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.

Follow this link to read George Lakoff’s explanation of the Obama code.

Lakoff explains about President Obama that

Speaking naturally, he lets his deepest ideas simply structure what he is saying. If you follow him, the deep ideas are communicated unconsciously and automatically.

Lakoff posits 7crucial intellectual ideas:

Behind the Obama Code are seven crucial intellectual moves that I believe are historically, practically, and cognitively appropriate, as well as politically astute. They are not all obvious, and jointly they may seem mysterious. That is why it is worth sorting them out one-by-one.

Lakoff’s idea number six, “Systemic Causation and Systemic Risk” is very insightful. It explains why the existence of this causation and risk spells doom for much of the underpinnings of the extreme conservative philosophy.  Whether they do it consciously or subconsciously, the conservatives have to defend against the idea that any possible problem might not be caused by specific individual actions that each individual is free to decide.  To admit of such a concept might mean that the free-market is not always right.

The concept of systemic causation is the underpinning of much of the ideas for improving quality manufacturing promoted by American quality guru W. Edwards Demming and first put into practice mostly by the Japanese industrialists. Systemic causation is also fundamental to human factors and safety engineering.  It is ironic that some of the same engineers whose careers are built on this concept cannot see it in action outside of the factory.

Follow this link to 22 quotes by W. Edwards Deming that might give you the flavor of the man.

Follow this link to Robert Kuttner’s open letter to David Axelrod.

He urges David Axelrod to advise President Obama’s team to take a more radical approach to fixing the economic crisis.

Kuttner is on the same side as Krugman, but the way he states his case is not all negative about the Obama team performance.  I hope he has more success in getting President Obama’s attention.

Follow this link to a piece by Mark Hulbert that explains why this stock market downturn may have a lot further to go. His claim that this might be the first genuine bear market in three decades gives further credence to Kuttner’s call for more radical action.

Follow this link to read the full text of  The American Recovery and Reinvestment Act of 2009.

You can also sign in and leave a comment.

This site links you to the five parts that are on the Government Printing Office web site. Initially the GPO site will be very busy and might not respond.

Follow this link to Paul Krugman’s column February 15th in the New York Times.

His interpretation of the Federal Reserve’s latest Survey of Consumer Finances is that there has been no wealth creation in the United States since 2000.

Earlier today I posted a link to remarks by Robert Kuttner.  He noted that 40% of the economy had been in financial services.  It occurred to me that if you take out that 40%, what is left may be a real measure of the size of our productive economy.  I wonder if that number is commensurate with what the Federal Reserve has discovered.

Follow this link to read Robert Kuttner’s prescription for the economic crisis.

Perhaps he said it before, or someone else may have said it.  Japan didn’t get out of its economic malaise of the 1990s until it finally made the banks realize the losses that were hidden in their books.  He is now saying the U.S. must do the same.

One of the things that I have been saying for a while is that with so many of our manufacturing jobs having been outsourced, soon the world will discover that the management of these jobs can be outsourced as well.  The only thing the U.S. will have left in our economy is the financing through our banks.  Then the world will realize that, with the jobs and the management having been outsourced, they no longer need money management from the U.S.  Then we will have nothing to support our economy.

Maybe that day is arriving much sooner than I thought.

Follow this link to the article in Huffington Post that quotes the Obama one-liner

Asked if he would be so willing to reach out to Republicans in the future, the president responded, “You know, I am an eternal optimist. That doesn’t mean I’m a sap.”

For those old enough to remember, they used to call comedian Henny Youngman the king of the one-liner.  I think Obama may well merit the title in the political sphere.

Follow this link to George Soros’ prescription for the economic crisis.

The article is long and the details are way beyond my limited knowledge to critique. The ideas sound reasonable to me on first reading.

I did, however,  note his statement that massive liquidity needs to be inserted into the economy to prevent deflation, and then when it works this liquidity must be drained from the system as fast as it was inserted.

Independently this thought had occurred to me and I discussed it at the end of my blog post Analogy That Explains The Stimulus Package. I am encouraged that I have been able to see some issues that coincide with the advice from someone with the vastly greater knowledge that George Soros has.

Follow this link to Paul Krugman’s New York Times column.

With friends like this, perhaps we don’t even need Republicans.

According to Krugman, Obama’s plans aren’t enough and Obama is too weak to get more.  Obama managed to get almost $800 billion in stimulus just a few weeks after taking office, and this shows what a failure he is?

Maybe Krugman is using reverse psychology.  Taunt Obama enough so that he will try extra hard to prove you wrong.  Well, if Krugman wants to guarantee his position on the outside looking in, then this is probably the best strategy.

I wonder what would happen if Krugman tried to write an article that would help Obama improve on what he has already accomplished? Maybe he has been on the outside so long he doesn’t remember how to do that.

I just heard Brian Williams on NBC Nightly News ask his business correspondent in frightened tones, “What if the stimulus package is too small?”  The correspondent uttered some mumbo jumbo, but did not come back with the obvious retort.

“Brian, what if you went to the grocery store and didn’t buy enough food?  Would you sit in your home and starve to death or would you go back to the store and buy more food?”

Earlier this evening the local news reported that there were enough local infrastructure projects to spend eight times as much money as Massachusetts is getting in stimulus funds. Given that, I don’t think there would be any problem putting more stimulus money to work should it be needed.

When it is very difficult to calculate whether a program is too big or too small, you can pick a size that is your best guess and then measure the effect as you go.  If it is too small, you can add.  If it is too big, you can stop before you have spent all the money.

Maybe the Bush administration would have assumed that they had it calculated down to the nickel and would just plow ahead without measuring.  Fortunately, the people in the Obama administration are far too rational to take that path.  In fact they want to put all the information out to the public so that there are as many eyes as possible watching what is going on.

With the way George Bush ran things, you really have to wonder what he learned at Harvard Business School.  How did they ever decide to grant him an MBA degree?