There is another, more serious downward spiral that has the U.S. economy in its grip.

This is the downward spiral in educating people for jobs in technology, science, manufacturing, and other wealth creating industries. In the rest of this post I may just say science and technology as a shorthand to represent this whole sphere of endeavor.

I have watched this spiral over the last 40 years of my career in high tech.  In the beginning, we had the American college student body shifting away from these more productive enterprises to the more lucrative financial and legal sector.

At first there was little outward sign of trouble.  The graduate schools in science and technology were filled with bright students from abroad such as India and China.  These people filled the spaces left vacant by the American students.  The first people to notice anything at all were the people who were keeping track of the composition of the graduate school student body.  It got to the point where almost 60% of PhDs were being awarded to non-US citizens.

The vast majority of these foreign students stayed after graduate school to work in US industries and even become US citizens.  Their opportunities back home were far less than they were in the US.  Given these factors, the innovative output of the US economy kept its strength.

With the rise of the internet and the liberalization of the Asian countries, it became easier and easier for foreign nationals to find great opportunities in their own countries.  I only started to see the change in the mid to late 80s.  As great as the American draw is, if the opportunities exist at home, there are strong attractions to keep people in their own country.  These include family and cultural ties.

The self-fulfilling spiral saw more technology and manufacturing jobs being outsourced.  The financial/legal sector became a larger and larger part of the American economy. Government policy kept pumping up the financial sector and diminishing the productive sector.

Still, many foreign students kept coming to the US for its excellent colleges. Eventually we started to see a trend that rather than stay in the US to get experience, foreign countries were even attracting American born students overseas to get technical experience.

I haven’t looked at the numbers lately to see what fraction of the technical college faculty is US born.  Without even looking at these numbers it is easy to see the inevitable trend.  If the people and the experience giving jobs are migrating back to Asian countries, soon the people to educate new students will have migrated back to these countries. The US colleges will lose their attractiveness to foreign students who will find the best teachers in their own countries.

The leading US universities will start to have trouble attracting both students and faculty.

The world will no longer need us for science and technology.  It will no longer need us for education.  It will no longer need us for management of industries.  With all those needs being met at home, the other countries will soon learn that they don’t need us for finance either.

Clearly, the US will fall way behind in technological edge.  We will lose our economic dominance.  The US will lose its number one position in the world economy.

With a whole generation of techincal students and teachers lost from our economy, it is not going to be a quick matter to turn things around even if we come to our senses politically.

When this economic downturn is over, I wouldn’t bet the farm that the United States will return as strong as ever as President Obama has promised.  I don’t know if the American public is ready to hear the story of how bad our situation really is.  If they are not ready, then they are not ready to contemplate what it will take to fix the situation.  They are certainly not ready to think about how long it will take and the change of lifestyle it will require.

Make sure you understand that I am not blaming this problem on the foreign countries and their citizens.  In this game of national economics, if our competition has a better game plan than we do, it is clearly our fault for not recognizing the situation and improving our game plan.  The more our leaders tell us that we are number one and have the best workers in the world, the less likely we will be to see that we need to work smarter and harder than we have been. There is no inherent reason why we are entitled to a higher living standard than the rest of the world.  We may have a hard time adjusting to the fact that we may have to compete better just to stay even.