There's no stopping people from racing to the bottom. There will always be developers and designers willing to give away their work for nearly free.
As a developer, this doesn't need to affect you at all. You're not racing to the bottom. The people in that race are not capable of competing with you on quality (or they wouldn't be fighting for $4/hr work). You can (and should) continue to charge several hundred dollars per hour for your services to clients who can tell the difference between you and those oDesk guys, and who are willing to pay for those services.
You're right though. It would be nice if there were a way to create a market that included neither those clients wanting to build a Facebook clone for $350 nor the developers willing to try. But nobody yet has come up with a way to do so.
As a developer, this doesn't need to affect you at all. You're not racing to the bottom. The people in that race are not capable of competing with you on quality (or they wouldn't be fighting for $4/hr work). You can (and should) continue to charge several hundred dollars per hour for your services to clients who can tell the difference between you and those oDesk guys, and who are willing to pay for those services.
You're right though. It would be nice if there were a way to create a market that included neither those clients wanting to build a Facebook clone for $350 nor the developers willing to try. But nobody yet has come up with a way to do so.