Despite the debt, the profligacy, the failing basic institutions, America retains one unshakable core principle that constitutes a hard-to-copy competitive advantage: the nation is defined by ideology, not ethnicity.
To see how big this advantage can be, consider the following solution to our industrial hollowing.
For 20 years, we have received an unceremonious manufacturing beat-down from China. But in the consumer-led recession, China is in perhaps worse shape than we. they risk social instability unless 10% of GDP is generated from exports. Sooner or later (probably sooner), central banks or no, the dollar will decline, and that trade imbalance will close.
At that point, assuming a dollar crash, it will suddenly be economically feasible to manufacture in the US, but because of the long-term hollowing, we lack the skill base.
What if, at that point, America simply offered permanent residency to any person in China with a degree in mechanical engineering and 5 years experience designing manufacturing lines?
Instant result: massive skills drain into the US. Why? For most people, it remains easier to start a business here, and easier to live an unfettered life here.
Could China do the reverse? Not in a million years. The nation is defined by ethnicity, so it cannot import talent. That’s a weakness.