Service Economy

[fatdaddy411]

With the growth of the services section of our economy (80% of the economy on a whole and rising) what does this mean for the nation on a whole? Is it just me, or does an economy so reliant on services seem like kind of a house of cards? Without a firm industrial/manufacturing basis, isn't there no real basis for the existance of the service sector? These are just my uneducated views here, but I think it's an issue worth addressing.

[Seaver]

With the global economy we dont need to hold the industrial base in times of peace.

This is why we ensure that we hold the worlds most powerful Navy, our entire structure is dependant on free trade. If that falls yes we go into a deep deep depressions (followed by the world).

But as it stands our costs due to taxes/min. wage laws it is simply not worth it to produce in America for the simpler items, when it can be made for litterally cents on the dollar in under developed countries. Increases th standard of living here, but kills our industry. So we go to what we're good at, being businessmen and middlemen.

[hammer4all]

The same ol' same ol'. Rich elite get richer while the poor get poorer.

Manufacturing jobs move offshore only to be replaced by lower-paying service jobs and the economic classes will continue to diverge.

http://www.inequality.org/facts.html

[CoachAlan]

This same argument was made when people started to move into cities during the "great migration." People were concerned that our nation would fail without a solid backbone of family farming to support our economy. We didn't fail then, and we won't fail now. Part of this nation's strength is our ability to be ahead of the curve (really, to SET the curve) in international economics.

[pan6467]

A nation that does not manufacture its own goods and imports far more than it exports is doomed to economic suicide. The 2 main reasons are:

1) trade deficits the nation relying on imports becomes reliant on foreign whims (and as we have seen the importing countries will do ANYTHING they can to destroy what manufacturing we do have that can compete).

2) without controlling manufacturing we are faced with lower paying jobs but are supplied with more credit to artificially sustain the economy.

Eventually, when the foreign countries have depleted our industries and raised the trade deficits so high that we can no longer sustain the debt, they'll start taking what we as a nation put up as collaterol.

I am not an isolationist, BUT ifirmly believe we need to tax imports the way other countries tax our products. AND we need to make sure that other countries (like China) can no longer get away with stealing our patented products and sell them at cheaper prices. Also, IF you want to argue that we need a global economy, then you have to argue for a level playing field which means equal pay in every country, equal environmental, and work safety regs in every country. Because if you don't then it isn't a level playing field and unfortunately in about 20 years when the boomers are retired and the schools are totally bankrupted and healthcare is dead (unless you are rich) we will be faced with a depression and other countries taking everything we own that we will be a 3rd world country with nukes. Which with the mentality of some in this country I could see us using the nukes and starting wars to get us out of the hole we have dug ourselves into.

It maybe gloom and doom and you may laugh but I truly believe that the kids today will inherit a much much poorer country and politically lost country than we have today. That is disgraceful, already my generation inherits a country financially worse than what my parents had (which is the first time ever in the USA), and my kids will inherit a country worse than I did, and so on unless we bite the bullet and do whatever we need to, to end the mess and get back on the right track.

[jb2000]

I do think that there is a trend that will continue to see higher productivity and a shrinking workforce in industrial fields. It is not unlike agriculture. We get a lot more food from a lot fewer farmers today than years ago. Skipping a discusion of GM food and the chemical-sustinance of such farms, it none-the-less has freed a significant number of our workers for other pursuits besides food production. I see the same happening with industry.

As for the nation itself, there is some concern if foreign powers become capable of cutting us off from industry, but I think this is not likely. Our largest suppliers of industrial goods have been our most friendly partners diplomatically, or at least have never contemplated cutting us off for real. The only raw material which we have really had problems with is of course oil, but even there we have made do.

One might ask why industrial suppliers would cut us off, since it would have an equal effect on their economy as well. Also, we have a significant share of the world's mineral wealth. In a weird twist of classic colonial process, many of the products we import are made with raw materials we exported to the industries.

If they are a nation that we end up at war with, sure, but it would take quite a lot of nations to truly cause us to be deprived of access to products. Our military-industrial base remains protected, so it won't prevent us from prosecuting war.

In all I don't see much threat from nations trying to cut us off from industry.

I think the global trend will be for fewer people to be needed in agriculture and industry, and for more people to be free to pursue 'creative' careers. The problem is that 'creative' paths are not always open to all who seek them and thus they are forced to serve those who are successful just to survive.

[pan6467]

Originally posted by jb2000

As for the nation itself, there is some concern if foreign powers become capable of cutting us off from industry, but I think this is not likely. Our largest suppliers of industrial goods have been our most friendly partners diplomatically, or at least have never contemplated cutting us off for real. The only raw material which we have really had problems with is of course oil, but even there we have made do.

It amazes me when I hear this as our one of our largest trade deficit recipients is China. It boggles my mind when the same people who claim they are out to destroy us and that we must consider them an enemy say with straight face that a trade deficit with them is ok and just part of a new Global economy. We are subsidizing and heavily indebted to the very government we are told to be scared of, THAT IS A FACT.

Tell that to the US steel industry that is being destroyed because countries like China and Japan subsidize their steel to the point that we cannot in any way compete. Then just to make sure they tax ours into oblivion.

Tell that to companies like Gorman Rupp in Mansfield, Ohio, where they are close to laying off people for the first time in company histroy. They show losses mainly because the Chinese are stealing patent rights and selling exact parts much cheaper. Which if GR didn't hold the patents to might be ok, but now it's just piracy and our government does nothing to protect GR and their intellectual properties.

Tell that to the workers of car companies finding who find their jobs going to Mexico because the imports (like Hyundai, Kia) come in almost tax freewhile ours are taxed into oblivion.

If there is to be a "global economy" then there has to be a level playing field in taxes also.

I just don't understand the reasoning that it is ok to ship our industries overseas. Hell, even phone customer service is being shipped overseas.

We ship our industry overseas, we ship our jobs overseas and we run HUGE trade deficits and yet it is ok and all is going to be fine? I'd like to know how that is going to happen.

Without industry the citizens are faced with the taxes to make up for it and workers are making less also. Our educational system is bankrupt, our infrastructure falling apart because we don't have the money to fix it. Yet, everything is going to be ok? In standard of living, EDUCATION, money in savings, life expectancy, infant mortality rates, healthcare and on and on we ranked #1 when I was born we now rank as one of the lowest in the industrialized world. Yet, our country is getting better? How? where are the facts? Why are we falling behind and not setting standards like we used to?

[fatdaddy411]

Sure the military-industrial base is protected, but the rate of production from these lines is very low. What allowed us such success in World War II was the conversion of civilian manufacturing facilities to military output. More and more these days, that's becoming less and less of an option. Sink a few carriers, shoot down a few bombers and you've really hurt the United States's ability to project its power.

Perhaps we are at the leading edge of the global economic curve, but the industrialization and development of foreign countries like India and China puts them in a position to challenge us globally, doesn't it? So isn't developing them economically kind of shooting ourselves in the foot in the long run? Once they've caught up with us technologically and in terms of economic infrastructure, I see no reason why China couldn't be the dominant power of the 21st century.

[jb2000]

pan & fatdaddy,

Interesting points. Pan, I think you misunderstand what I was saying. I would certainly expect the kind of cutt-throat competition you express regarding cars and steel. However, what I was trying to say is that I don't expect those countries to deprive us of the access to the products. For example, many nations subsidize their steel industry (seen by many as one of the basics of being a 'real' power). They may indeed be driving American companies out of business (although it appears we are out of the worst of it for the moment). But they aren't trying to cut the US off from steel--to the contrary they are eager to sell us as much steel as we want. The same with cars: they may be competing with our car industry but not trying to make America lack access to cars, quite the contrary.

Fatdaddy, your points regarding military-industrial issues is right on. World War II was indeed an industrial war. It is hard to imagine what future conflicts will manifest as, but most folks who study military affairs feel that production rates of major weapon systems won't be a factor. The idea is that war (or at least the full-scale combat part) will be quick, with no opportunity to spool up industry. Add to that the challenge of rapidly training forces to use that technology, and we aren't going to see the same kind of build to fight strategy work.

World War II weapons were easy to make in converted factories, because they frankly weren't that different than civilian counterparts. Sure armor and munitions are unique, but still at their base they are mechanical, and thus the same factory that built Fords could be rapidly converted to build Shermans or P-51s. The same isn't true today. Are you going to convert a GMC Truck plant to start making F-15s or M1 Abrams? Not hardly. It would be probably easier to build a new plant from scratch.

Actually, we have probably better chance of creating a WWII-style building program for ships than any other modern weapon, because most of the ship is still not that different from back then. However, ships have always taken long periods to build, and that hasn't changed. If a war starts today, it doesn't matter what we do, we won't have a new carrier before the smoke clears.

In short I think the issues you raise are more a consequence of the new age of warfare, and not of anything we can do about maintaining industrial base.

What maintaining the military-industrial base does do is allow us to remain masters of our own equipment. They are our designs exactly to our spec. We can share with who we want when we want, and those wanting to have the best stuff have to come to us. It is kind of an indirect global military influence.

Yes, I do think that China and India are both potential powerhouses (they are now in some respects) which could challenge our global dominance in the future. But then we thought Japan was going to run away with it not too long ago. Granted, China and India have some advantages on Japan for more long-term growth, but disadvantages as well. I would have to say that most likely, the path followed by China and India will not be unlike the US and Japan, in that industrialization will fuel the development of their countries, but that in the end, their economies, like ours, will move beyond an industrial base to a more service and creative base.

[Seaver]

Good post JB you hit everything I was going to.

Our systems are WAY too complex to manufacture from a car factory now. They used to be made of aluminum and steel where now our tanks and planes are titanium (totally different process). Our ships used to be simple coal or combustion driven where now they are complex and sensitive turbine. Our weapons used to be steel and wood, now complex with microchips, internal guidance, and of a combination of metals.

Our effectiveness is infinately better than before, but this has the drawback that only highly specialized equipment can manufacture it. Losing a few car factories or textile mills wont affect what will happen in times of war.

[pan6467]

Originally posted by jb2000
pan & fatdaddy,

Interesting points. Pan, I think you misunderstand what I was saying. I would certainly expect the kind of cutt-throat competition you express regarding cars and steel. However, what I was trying to say is that I don't expect those countries to deprive us of the access to the products. For example, many nations subsidize their steel industry (seen by many as one of the basics of being a 'real' power). They may indeed be driving American companies out of business (although it appears we are out of the worst of it for the moment). But they aren't trying to cut the US off from steel--to the contrary they are eager to sell us as much steel as we want. The same with cars: they may be competing with our car industry but not trying to make America lack access to cars, quite the contrary.

You make good points in your whole post and I wish I could be so optimistic.

I post what you replied to me, but I do respect your opinion and gained some insight on your entire post.

Of course they don't deny the products to us, first they have to make us dependant upon them (which we aren't quite there yet, but getting there fast at the pace we are going) and secondly the trade deficit is still rising fast. We still are competing but barely. Once China has taken all it needs from us and our trade deficit with them is high enough, they can start calling in the debts. Then what do we do? No industry to speak of, low paying jobs, educationally behind everyone else, what do we do?

It's the newest warfare, and yes Japan started it but couldn't maintain the high levels solely because the Chinese saw what Japan was doing to us and said they could do it because they could pay far less wages and get away with pirating because they have no treaties that say they have to recognize patents and copyrights.

Unlike the Japanese I don't foresee China backing off global domination.

[cthulu23]

As China has recently joined the World Trade Organization, they will be forced into compliance with other international trade agreements. The steel tariffs that Bush pushed through a year or two ago were quickly rescinded largely due to pressure from the WTO. I personally despise the WTOs (unelected and undemocratic) power and influence over member countries, but you can expect that some of the most egregious trade policy imbalances will be addressed by it.

Here is a real world example of how the WTO works...France, another member nation, did not want to accept imports of American genetically engineered crops...the US sued through the WTO for restraint of trade and was able to set tariffs on other French products to offset the economic loss (products such as certain cheeses and wines).

Of course, organizations like the WTO and the World Bank have helped to fuel the global race to the bottom for workers, as they make their membership or loans contingent on neo-liberal trade policies and domestic belt tightening. You want a world bank loan? Better cut back production of food crops and start growing exportable commodities, denationalize industry and allow in foreign business and, while you're at it, privatize your water system. This creates an environment where countries compete with one another by lowering standards and pay to attract business, driving down working conditions and expectations globally. This is supply side on a massive scale, and it has done little to better the lot of the denizens of this planet.

[fatdaddy411]

China has a LOT of advantages Japan didn't have. Natural resources and a FAR larger population just to name a few. What's to stop the mutha's?

[jb2000]

Then what do we do? No industry to speak of, low paying jobs, educationally behind everyone else, what do we do?
[/B]

That's the real problem, isn't it? With the reduction of manufacturing jobs, people are freed to pursue creative careers, but these opportunities are not enough to be offered to all. With agricultural reductions, industry was there to pick up that labor and use it. But the same isn't true about the creative fields. They can't simply employ large-scale labor as it is reduced from manufacturing. Thus these people have to employ themselves in service jobs that are worse than their manufacturing positions.

This kind of regression is real problem, and for the global economy to be sustained, we will have to find better ways to employ this growing segment of the population.