Happy New Year: Economic Forecasts for 2011

As a corporate strategy leader, macro economic outlook weighs heavily on my mind this time of year.  One of the things I learned from the strategy experience is that knowledge of ones own markets, customers plans and the projections of industry experts are easily trumped by the overall economy, particularly when much of the spending in telecommunications networks is in response to consumer and general business discretionary spending.  A rising tide can save a poor company and a falling tide can put a good company at risk.

Several discussions I’ve read about 2011 predict continuation of the economic dilemma of 2010... that is, continued growth for US companies (at about 4%) and continued high employment for US workers (slowly falling from the current 9.3% (November figure, unadjusted.))  This is a reflection of the fact that most large US domiciled corporations are global and that developing markets are expected to continue strong growth in 2011.  It also reflects the fact that these corporations have continued to shift employment from high-cost regions (US and EU) to low-cost regions (Mexico, Brazil, India, China and eastern Europe.)  The current political dynamics in Washington seems unlikely to impact  either of these trends in the coming year.  I agree with this view, although as a freshly unemployed person, I’m not happy about it.

Another big trend for the US is the impending retirement of the boomer generation.  The first wave of boomers will begin retiring in 2011.  I expect the US federal budget battles to be intense and the impact on boomer’s lives will either be the elephant in the room or a matter of open political warfare.  I expect more smoke than fire, but 2011 will be another of a series of battles regarding boomer entitlement programs.

When I think of the US in the 21st century, I often think about the UK in the 20th century.  The British empire was at it greatest height in 1945, just as it passed the baton to the US and we began to exercise our own superpower empire.  I lived in the UK from 1978 to 1980 and experienced the post-imperial discomfort of the British people, their uneasy relationship to the US, and their ambivalence about their own history.  It has been said that the financial cost and human cost of maintaining empire became too great for the British in the first half of the 20th century, so they were willing to let the empire go.  The British economy had to pay for a global military and a lot of common people were required to become soldiers and bureaucrats and move to the far corners of the planet to support the empire.

The US may be reaching the same breaking point on its empire, both from the perspectives of cost and political will.  The simultaneous rise of China as a world power and as holder of much of the US debt, adds an additional factor that could accelerate the US transition from imperial power to regional player more rapidly than any of us could predict. This is unlikely to happen in 2011, however, it is something I will be watching over the next few years.

What are your thoughts about the economic prospects for 2011... Good, Bad or Ugly instability?