Back to farming and mining

What is the American economy's core competence? That is, what are we the best at? Technology? Finance? Those sectors have taken big hits in the last decade, although tech isn't doing too bad these days. Certainly not high-tech manufacturing; that's better left to places like Germany, Japan, and Korea.

For a while, it looked like our core competence was writing IOUs. The government borrowed from China, and people borrowed on their credit cards and through their mortgages. America consumed a lot more than it produced, but the day of reckoning was always on the horizon. Now, with the "credit crunch," the reckoning is right in front of us.

So what is our core competence going to be now? The Economist may have an answer:

Move inland from the coasts and away from the industrial Midwest, however, and the picture, for now, looks less grim. A belt running from Texas north-west across the Great Plains and the Rocky Mountains has been doing particularly well, thanks to soaring exports and high commodity prices. Ethanol subsidies and “agflation” have brought a bonanza to the farm states. Agricultural exports are up almost 20% compared with 2006, while farm incomes are growing smartly. Extractive industries are booming. Miners find it worthwhile to dig for copper in Butte, Montana, even though the operators say it is the worst-grade ore in the world. These states now have some of the lowest unemployment rates in the country. [emphasis mine]

Ah. So that's what we're good for now - selling minerals to feed China's hungry factories, and food to feed China's hungry mouths. And if that's true, our competitors are not Germany, Japan, India, Korea, or the UK; they're Argentina, Botswana, Australia, Brazil, and Indonesia.

Look at the quality of governance in resource-dependent countries, and it's pretty scary. When the economy depends on resources instead of services or manufacturing, the government doesn't have as much need for an educated, hard-working, healthy populace. That means the government has less incentive to provide things like education, roads, public health, legal rights, etc. Is that where we're headed?