TL;DR - in putting blocks on immigrants while continuing to cut educational spending, I think the long term prognosis for the US economy is overwhelmingly negative and investors should probably devote more money to other places
My Basic Assumption: A country needs either (a) continued investment in its education system or, (b) the ability to bring in well educated and 'smart' people from outside to make up for deficiencies in its own education system. Without one of these, a country will not have the human capital it needs to push out the productivity frontier and therefore be stuck at some maximum output and capacity
What the US has been doing to now: US investment in domestic education has been low and declining over the decades but it has been able to draw in an inordinate number of very smart and educated people from all parts of the world to work on its behalf in its government or agencies or universities or research centres. This has allowed US companies to be the primary beneficiaries of breakthrough's in organizational structure (like 6 sigma) and tech (remote working).
Going forward. The current administration seems to want to continue the withdrawal of funding from educational programs. Not just schools, but also things like the 17 programs to be axed (to save <0.1% of the budget). This would be less of a concern if they weren't also eager to put more barriers to immigration even to educated immigrants. The ever harder H1B requirements and still harder green card requirements are evidence of this intent.
The effect according to me. If you agree that without either more educated native populations or the ability to attract enough smart people from outside, then the US as an investment doesn't seem terribly enticing in the longer term.
The short term benefits can't be sustained because they are reaping benefits accrued (or deferred) to now like repairing infrastructure or tax breaks/holidays without using the proceeds to productive expenses (education, research, capacity building).
You might say that the political process will force an about turn before seriously negative outcome are realised but it hasn't happened so far. These are sudden accelerations of longer trends.
The alternatives avenues as I see them. sticking with theme that places which continue to invest in education and/or are able to attract smart people
North America. I think Canada is an obvious place to invest but suffers from a scarcity of non-resource, non-US tied companies. Mexico has the problem of being too closely tied to the US but if it can diversify away it has enough people and does invest in them to be a viable longer term play. It's the 7th largest economy in the world so it's by no means small
South America Peru and Chile are places that have been investing in education and actively seeking to invite researchers, entrepreneurs and companies to set up shop in their country and Chile's stock market seems to be quickly moving away from mining companies. Brazil seems far too embroiled in government scandal and doesn't seem to put much if any investment in its people or bring in outsiders. Don't know about Argentina, Bolivia, Ecuador, Venezuela, Colombia, El Salvador
Europe at large certainly offers a diverse set of public companies while checking the human capital box. It currently has a big economic problem but human capital is a more fundamental strength the individual economies enjoy without exception.
Asia I think China and India are shoo ins as good places to invest for the next few decades and it behoves us to understand the companies that operate in those markets. Both countries are investing a lot in their education systems and though they have been net losers of smart people, that would be reversed if the US carries out the planned barriers on its own immigration. In the middle east, Dubai, Baharain and Kuwait seem capable and willing to bring in the research groups from everywhere else and be the place where innovation occurs which makes those economies interesting places to invest. I am not very familiar with the other asian countries though I understand that Vietnam and Indonesia are doing very well. I can't say much about Japan and Korea because of their export orientation.
Africa This is where I am focusing a lot of time. Some countries like seem to be moving along the development curve and have working capital markets but its spotty at best in terms of places I can actually put my money to work.
thoughts?
Submitted February 08, 2017 at 08:51PM by wanmoar http://ift.tt/2kor7np
