Points 1-3, While I agree that US infrastructure is sub-par given its riches, comments about “manufacturing workforce dying off” and hand-wringing that services and healthcare being dead-ends are dead-wrong. Prestowitz is right that we should have a big fiscal push and an industrial policy to raise employment (politically impossible now), but xenophobia and protectionism are ill-placed.
a. The main force depressing manufacturing short-term is the deep recession, but long-term the cause of our disappearing production-line workers is productivity, not China. Post-war US industrial production is up 550%, with only 80% of the 1948 workforce. Manufacturing payrolls have been steadily declining for 3 decades, with the trend slowing before that. (See attached; IP is in real terms)
b. For a more detailed look at secular, sectoral change, look at agriculture. Employment is down 77% since WWII ended. Disaster? No, far from it. Miraculous success led by knowledge and technological innovation, which continues at a breathtaking pace. The numbers are here: the labor input and materials (chemicals, services)
c. Infrastructure will need construction workers and engineers, not the same as manufacturing workers.
d. Healthcare in the US has big problems, including the supply constraint by the ADA monopoly, and issues raised by Atul Gawande in a series of essays. But increasing healthcare employment is inevitable given the demographic trends, and should be encouraged as the U.S. may well have an absolute and relative advantage in many areas, and so can bring down prices and increase exports of medical services.
China’s FX is indeed quite undervalued, but they are the losers in this bargain, working for the rest of the world on the cheap. Their $3 trillion in reserves is an outgrowth of this mercantilist policy and captures the size of their subsidy to the rest of the world. The PBOC has made the worst FX trade ever in history, and has deeply disfigured its own economy as a result. Rebalancing will be painful for both sides.
Points 3-5, of course the US needs better education. As an aside, the college-educated unemployment rate in the US is 4.5% (normal is 2.5%), with participation rate back to pre-crisis levels, so far better than the remaining 2/3rds of the population. But if research moves to China, so what? From an economic standpoint, it is important to realize that most innovation is non-rival and non-excludable, if not anti-rival; copyright and patent law are important but weak protections that try to solve this important market failure (the far-seeing US Founding Fathers were aware of this, putting patent protection into the Constitution!) The Chinese have been stealing a lot of others’ work; maybe they will appreciate how damaging that is when they get a taste of their own medicine.
6. See point b. The US is not in terminal decline or on the verge of a Dark Age. That is where China has been for a couple of centuries (from the Opium Wars to the Great Leap Backward), but its relative gain on the U.S. doesn’t mean an absolute collapse. One should be careful to avoid the intuitively appealing but intellectual erroneous Malthusian doom-mongering or 1980’s style Japanophilia/phobia; serious people have been worried about America’s terminal decline since shortly after the country was founded. I’m not taking a Panglossian view – RGE is the first to point out serious, short and long-term problems and mistakes of the US. Yet China has at least as many problems, and more serious ones at that. Zakaria’s perspective is useful here. Of course, the “rise of the rest” means resources and commodities and farmland are great long-term investments. The US’s overall educational performance is dismal, but it is not close to losing its leadership in R&D, look at the companies in the Nasdaq and the quality of our universities. I agree 100% that having educated immigrants, the US ought to do a far better job keeping them.
7. The US military-industrial complex is still very healthy, and has no serious rival, even of the number of Chinese aircraft carriers does finally go above zero.
8. Britian has indeed been in relative decline for a century and a half. This is my second stint living here, and it isn’t Sweden, but it is a rich, free, modern country. Living standards are high and rising, thanks again to the trade-openness and rise in productivity in both the UK and RoW. Non-oil exports total $US35bn per month (20% of GDP. double that of the larger, more autarkic US) include a lot more than pharma and Will-and-Kate paraphernalia. It is a manufacturing powerhouse; see http://www.statistics.gov.uk/statbase/product.asp?vlnk=731 for detailed exports by industry.
Hope those comments help shed light on some important issues, and of course they’re only one man’s opinion.