Longer-term, I doubt that the US or Europe will grow faster than 3 per cent a year any time in the next five years. The developing world, however, will grow in excess of 5 per cent a year. The result of this is that the mature industrial economies are losing about a percentage point a year in share of world GDP to the emerging markets and they are losing a similar amount in share of world stock market capitalisation.

The biggest problem the US is facing is the productivity of capital. After the end of the second world war it took less than $2 of investment by government, corporations and individuals to produce $1 of GDP growth. The productivity of capital continued to be impressive until 1980 when Europe had recovered and Japan was producing cars and consumer electronics products that found wide acceptance in world markets.

In the single decade of the 1980s, the productivity of capital declined from a level where it took less than $2 of investment to produce $1 of growth to one where about $3 was needed. If you assign a 30 per cent gross margin to that revenue growth, the return on investment declined from 15 per cent to 10 per cent.

That level of return proved to be satisfactory, but in the first decade of the current century capital productivity declined seriously in the US. Because of profligate spending on over-priced housing and other assets that declined seriously, as well as deficit spending by the government, by the end of the decade it took $6 of capital to produce $1 of growth. The return on that would only be 5 per cent and few would put money at risk for that reward.

When you look abroad to assess our competitive position, the results are not encouraging. It is hard to put together comparable information but, based on the data I could gather, Europe was still getting $1 of growth for $2 of investment and China was getting at least $1 of growth for each dollar of investment.

If the US is to stop losing ground against other mature and developing economies, it is going to have to put money to work more effectively. We are still the leaders in technology and scientific research and we must continue to take advantage of the commercial possibilities of innovation. If we do not reverse the current trends, growth in the US beyond this year will be disappointing and our standard of living will decline.

David Fuller's view Few of us would wish a lower standard of living on anyone but it is what often happens when nations seriously stumble in terms of economic governance, as we have certainly seen with most of the OECD countries. One could also argue with some justification that our decline has not just been in the economic sphere. When governance deteriorates, it starts at the top, trickles down and spreads like a metastasizing cancer to other regions of our societies.

Fortunately, the process is reversible, given the collective will and wisdom to change the national trend. Arguably, the rise and fall of nations moves in very long-term cycles. Change comes from within but may be a slower process in terms of tangible or relative results if developing nations continue to progress more quickly. We certainly see this today and I believe it should be a factor in our investment allocation decisions.

Fullermoney has long maintained that the most important single factor for emerging (progressing), high-growth economies, leading to high profits, is good or at least improving governance. This may seem difficult to measure when we hear about corruption and inefficiencies in India, for instance. Those are real problems but the trend of governance in India, I maintain, is improving rapidly, albeit from a low base, which was a legacy of the old Soviet-style economic policies of earlier decades.

Lastly, many developed economies are grappling with serious debt problems today. However, national governance is usually sufficiently sound for individual companies to prosper from good corporate governance, leading to robust profits growth. You know which companies are succeeding, or if in doubt, look at price charts for relative performance. The most successful companies will almost certainly show relative strength not only from the lows of the last bear market, but also in terms of approaching their previous bull market highs.