“I do not believe in American exceptionalism, except in one way. In the recent decades, the U.S. has been exceptionally bad.” Jeremy Grantham, co-founder of GMO and long-term investment strategist, did not pull any punches with Mike Green, of Logica Capital Advisors, in the latest Mike Green In Conversation. Grantham and Green examined if we are in a market bubble similar to that from 1999-2001, why the best investment opportunities may be in China and how the United States is regressing compared to the rest of the world. 

The Opportunity – China is catching up fast to the United States in many areas. In others they are exceeding.  Grantham notes that ESG trades, climate change and venture capital are the areas where China appears to have more upside. China is moving full steam ahead on their green economy, but the U.S. is bogged down in petty politics and failed leadership. 

“The problems we face today can only be dealt with collectively. They are climate change, where you need leadership, and you need regulation,” Grantham stated. They are COVID-19, where you need that leadership and well-organized, standard blocking and tackling which we seem to be incapable of doing. We have toxicity in the system, which is ruining the fertility of homo sapiens and undermining the viability of the natural system, and that needs regulation.”

Green points out the irony to reach a green economy requires some dirty production. Mining and processing of rare earth metals, copper, nickel and cobalt will put local populations in jeopardy of health risk, but both he and Grantham surmise the ends may justify the means. 

“We paid the price. We made the rush to become a rich country,” Grantham explained. “Frankly, they are doing a hell of a lot better than we did there. In other words, they are addressing that toxic air much quicker and better than we did back in the late 19th century and the early 20th century. If you were their bosses, and you had inherited a billion poor people, and 400 million that might be faintly described as middle class, you would say your job number one was to get as many people as you could across the Great Divide into being relatively well-educated, relatively well-fed and clothed, and part of the industrial system. They have done that. They are now one of the halves as opposed to the have nots.” 

Venture Capital – Venture capital is one area where the United States continues to excel but China will catch up over the next 20 years unless changes are made. Grantham does not see that as inevitable, it requires the west to recognize they need to make changes.

“Paradise, for me, would be a vital venture capital industry, much better funded even than it has been, doubles, triples, quadruples of money coming in, an R&D budget that is funded both through venture capital and through corporations and through government at much higher levels, combined with a sensible long-term oriented set of realistically scientific based regulations designed to get us to a suitable place in the distant future, and not a series of ad hoc 18-month plans that dominate the politics and business as usual,” Grantham opined. “Thirdly, a retooling of the social contract.”