"Ed Huntress" writes:

No, I didn't say we don't benefit from innovation. I said that relying on
innovation to compete with 80-cent/hr. wage rates is an artifact of the
past. It doesn't work as a general method for competing with low-wage
countries, now that our free-trade policies are having success in breaking
down the barriers for capital flow.

Is the effect of a capital-flow deficit different from a
balance-of-trade-deficit?

Less capital would seem to mean fewer jobs, *unless* we can
create jobs that are less capital-intensive than the ones we're
losing (including the capital spent on education & training).
This seems to be what you're implying when you mention jobs in
the financial sector.

Back in 1987 Tom Peters wrote a book that argued (among other
things) that moving manufacturing overseas meant giving up an
important source of innovation, because a lot of it comes from
interactions between the design guys and the production guys,
which is difficult if they're on different continents.

Of course you can always move the design people overseas as well.
Then all that's left for us to do is consume the result-- unless
too many of us are unemployed (oops).

The service sector is said to be doing well, but it's hard to
increase productivity when services have to be rendered in person.
And all wealth comes from productivity.