value of Manufactured goods vs. Services

[Pianist4Freedom]

I asked myself a simple question the other day: What do I use on a daily basis to save me time and effort? Goods, or services? The obvious answer is goods. My car, my computer, electricity (is that a good or a service...?), the refrigerator, video games, cell phone, on and on and on.

What I'm getting at is, if what many of you are saying is true---our manufacturing base here in the USA is nowhere near robust enough to pay our trade deficit. And what legitimate service exports we have is probably not very much.

Basically, I wish I could find some hard facts about the size of various parts of our economy.

Also...to what degree does insourcing play a role in all this?

 

[Zippyjuan]

In a free market economy, the production of goods will move to wherever they can be made at the lowest cost. A couple decades ago that was Japan and now it is China. Outsourcing is done to save money for a manufacturer. This lets them either retain more profits or lower the price of their goods to better compete with alternatives. Consumers get to buy goods at lower prices. This also puts downward pressure on wages in the original country (say the US) if they want to compete and retain the jobs to make those goods.

A trade deficit is not in and of itself necessarily a bad thing. In the past, we ran a trade deficit because we had surplus income and demanded more things than we could produce ourselves. We had a greater surplus demand than other countries so we imported more than we exported. This was a sign of a healthy economy and that we were doing better than other countries economically speaking.

But now, rather than supplementing our domestic production, we are relying more and more on other countries to produce much of what we consume. Not because we lack the ability to produce, but because others can do it cheaper.

Some information about the composition of our economy: http://usinfo.state.gov/products/pubs/economy-in-brief/page3.html

Services produced by private industry accounted for 67.8 percent of U.S. gross domestic product in 2006, with real estate and financial services such as banking, insurance, and investment on top. Some other categories of services are wholesale and retail sales; transportation; health care; legal, scientific, and management services; education; arts; entertainment; recreation; hotels and other accommodation; restaurants, bars, and other food and beverage services.

Production of goods accounted for 19.8 percent of GDP: manufacturing—such as computers, autos, aircraft, machinery—12.1 percent; construction, 4.9 percent; oil and gas drilling and other mining, 1.9 percent; agriculture, less than 1 percent.

Federal, state, and local governments accounted for the rest—12.4 percent of GDP.

 

[Acala]

unemployment

It should be noted that in the government's latest unemployment report - the one that was spun by the media as not as bad as expected - the dramatic job losses were in manufacturing, construction and retail sales while the job gains that made the totals look "not so bad" were in government, education and health care.

In other words, what is left of the American producers and retailers of goods are taking it in the shorts while the government and the businesses it subsidizes most heavily are soaking up the money government is borrowing and creating.