Want to stop the slide in U.S. dominance? Make more Americans.
There's been a lot of hand-wringing of late regarding the imminent demise of America's global economic dominance as China's gross domectic product (GDP) outstrips that of the United States. Those concerns are overwrought -- aggregate output and average quality of life in a country are two very different things. But if you really want to preserve America's top spot in the GDP rankings, there's only one way to do it. You've got to make more Americans.
Depending on whom you ask and how you measure, the United States either already has a smaller economy than China, will have a smaller economy than China in the next few years, or will fall behind sometime in the next half-century. What seems widely agreed upon is that American economic dominance will end.
It would be nice to imagine keeping the top spot through rapid income growth. But according to the World Bank, average U.S. income growth for the last two decades was just 1.5 percent. Even in the high-rolling period between 1992 and 2000, U.S. GDP per capita grew by a little under 2.7 percent a year. Over the last two decades, China's income per capita grew at an average rate of 9.3 percent. That rate may well fall in the future -- indeed, economic theory and the scary state of the country's banks suggest it will. But it could fall by half and still outpace U.S. long-term performance by over 3 percentage points a year.
Does that mean it's all over for U.S. economic dominance? Probably. But at least Americans can delay the inevitable. If the United States can't keep up its output lead by more rapid growth of GDP per capita, then perhaps it should just find some more capita. After all, if you double the population while keeping incomes constant, you've doubled the size of GDP. And rough measures suggest that a lot of people would be willing to help -- approximately 145 million adults worldwide are keen to move to the United States, according to Gallup's global polling.
In fact, the strategy of bringing more people into the United States is already playing an important role in staving off the end of American global dominance. The United Nations predicts that China's population will rise from 1.27 billion in 2000 to nearly 1.4 billion by 2050. Meanwhile, the U.S. population is projected to grow from 285 million to 409 million -- a far more rapid growth rate. America's population will climb from 22 percent of China's to 29 percent over the half-century. And about four-fifths of that U.S. population growth will be due to new immigrants and their descendents.
The World Bank suggests that China's GDP per capita at market exchange rates was about $4,400 in 2010, compared with $47,200 in the United States. Assume, for the sake of argument, that U.S. income per head grows at 2 percent annually over the next 40 years, while China's per capita growth is 5 percent. Given demographic trends, by 2050, China's economic output at market rates will be about the same size as the America's, at around $43 trillion. But if there were none of the migration that demography experts predict over the next 40 years, the United States would have an economy only three-quarters as big as China's by midcentury. On the other hand, imagine the U.S. population grew just a bit faster -- to, say, 450 million by 2050. The country would then remain the world's economic superpower in terms of what it could buy globally, with a market income more than $3 trillion larger than China's.
Meanwhile, migration might also help close a little of the per capita GDP growth gap with China as well. A recent paper in the journal Economics Letters suggests that a 10 percent rise in a country's migrant stock increases that country's per capita income by 2.2 percent. A separate OECD study on a set of rich countries suggests the same result. Take the U.S. experience with Indian immigration as an example of the potential returns: Indian immigrants accounted for 26 percent of Silicon Valley start-ups between 1995 and 2005. More broadly, in a quarter of the U.S. science and technology companies founded from 1995 to 2005, the chief executive or lead technology specialist was foreign-born. In 2005, these companies generated $52 billion in revenue and employed 450,000 workers.
But increasing migration has other benefits for native-born Americans beyond extending the psychological comfort of holding onto the status of world's most powerful economy. Not only is there evidence against the theory that immigrants take jobs from the native-born, but they also do jobs that there won't be native-born people around to handle. As the average age of Americans climbs over the next 20 years, the U.S. Census Bureau suggests that the number of people age 65 or over will climb from 22 percent to 35 percent of the working-age population. Add in kids, and that means every 100 people of working age will be supporting 83 people above or below working age by 2030. Want to keep the cost of greens fees down for all those retirees? Import some gardeners from poorer countries. The lower cost of services provided by immigrants will also help shrink the gap with China when it comes to economic strength measured in purchasing power parity (when you adjust income measures for the different cost of goods and services across countries).
If more labor is the secret to continued American global economic dominance, there is one course other than importing it -- expanding domestic production. Paying people to get pregnant can work. But, frankly, this is a case where there is a huge advantage to outsourcing. Domestic production is very high-cost. The average expenditure to raise a child to age 18 in the United States is $227,000, according to the U.S. Agriculture Department. That's the same cost as raising 34 kids living on a dollar a day to their 18th birthday in the developing world. Furthermore, importing people rather than Americans making them themselves means that there are fewer of them left in other countries. All else being equal, that means aggregate output in other countries grows more slowly (not only directly, but because migrant remittances are associated with declining birth rates). In turn, that extends America's run of global economic dominance.
If population is power, China shot itself in the foot with its one-child policy. If it had twice the population but the same income it has now, there would be little question of the country's economic dominance. This makes you wonder whether perhaps the U.S. foreign-policy establishment hadn't already figured out all this years ago. U.S. Defense Secretary Robert McNamara, for example, went straight from the Pentagon to the World Bank, where he was a powerful proponent of family planning. His work at the development organization may have done more to preserve America's relative global strength than all the military buildup he orchestrated at the Defense Department.
And that means all those national security hawks who want to build a fence across America's southern border have it exactly backward. Preserving America's preeminence takes opening the gates wide. It's the only way to ensure that, in 2050, Americans can still proclaim: "We're No. 1!" Or, if the strategy is working really well, "Somos el número uno!"
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