5 Growth and Renewal Opportunities
Four years after the official end of the Great Recession, economic recovery has been anemic culminating in the lowest labor participation rate in decades. But the U. S. does not have to resign itself to sluggish growth. Game changers: Five opportunities for U.S. growth and renewal, a new report from the McKinsey Global Institute (MGI), identifies specific catalysts that can add hundreds of billions of dollars to annual GDP and create millions of new jobs by 2020.
July 19 2013 by ChiefExecutive.net
The McKinsey report identifies five mutually reinforcing developments that authors Susan Lund, James Manyika, Scott Nyquist, and Mendonca say are poised to achieve scale immediately and could accelerate growth across multiple sectors by 2020. They also focus on areas with an immediate window for action. The following are excerpts from the McKinsey Global Institute (MGI) analysis.
- Shale-gas and -oil production. Powered by advances in horizontal drilling and hydraulic fracturing, the production of domestic shale gas and oil has grown more than 50 percent annually since 2007. The shale boom could add as much as $690 billion a year to GDP and create up to 1.7 million jobs across the economy by 2020. The impact will extend to energy-intensive manufacturing industries and beyond. The U.S now has the potential to reduce net energy imports to zero—but only if it can successfully address the associated environmental risks.
- US trade competitiveness in knowledge-intensive goods. The U.S. is one of the few advanced economies running a trade deficit in knowledge-intensive industries. But changing factor costs, a rebound in demand, and currency shifts are creating an opening to increase U.S. production and exports of knowledge-intensive goods, such as automobiles, commercial airliners, medical devices, and petrochemicals. By implementing five strategies to boost competitiveness in these sectors, we believe the U. S. could reduce the trade deficit in knowledge-intensive industries to its 2000 level or close it—which would add up to $590 billion in annual GDP by 2020 and create up to 1.8 million new jobs.
- Big-data analytics as a productivity tool. Sectors across the economy can harness the deluge of data generated by transactions, medical and legal records, videos, and social technologies—not to mention the sensors, cameras, bar codes, and transmitters embedded in the world around us. Advances in computing and analytics can transform this sea of data into insights that create operational efficiencies. By 2020, the wider adoption of big-data analytics could increase annual GDP in retailing and manufacturing by up to $325 billion and save as much as $285 billion in the cost of health care and government services.
- Increased investment in infrastructure, with a new emphasis on productivity. The backlog of maintenance and upgrades for U.S. roads, highways, bridges, and transit and water systems is reaching critical levels. The U.S. must increase its annual infrastructure investment by one percentage point of GDP to erase this competitive disadvantage. By 2020, that could create up to 1.8 million jobs and boost annual GDP by up to $320 billion. The impact could grow to $600 billion annually by 2030 if the selection, delivery, and operation of infrastructure investments improve.
- A more effective U.S. system of talent development. The nation’s long-standing advantage in education and skills has been eroding, but today real improvements are within reach. At the postsecondary level, expanding industry-specific training and increasing the number of graduates in the fields of science, technology, engineering, and math could build a more competitive workforce. At the K–12 level, enhancing classroom instruction, turning around underperforming high schools, and introducing digital learning tools can boost student achievement. These initiatives could raise GDP by as much as $265 billion by 2020—and achieve a dramatic “liftoff” effect by 2030, adding as much as $1.7 trillion to annual GDP.
These opportunities can have immediate demand-stimulus effects that would get the economy moving again in the short term and also have longer-term effects that would build U.S. competitiveness and productivity well beyond 2020. Taking action now could mark a turning point for the economy and drive growth and prosperity for decades to come.