ineuality. What's frustrating is that there is still no substantial change of policy to reverse the damage done by last decade of policy. They would send ryan or find some other flavor of the month to push for same messed up policy.

    April 23, 2012 at 10:34 am | Reply
  11. Wastrel

    I guess I'm being censored because I disagree with Zakaria most of the time. Here are three things that aren't accidents of the current global economy: A federalist system with real limits on the national government, the right to bear arms, and separation of religion and state.

    April 23, 2012 at 11:40 am | Reply
  12. deep blue

    Huge trade advantage means that the dollar has lost its value, which may or not be a good thing. This is a bit of a positive spin on the beginnings of inflation.

    April 23, 2012 at 11:49 am | Reply
  13. Tim S

    Fareed,

    You repeated to dogma that EVERYONE says when you said govts need austerity program and retirement age needs to be increased. To your credit you did say investments are needed. How are people in their 70s supposed to get jobs when there is age discrimination against people in their 50s? What is someone in their 70s able to do? With the huge increases in productivty the retirement age should be decreasing. That would improve the unmeployment problem. If workers received the fruits of these productivty increases instead of it being siphoned off at the top retirement was possible at earlier ages. Instead of making workers work until they drop how about we take some of the wealth from the top 1% and redistribute it to those who earned it? It is good for the workers it will boost the economy so it will benefit the wealthy. It is good for everyone.

    April 23, 2012 at 12:10 pm | Reply
    • markodavid

      1%? I think about 35% would be just fine

      April 23, 2012 at 9:32 pm | Reply
  14. palintwit

    Coming soon... "The Palin Manifesto". Painstakingly hand written by Sarah Palin herself in the same authoritative literary style that we've seen on the palm of her hand. Outlines in great detail her vision for America. Order your copy now.

    April 23, 2012 at 2:02 pm | Reply
  15. The One Who Knows

    America has another thing going for it...me. But that goes without saying...obviously.

    April 23, 2012 at 2:05 pm | Reply
  16. Obama

    AMERICA'S THREE THINGS IT HAS GOING FOR THEM:

    White Women
    Crack Rocks
    Tyler Perry

    April 23, 2012 at 2:16 pm | Reply
  17. Thor

    Good to finally see some good news from a news source, i'll get on here more often, Sharma

    April 23, 2012 at 4:50 pm | Reply
  18. Obama Bin Badagin

    Don't forget those 5 million Jews.

    April 23, 2012 at 5:39 pm | Reply
  19. Jim USA

    Why are foreign people speaking of America. Can we interview some Americans regarding America please.

    April 23, 2012 at 7:26 pm | Reply
    • ✠ RZ ✠

      Yes Jim, someone like Paul Craig Roberts would do just fine by me. But the mainstream media won't touch it.

      April 24, 2012 at 1:09 am | Reply
  20. ✠ RZ ✠

    Yes, 3 things, going, going, going, gone! Sure hope there are less than 3 things against it !

    I will always agree with Bill Clinton that "There is nothing wrong with America, that cannot be cured by what is right with America". Except that the government cannot/will not agree to support what's right, and nor is there a leader anywhere who has enough guts to stand up and fight for what's right.

    April 23, 2012 at 7:54 pm | Reply
    • Patrick

      "Except that the government cannot/will not agree to support what's right."
      What do you mean?

      April 28, 2012 at 5:07 pm | Reply
  21. Zoglet

    Wooohoooo! Team Amerika Hell Yeah!

    April 23, 2012 at 8:13 pm | Reply
  22. matt a

    Europe will fall and the BRICs will catch the proverbial flu of long standing effect. Who do we export to?

    April 23, 2012 at 11:22 pm | Reply
  23. krm1007

    It's about time the Indians opened up their markets to American products. For starters, send them the american beef. US Commercial Grade. They could use some proteins.

    April 24, 2012 at 2:33 pm | Reply
  24. Rahul R

    Fantastic book – Breakout Nation. WHat a game changer with excellent analysis of what makes a breakout nation

    April 25, 2012 at 3:26 am | Reply
    • Sachin Bhargava

      agree fully – bought 10 copies and distributed to my team! must buy!

      April 25, 2012 at 3:27 am | Reply
      • Bhushan Sirohi

        brilliant idea Sachin – will do the same for my team as well. game changer.

        April 25, 2012 at 3:33 am |
  25. Jagdeep Sarna

    agree with the author of Breakout Nations on:
    So if Chinese wages are compounding at 15 percent a year and American wages are – are total cost of compounding at a measly, you know, 2, 3, 4 percent, you know, that obviously leads to a lot of sort of tension at home.

    I.m mid way on the book – beleive me havent read anything like this in a long time. this should be part of management schools curriculum.

    April 25, 2012 at 3:29 am | Reply
  26. Bhushan Sirohi

    this guy is one hell of the sharp fellow. have been reading his articles in ET for last 3 years – he has got it all right. in fact Hi,
    The billonaires index as mentioned in the book – has been explained so well. just totally out of words for such a great book.

    I agree with Jacky Sarna – this book should be made part of curriculum not just in the expected break out nations but in Ivy league universities – this is the future!

    April 25, 2012 at 3:32 am | Reply
  27. Pranav Mehra

    As Prannoy put it – Montek and other Indian Policy makers need to read this book and work on changing the Indian Scenario.

    http://www.ndtv.com/video/player/ndtv-special-ndtv-24×7/india-a-breakout-nation/230185

    April 25, 2012 at 3:35 am | Reply
  28. Make Money Online Information

    We are a bunch of volunteers and starting a brand new scheme in our community. Your site provided us with helpful information to work on. You have done a formidable job and our whole community shall be grateful to you.

    May 2, 2012 at 4:51 am | Reply

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