The Fading of Old Glory

As I write predictions for 2011 in the capital markets for various clients, I am seeing a picture that I don't particularly care for. The United States' star is losing its ascendancy as hungrier, less regulated nations begin to encroach on our traditional territories. In just the past two weeks I have seen my kids - educated and trained graphic artists - lose freelance work to equally educated young (or old, who knows?) people in India, China and Korea - for a tenth of the going U.S. rate. I have seen a relative's MRI results read by a doctor in India. I read that many hospitals in the U.S. are outsourcing basic medical services, such as reading CT scans, to doctors in India and China who are doing remote diagnosis. I have heard of lawyers in India training to be able to help companies deal with new U.S. financial regulation. Indian tax accountants are taking away jobs here in the U.S. as domestic consultants outsource the production of tax returns.
The United States is all about commerce and profits. The constant emigration of jobs, manufacturing, innovation and trade to emerging countries where the talent is plentiful and cheap saves U.S. corporations billions. But what does it leave for this country? Manufacturing is all but dead apart from cars. Financial services firms propped up the economy for a while - albeit with smoke and mirrors - and are now heading for the exit as fast as possible, fearing new financial regulation will harm profit margins. Brazil, Australia, and other countries are embracing high speed and algorithmic trading and will soon not need our bulge bracket banks to help them out with it. The health care industry is top-heavy and inefficient with health insurance companies a complete rip-off which will someday be exposed. What is left? The generation that is attending and/or just graduated from university is going to pay dearly for American excesses. It is said half-jokingly that graduates today are most likely to land jobs where they will say "would you like fries with that?" It may be years before they can get into solid, growth area companies where they can make a career.
But what companies will they be? Technology? We have Apple and Microsoft and IBM and Intel, true. But they are on the downward edge of the razor blade that is the technology innovation curve. Innovation can also be outsourced, but it has been the exclusive domain of America for about 150 years. It has to remain so, otherwise what do we have left? A bit of oil, some corn and a lot of people.
New products need to be invented and fast-tracked to production before the Chinese can copy them. I remember in the 1960's when "Made in Japan" was a standard joke for crappy quality, a snide reference to how much better things made in America were. Now Japanese cars are  the ones U.S. car makers have to beat in terms of quality and service.
I think this country is in more trouble than we can foresee. If there is not a dedicated effort to increase innovation and support the opening and growth of new companies we could one day see our kids moving to India or Brazil to find work.