U.S. Sun Can Also Rise as Asia Surpasses Europe

Joel Kotkin is West Coast editor of Inc. magazine. Yoriko Kishimoto is a business consultant. They are co-authors of "The Third Century: America's Renaissance in the Asian Era" (Crown), due this summer.

In its third century, the United States confronts unprecedented questions concerning its character, role as a nation and ultimate destiny. Until this decade, Americans saw themselves as the vanguard of a European-based Western civilization that since the 1600s imposed its will on all other peoples of the world.

But today that confidence in Western superiority no longer fits reality. The Europe that once strode the planet like a colossus, controlling over 36% of world trade, now accounts for little more than 12%. Nor is the future bright, as Europe's population begins to age and even decline--West Germany is expected to have half as many people by the middle of the 21st Century. "Europe," notes French population expert Jean Francois Dumont, "is entering a demographic winter."

In addition to population factors, the economic power of Western Europe has declined throughout the 1980s. Outside of a revived Britain, European economic growth rates during this decade have lagged behind those in Asia and the United States. And despite massive targeting by government agencies, Europe's share of high-technology-based industries dropped nearly 13% between 1980 and 1984, while Japan and the United States increased their share by 22%.

To many, Europe's decline presages that of the United States. The Wall Street crash plus massive trade and budget deficits have also contributed to a widespread sense that the United States is a nation on the way down. This ignores the fact that the United States is in the process of a major historic transformation from a European to a multiracial--and particularly Asian-oriented--society.

The most obvious signs of this de-Europeanization can be seen in trade. In 1960, U.S. trade with Asia was less than half that with Europe; within 20 years the total Asia-bound volume surpassed trade with Europe. By 1986, the transpacific commerce of the United States reached $215 billion, exceeding by 50% all trade with Western Europe, and by 1995, according to the President's Commission on Industrial Competitiveness, the volume will be twice that with the Atlantic-facing world.

U.S. society is going through a similar process. Today Pacific Basin countries are the largest source of legal U.S. immigrants--Europeans account for barely one in 10 newcomers. Now facing the greatest wave of immigration since the turn of the century, the United States is an emerging "world nation" with ethnic ties to virtually every race and region.

For many, these changes threaten long cherished ideas about the nation's racial identity and its traditional political and cultural ties to Europe. Yet through the openness of its culture, its racial diversity and the entrepreneurial dynamism of its economy, the United States can assume a pivotal, even dominant, role in the emerging post-European international order.

To achieve success in this new milieu will require a severe re-evaluation of traditional ways of thinking. For the past decade, for instance, Americans have grown accustomed to viewing Asia as their "sweatshop" for manufacturing industrial and consumer products. In the process, however, American businessmen often ignored the tremendous market potential of Asian economies.

A recent survey of growth company executives, for example, found Britain was the preferred site for foreign expansion--twice as popular as Japan, the world's second richest capitalist marketplace and for more than 20 years the biggest buyer of U.S. goods after Canada. Companies showed a marked preference for France, Germany, Italy and other slow-growth European countries over China, Hong Kong, Korea and Taiwan, the most rapidly expanding economies and markets in the world.

Such decisions to concentrate on status quo markets may make sense in terms of cultural comfort or even short-range profits, but they mean almost certain obsolescence in the world now being born. While U.S. firms have retrenched, for instance, Japanese companies have aggressively developed markets in Asia's newly industrializing countries (NICs) as well as such future potential growth markets as India, Malaysia and Thailand.

A similar radical re-appraisal must be taken of the emerging non-European nature of the U.S. population. To a large portion of the nation, the emergence of large Hispanic and Asian populations represents a threat, in the words of former Colorado Gov. Richard Lamm, of "contamination" of the European-centered culture created by "us natives."

Despite such negative reactions, these new Americans should be seen as vital assets for the nation's adjustment to its post-European future. Immigrant skill and labor has played a crucial role in the economic revitalization of cities across the country, from Los Angeles to Miami. Half of Los Angeles factory jobs, for instance, are held by Hispanics while Asians hold major positions on high-tech assembly lines from Orange County to Dallas.

With their higher birthrates, immigrants are also the central factor distinguishing U.S. demography from that which is rapidly undermining growth prospects in Europe and Japan. These new Americans also represent an enormous internal growth market--a sort of domestic new frontier for local businesses. By the year 2000, for example, incomes of blacks, Asians and Hispanics should more than double, reaching $650 billion, greater than today's total gross domestic product for West Germany.

But perhaps the greatest contributions of new Americans will be in helping the United States meet and, indeed, overcome the challenge posed by the ascendant Asian economies. Like the European immigrants who lay the foundations of U.S. technology during the nation's first two centuries, immigrants--mostly Asians--are becoming the new source of U.S. scientific and technological power. By the late 1980s, for example, Asian countries accounted for eight of the 10 top nations sending students to U.S. universities, including more than 70% of all foreign doctoral students.

Although some have seen in these figures a self-defeating tendency to train our fiercest competitors, many students stay in the United States after graduation. Taiwan, for instance, has sent nearly 100,000 graduate students here only to see as many as four in five, including several eventual Nobel Prize winners, remain.

This emerging "world nation" could help U.S. business in its dealings with the ascendant regions of the world. Los Angeles' large Japanese-American population, for instance, helped lure the massive presence of Japanese corporations, banks and real estate development interests that have helped transform this city into a world center. Similarly, the more than one million Chinese-Americans have made the United States an attractive investment locale for the far-flung Chinese diaspora--most importantly from Taiwan, which, with over $60 billion in cash reserves, sits on the world's second largest pool of dollars.

Finally these new Americans provide the nation a bridge on which to travel toward a post-European future. Asian-Americans in the Pacific, Latinos in South America and Afro-Americans in Africa have proven to be among the most effective agents of U.S. business in the Pacific Basin and other developing areas.

These factors suggest that despite the notions of decline fashionable among much of the intellectual, political and business Establishment, America has within it the capabilities to adjust and even thrive in the new post-European world economy. The rise of Asia, or other parts of the nonwhite world, need not mean the setting of the American sun.

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