The Kids Will Be Alright

America's population growth makes it a notable outlier among the advanced industrialized countries. The country boasts a fertility rate 50% higher than that of Russia, Germany or Japan and well above that of China, Italy, Singapore, North Korea and virtually all of eastern Europe. Add to that the even greater impact of continued large-scale immigration to America from around the world. By the year 2050, the U.S. population will swell by roughly 100 million, and the country's demographic vitality will drive its economic resilience in the coming decades.

This places the U.S. in a radically different position from that of its historic competitors, particularly Europe and Japan, whose populations are stagnant. The contrast between the U.S. and Russia, America's onetime primary rival for world power, is particularly dramatic. Some 30 years ago, Russia constituted the core of a vast Soviet empire that was considerably more populous than the U.S. Today, even with its energy riches, Russia's low birth and high mortality rates suggest that its population will drop to less than one-third that of the U.S. by 2050. Russian Prime Minister Vladimir Putin has spoken of "the serious threat of turning into a decaying nation."

An equally dramatic and perhaps more critical demographic shift is taking place in East Asia. Over the past few decades a rapid expansion of their work force fueled the rise of the "East Asian tigers," the great economic success stories of the late-20th and early-21st centuries. Yet that epoch is coming to an end, not only in Japan and Korea but also in China, where the one-child policy has set the stage for a rapidly aging population by mid-century.

Within the next four decades, most of the developed countries in both Europe and East Asia will become veritable old-age homes: A third or more of their populations will be over 65, compared with only a fifth in America. Like the rest of the developed world, the U.S. will certainly have to cope with an aging population and lower population growth, but in relative terms the county will boast a youthful, dynamic demographic.

As many other advanced countries become dominated by the elderly, the U.S. will have the benefit of a millennial baby boom as the "echo boomers" start having offspring in large numbers later in this decade. This next surge in growth may be delayed if tough economic times continue, but over time the rise in births will add to the work force, boost consumer spending and allow for new creative inputs.

The differing demographic trajectories create a diverse set of issues for 21st-century America than those facing its rivals. The key challenges the European Union, Japan and Korea will contend with in the coming decades involve coping with a rapidly aging population, filling labor shortages and finding ways to invest in growing economies. In contrast, the U.S.'s greatest priority will be to create opportunities for its ever-expanding population. The New America Foundation estimates the country needs to add more than 125,000 jobs a month simply to keep pace with population growth in 2010. What the U.S. does with its "demographic dividend"—that is, its relatively young working-age population—will largely depend largely on whether the private sector can generate the incomes among the young to meet the needs of a larger aging population.

Entrepreneurialism and America's flexible business culture—including the harnessing of entrepreneurial skills of aging boomers—will prove critical to meeting this challenge. Many of the individuals starting new firms will be those who have recently left or been laid off by bigger companies, particularly during a severe economic downturn. Whether they form a new bank, energy company or design firm, they will do it more efficiently—with less overhead, more efficient use of the Internet and less emphasis on pretentious office settings.

"People are watching their companies go under. Therefore you get three vice presidents who get laid off but know their business," says Texas entrepreneur Charlie Wilson. "They start a new company somewhere cheap that is more efficient and streamlined. These are the new companies that will survive and grow the next economy."

It is here—at the grassroots level—that you can best glimpse the essential sources of American resiliency. American society draws most of its adaptive power not from its elite precincts but through the efforts of communities, churches, entrepreneurs and families.

You can see this in the resurgence of once-declining Great Plains cities like Fargo, N.D., where high-tech now joins agriculture and manufacturing to form one of the country's strongest local economies. Or you can visit the emerging immigrant hotbeds, such as the San Gabriel Valley east of Los Angeles or the Sugarland area, just west of Houston, with their plethora of new churches, temples, companies and ethnic shopping malls.

Immigrants represent a critical component of our next wave of new dynamism. Between 1990 and 2005, immigrants started one quarter of all venture-backed public companies. Large American firms are also increasingly led by people with roots in foreign countries, including 14 of the CEOs of the 2007 Fortune 100.

But much of the energy will come from more obscure enterprises. Recent newcomers have already distinguished themselves as entrepreneurs, forming businesses from street-level bodegas to the most sophisticated technology start-ups.

What drives immigrants is their optimism in America's future. California developer Dr. Alethea Hsu, in explaining why she opened a new Asian-oriented shopping center in Orange County, cited the entrepreneurial energy of both affluent and working class immigrants which, she said, will allow them to thrive through the recession and beyond. "We are leased up, and we think the supply of shopping still is not enough," Ms. Hsu said in early 2009. "We feel great trust in the future."

This entrepreneurial urge also extends beyond the immigrant community. In 2008, 28% of Americans said they had considered starting a business, more than twice the rate for French or Germans. Self-employment, particularly among younger workers, has been growing at twice the rate as in the mid-1990s. In the most recent Legatum Prosperity Index, the U.S. ranked at the top among all countries in terms of entrepreneurship and innovation.

Most important of all will likely be the rise of the millennial generation—a group of Americans who will start reaching their prime earning years late in the next decade. Surveys identify them as strongly family- and community-oriented. The millennials will be America's new entrepreneurs, workers and consumers in the coming decades. They will provide the kind of resource our major competitors are destined to run short on.

The millennials also will help shape an increasingly culturally diverse America which by 2050 will be roughly half made up of ethnic minorities. This emerging post-ethnic future contrasts dramatically with the ethnic politics common among the nation's chief global rivals. Even famously politically correct nations as Sweden, Denmark and the Netherlands have turned against immigration. Switzerland just banned the construction of minarets, while France is considering banning some forms of Islamic garb.

Our prime Asian rivals—China, Japan, and Korea—remain even more culturally resistant to diversity. Chinese xenophobia, in particular, is deeply entrenched, notes Martin Jacques, author of "When China Rules the World." A Chinese world superpower would be both racially homogenous and far from tolerant of newcomers. Recently the appearance of a mixed-race Shanghai girl on a national talent show sparked a surge of racist invective.

The very diversity of the emerging America makes many wonder what ultimately will hold the country together. Ultimately, this unique society will find its binding principle in the notions that have long differentiated it from the rest of world: a common belief system, a sense of a shared destiny and an aspirational culture.

As the British writer G. K. Chesterton once put it, the U.S. is "the only nation…that is founded on a creed." This faith is not, and was not initially meant to be, explicitly religious; rather, it is a fundamentally spiritual idea of a national raison d'être.

Of course, this optimistic scenario depends on intelligent and energetic actions by central and local governments, as well as community organizations. But the road to the American future will be primarily laid not by the central state but by families, individuals and communities. During the industrial age Ralph Waldo Emerson once observed, "The age has an engine, but no engineer." Much the same may be said in the coming decades.