# What's so bad about a "service economy" **URL:** \ **Category:** Great Debates\ **Created:** [December 3, 2008, 9:42pm UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571 "2008-12-03T21:42:51Z")\ **Posts on this page:** 20\ **Page:** 4
**Author:** ![Markxxx](https://avatars.discourse-cdn.com/v4/letter/m/5daacb/32.png) [@Markxxx](https://boards.straightdope.com/u/Markxxx)\ **Post date:** [December 4, 2008, 10:38pm UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/61 "2008-12-04T22:38:53Z")
Part of the problem with a service economy is there is no way to put an absolute on the value of the company. For instance look at GM, they make cars. Supposing tomorrow everyone stops buying cars. OK GM is broke, but even then the cars that they produce have a value, even if it will only be scrap metal. So someone could say OK at worst GM folds we sell all the cars for scrap and the stock market value of GM is 5¢. All people would look at this an agree, because the price of scrap has a definate value. But look at Google, it’s an idea? How do you put a value on an idea. Someone might say, Google’s algorithm is fine today, but look at AltaVista that was the “Google” of it’s day, now it’s gone. So they value Google at say $100.00/share. Another person says “That was the early days of the Internet and now Google’s too strong to every be upsurped.” So this guy puts Google at $300/share. Who’s right? Who knows? And how do you put a worst case senerio value on an algorithm? ---
**Author:** ![treis](https://avatars.discourse-cdn.com/v4/letter/t/bc79bd/32.png) [@treis](https://boards.straightdope.com/u/treis)\ **Post date:** [December 5, 2008, 12:03am UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/62 "2008-12-05T00:03:20Z")
> [@msmith537](#): > > The problem with a “service economy” which I don’t think has been touched on, is that IMHO, it creates an entire economy of “bullshit”. We pay millions of lawyers, bankers, accountants and consultants to shift numbers around a spreadsheet or make new rules for shifting those numbers around. What we are experiencing now in the economy is largely due to a series of massive accounting errors. Ah yes, the useless consultant. A Dilbert classic. Yeah, there are some useless people, but in reality most of those people that have a job produce something in order to keep that job. [QUOTE=Ruminator] I’d like to respond to the rest of your comments but for now I’m most curious about this aspect. Do you believe Gross Domestic Product (GDP) is the best indicator of true wealth and sustainability of that wealth? If not, what are its flaws? If GDP has no flaws but maybe should be combined with other indicators, what would those other indicators be? I will withhold my opinion because I don’t want to taint your thoughts on this. [/quote] Yeah, I’d say GDP is the best measure of wealth. You can monkey around with things like savings rates and what not, but a significant gap in GDP outweighs these tings. [QUOTE=Markxxx] Part of the problem with a service economy is there is no way to put an absolute on the value of the company. For instance look at GM, they make cars. Supposing tomorrow everyone stops buying cars. OK GM is broke, but even then the cars that they produce have a value, even if it will only be scrap metal. So someone could say OK at worst GM folds we sell all the cars for scrap and the stock market value of GM is 5¢. All people would look at this an agree, because the price of scrap has a definate value. But look at Google, it’s an idea? How do you put a value on an idea. Someone might say, Google’s algorithm is fine today, but look at AltaVista that was the “Google” of it’s day, now it’s gone. So they value Google at say $100.00/share. Another person says “That was the early days of the Internet and now Google’s too strong to every be upsurped.” So this guy puts Google at $300/share. Who’s right? Who knows? And how do you put a worst case senerio value on an algorithm? [/quote] In reality, GM’s wealth is based on ideas as well. Google has land, server farms, and office equipment. It’s true that GM has more stuff, and would likely have a higher scrap value, but the real value in GM is in ideas just as it is Google. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [December 5, 2008, 1:08am UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/63 "2008-12-05T01:08:18Z")
[http://www.youtube.com/watch?v=U7YBjjLKLd0](http://www.youtube.com/watch?v=U7YBjjLKLd0) Here is what McCotter said in congress. ---
**Author:** ![pancakes3](https://avatars.discourse-cdn.com/v4/letter/p/ba9def/32.png) [@pancakes3](https://boards.straightdope.com/u/pancakes3)\ **Post date:** [December 5, 2008, 2:37am UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/64 "2008-12-05T02:37:30Z")
I think it’s pretty simple how GDP is calculated and thus pretty simple to see what GDP represents. GDP = C + I + G + (X-M). It’s meant to represent the value of goods and services produced in a nation, and for most purposes, it’s a very good estimate. However, it sounds like the argument is if GDP can be construed as “wealth” and sustainability of “wealth.” No, I wouldn’t say it reflects wealth very well because it neglects the savings aspect of money management, which cuts out a lot of the dollars from the equation. However it does quantify the “sustainability” of wealth rather well because the metric of GDP is how much a nation has produced in terms of goods and services - generation of new wealth. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [December 5, 2008, 5:26am UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/65 "2008-12-05T05:26:30Z")
> [@Ruminator](#): > > Foreign capital in-and-of-itself is not evil… but people have to pause and analyze **why** the USA got itself into a situation that it needs so much of it. It then has to analyze if that particular “why” is sustainable and healthy. It’s not that the US “needs” so much of it. It’s that foreign investors see a lot of opportunity in investing in the US economy. People generally aren’t in the habit of investing in things they don’t think will provide a return on that investment. > [@treis](#): > > Ah yes, the useless consultant. A Dilbert classic. Yeah, there are some useless people, but in reality most of those people that have a job produce something in order to keep that job. Mostly they produce advice and paperwork. ---
**Author:** ![Declan](https://avatars.discourse-cdn.com/v4/letter/d/ecae2f/32.png) [@Declan](https://boards.straightdope.com/u/Declan)\ **Post date:** [December 5, 2008, 7:23am UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/66 "2008-12-05T07:23:03Z")
> [@Justin\_Bailey](#): > > With all the economic trouble in the news lately, I’ve been pondering a question I occasionally ponder: what’s so bad about a service economy? Nothing is wrong with it , we already have a service economy. Its parasitic to the manufacturing economy in most places in North America. What some people have mentioned upstream is that basically we are providing welfare to the rest of the world to upgrade their economies and middle class so they can buy widgets and blingable. North America and Europe are legacy economies that you can only make so much money on , while if you can get a percentage of China or India’s population you can make a kings ramsom every year selling stuff. The only barrier is money, they individually do not have it or access to it. My boss said a few days ago , when we got nailed with a pay cut that GM is expected to sell 10 million cars , down from a high of 17 million cars and trucks. Think about that number for a second , 10 million , it sound like a lot but when your talking about an agregate population of 2 billion people , selling 50 million cars is not to be laughed at. Add Mexico and South America with wage parity of North America and its worth it for the globals to strip mine North America for anything manufacturable and send it to the poor benighted people down there, so they can send their kids to college and enjoy the good life. So at our expense , the corparates have decided not to wait for the poor benighted peoples of the world to actually get their act together, and pull them up with our bootstraps. Service economy as a primary economy is being brought to you by the same people that have screwed up the banking system. Declan ---
**Author:** ![UltraVires](https://avatars.discourse-cdn.com/v4/letter/u/ecccb3/32.png) [@UltraVires](https://boards.straightdope.com/u/UltraVires)\ **Post date:** [December 5, 2008, 1:42pm UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/67 "2008-12-05T13:42:07Z")
> [@Ruminator](#): > > It’s a crazy psychological puzzle that’s hard to rationalize. Anyways, that American will not use the $5000 to buy parts and build in his garage the next great invention for the world market will buy. No, he’ll take that $5000 and blow it all on useless crap. Another $5000 credit-card offer will come in the mail and he’ll repeat the cycle. Multiply that scenario times millions of consumers. I’ve never understood the “useless crap” argument. These are simply moral judgements. If I take $5000 off of my credit card and buy lapdances and drinks at the local strip club, you could make a moral judgement and say that they money should have been spent on my family, or even not borrowed at all, but.. There is now $5000 in the economy that wasn’t there before. The strip club owner, the bartenders, and the dancers now have money in their pockets that they can take to the grocery store to buy food for their families, giving the grocer money to support his family, etc. The whole idea of an economic system is to funnel money from those who have an excess to lend it to people who have a shortgage, no? ---
**Author:** ![Throatwarbler\_Mangrove](https://avatars.discourse-cdn.com/v4/letter/t/8c91f0/32.png) [@Throatwarbler\_Mangrove](https://boards.straightdope.com/u/Throatwarbler_Mangrove)\ **Post date:** [December 5, 2008, 1:53pm UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/68 "2008-12-05T13:53:06Z")
The who idea that if you’re not either a worker or a peasant you must be useless has already been tried out in the Communist countries. People like those in this thread have actually come to power in those places and gotten rid of everyone who isn’t physically producing tanks/tractors/Kalashnikovs, because who needs those other guys, right? ---
**Author:** ![haymarketmartyr](https://avatars.discourse-cdn.com/v4/letter/h/35a633/32.png) [@haymarketmartyr](https://boards.straightdope.com/u/haymarketmartyr)\ **Post date:** [December 5, 2008, 1:53pm UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/69 "2008-12-05T13:53:29Z")
For those who see nothing wrong with this service economy… please tell me this … the USA is the only superpower left in the world. If we continue on this road to rid ourselves of our manufacturing capabilities, and we get into a major war somewhere down the road lets say with China - do we expect the Chinese to make weapons for us to use against them? One of the reasons the USA was in a position to help win World War II was because we were the Arsenal of Democracy. Our industrial and manufacturing sector helped win that war just as much as soldiers in Europe, Africa and Asia. And one other thing… where do some here get the idea that it is some sort of given that education equates with higher earning power and lack of formal education should shackle someone to bottom of the barrel wages? It is snobbish and elitist to think that a degree entitles you or anyone to a better life that someone who does not have a degree. What ever happened to getting an education as its own end? ---
**Author:** ![treis](https://avatars.discourse-cdn.com/v4/letter/t/bc79bd/32.png) [@treis](https://boards.straightdope.com/u/treis)\ **Post date:** [December 5, 2008, 1:56pm UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/70 "2008-12-05T13:56:02Z")
> [@msmith537](#): > > Mostly they produce advice and paperwork. That’s all I do, and it undoubtedly saves money for the customer. ---
**Author:** ![treis](https://avatars.discourse-cdn.com/v4/letter/t/bc79bd/32.png) [@treis](https://boards.straightdope.com/u/treis)\ **Post date:** [December 5, 2008, 2:03pm UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/71 "2008-12-05T14:03:52Z")
> [@haymarketmartyr](#): > > For those who see nothing wrong with this service economy… please tell me this … the USA is the only superpower left in the world. If we continue on this road to rid ourselves of our manufacturing capabilities, and we get into a major war somewhere down the road lets say with China - do we expect the Chinese to make weapons for us to use against them? > > One of the reasons the USA was in a position to help win World War II was because we were the Arsenal of Democracy. Our industrial and manufacturing sector helped win that war just as much as soldiers in Europe, Africa and Asia. I don’t think we are going to start outsourcing our F-22s to China anytime soon. Besides, advanced technology is what wins wars today, not numerical superiority. Which country is going to have better technology? The one with 90 scientists and 10 line workers, or the one with 90 line workers and 10 scientists? > [@haymarketmartyr](#): > > And one other thing… where do some here get the idea that it is some sort of given that education equates with higher earning power and lack of formal education should shackle someone to bottom of the barrel wages? > > It is snobbish and elitist to think that a degree entitles you or anyone to a better life that someone who does not have a degree. What ever happened to getting an education as its own end? Education increases the amount of marketable skills you have. It makes you more productive as a worker, and thus, more likely to garner a higher wage. ---
**Author:** ![Throatwarbler\_Mangrove](https://avatars.discourse-cdn.com/v4/letter/t/8c91f0/32.png) [@Throatwarbler\_Mangrove](https://boards.straightdope.com/u/Throatwarbler_Mangrove)\ **Post date:** [December 5, 2008, 2:31pm UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/72 "2008-12-05T14:31:30Z")
> [@haymarketmartyr](#): > > For those who see nothing wrong with this service economy… please tell me this … the USA is the only superpower left in the world. If we continue on this road to rid ourselves of our manufacturing capabilities, and we get into a major war somewhere down the road lets say with China - do we expect the Chinese to make weapons for us to use against them? > > One of the reasons the USA was in a position to help win World War II was because we were the Arsenal of Democracy. Our industrial and manufacturing sector helped win that war just as much as soldiers in Europe, Africa and Asia. I wish people would stop suggesting this as a plausible scenario. Look, I can’t think of ANY reason why a “major war” between 2 nuclear powers would not result in a massive exchange of nuclear weapons. So don’t worry about it too much, OK? In any case, US manufacturing output has been rising for the last 20 years and is still rising steadily, so the whole premise is bullshit anyway. ---
**Author:** ![haymarketmartyr](https://avatars.discourse-cdn.com/v4/letter/h/35a633/32.png) [@haymarketmartyr](https://boards.straightdope.com/u/haymarketmartyr)\ **Post date:** [December 5, 2008, 2:50pm UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/73 "2008-12-05T14:50:53Z")
> [@](#): > > So don’t worry about it too much, OK? Is it better to worry about abstract economic theory that usually does not work in the real world anyways? ---
**Author:** ![CalMeacham](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/calmeacham/32/35_2.png) [@CalMeacham](https://boards.straightdope.com/u/CalMeacham)\ **Post date:** [December 5, 2008, 3:00pm UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/74 "2008-12-05T15:00:51Z")
> [@](#): > > I don’t think we are going to start outsourcing our F-22s to China anytime soon. Besides, advanced technology is what wins wars today, not numerical superiority. Which country is going to have better technology? The one with 90 scientists and 10 line workers, or the one with 90 line workers and 10 scientists? Now that R&D is being outsourced to Eastern Europe, India, and – yes! – China, how long do you think it’s likely that China will only have 10 scientists? Or that the US will continue to have 90? ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [December 5, 2008, 3:32pm UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/75 "2008-12-05T15:32:36Z")
> [@treis](#): > > That’s all I do, and it undoubtedly saves money for the customer. Yeah. What do you think I do all day? I surf the web and create “strategy assessments” that no one reads or acts on. Anyhow my point isn’t that consultants are useless. I’m thinking to my own experience. For the past 4 years I worked in a billion dollar consulting firm that specializes in advising law firms on things like corporate restructuring, computer and financial forensics, economic consulting, PR and whatnot so they can advise their Fortune 1000 and investment bank clients. In my mind I’m thinking, we are spending billions of dollars on what basically amounts to gloming off fucked up companies. Would that money be better off curing cancer or developing a longer lasting light bulb or some shit? ---
**Author:** ![treis](https://avatars.discourse-cdn.com/v4/letter/t/bc79bd/32.png) [@treis](https://boards.straightdope.com/u/treis)\ **Post date:** [December 5, 2008, 3:36pm UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/76 "2008-12-05T15:36:23Z")
> [@CalMeacham](#): > > Now that R&D is being outsourced to Eastern Europe, India, and – yes! – China, how long do you think it’s likely that China will only have 10 scientists? Or that the US will continue to have 90? So long as we are a service economy and they are a manufacturing one. The amount of R&D (and manufacturing for that matter) that is being sent overseas is overblown. Tell me, what is the last significant invention or breakthrough that has come out of China? As a practical matter, yeah, if China or India ever catches up to us in innovation, domestic tranquility, honest governance, expertise, education, etc. etc. we are pretty fucked. It’s simple math. They have 1 billion people, and we have .3 billion people. However, it seems like both of those countries will be sandbagged by poor education and inefficient government for the foreseeable future. ---
**Author:** ![haymarketmartyr](https://avatars.discourse-cdn.com/v4/letter/h/35a633/32.png) [@haymarketmartyr](https://boards.straightdope.com/u/haymarketmartyr)\ **Post date:** [December 5, 2008, 3:43pm UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/77 "2008-12-05T15:43:10Z")
Treis - I am sure we will export experts in all those areas to help them catch up in the not too distant future. We do it with everything else. ---
**Author:** ![CalMeacham](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/calmeacham/32/35_2.png) [@CalMeacham](https://boards.straightdope.com/u/CalMeacham)\ **Post date:** [December 5, 2008, 4:22pm UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/78 "2008-12-05T16:22:21Z")
> [@](#): > > Tell me, what is the last significant invention or breakthrough that has come out of China? I don’t know – most invrentions get pretty quietly implemented, not brought out with huge fanfare. As a practical matter, China has had a HUGE increase in the numbers of patents filed and granted in the past few years, and is now one of the world’s highest ranking patent nations, following close behind the US and Japan. > [@](#): > > China sees sharp rise in patent filings > Last Updated: Monday, October 16, 2006 | 2:16 PM ET > CBC News > The number of patents filed in China has increased by more than six times in a decade — an important indicator of technology flow, say intellectual property experts. > > The UN’s World Intellectual Property Organization said on Monday that more than 130,000 applications from Chinese and foreigners were filed with Beijing in 2004, the last year for which figures are available. > > That puts China in fifth place in the total number filed, behind Japan, the United States, the European Patent Office and South Korea. [http://www.cbc.ca/technology/story/2006/10/16/patents.html?ref=rss](http://www.cbc.ca/technology/story/2006/10/16/patents.html?ref=rss) > [@](#): > > Watch Out, America: China Files 700,000 Applications in 2007 > > Friday, May 16, 2008 > by: Harold Wegner > > This year China becomes the first country to break the 700,000 patent filings per year barrier, far outstripping No. 2 Japan and far outdistancing every other country in the world in terms of domestic patent filings. > > Pan-European Intellectual Property Summit 2008 > > Statistics available for the year 2007 from SIPO – China’s national patent office in Beijing – demonstrate a remarkable increase in the number of patent filings that approached an annual rate of 700,000 filings per year. [http://www.ipfrontline.com/depts/article.asp?id=19059&deptid=5](http://www.ipfrontline.com/depts/article.asp?id=19059&deptid=5) > [@](#): > > China sees sharp rise in patent requests - UN > 08.09.07, 3:12 PM ET > > Popular Videos > > Tinseltown’s Most Influential > Over 50 And Filthy Rich > Mass Layoffs > Post-election Taxes > New York In Crisis > > Most Popular Stories > > Saudi Arabia’s Next Act > The Lithium Gold Rush > Visit Iceland–It’s On Sale > Entrepreneurs Who Rose From The Ashes > McDonald’s Recession-Proof Menu > > GENEVA (Thomson Financial) - China has seen a sharp increase in requests for patents, giving it the world’s third-highest number behind Japan and the United States, the UN’s intellectual property agency said on Friday. > > The number of requests for patents in China grew by 33 pct in 2005 compared to the previous year, the World Intellectual Property Organisation said in a report. > > Requests grew by 4.7 pct worldwide, it said. > > China’s numbers for 2005 contributed to decade-long growth, with the number of patent requests from residents of the country multiplying by more than eight between 1995 and 2005. > > South Korea has also seen a solid increase, with the number of requests over that same period doubling. > > ‘It is now very much the expectation that countries like China and Republic of Korea will continue their rapid developments in innovation,’ said Francis Gurry, deputy director general for the agency. [http://www.forbes.com/markets/feeds/afx/2007/08/09/afx4004973.html](http://www.forbes.com/markets/feeds/afx/2007/08/09/afx4004973.html) With companies like Bell Labs and Intel starting R&D Labs in China, I’d expect to see this trend continue. ---
**Author:** ![tagos](https://avatars.discourse-cdn.com/v4/letter/t/bbe5ce/32.png) [@tagos](https://boards.straightdope.com/u/tagos)\ **Post date:** [December 5, 2008, 4:27pm UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/79 "2008-12-05T16:27:50Z")
> [@treis](#): > > However, it seems like both of those countries will be sandbagged by poor education and inefficient government for the foreseeable future. And of course we’re not plagued by any of these. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [December 5, 2008, 5:10pm UTC](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571/80 "2008-12-05T17:10:06Z")
An industrial base is a significant part of invention. There are a lot of people who try to improve assembly process and the product itself. Believe it, if we quit manufacturing we will fall way behind. Technology is an ongoing process. Every thing is scrutinized over and over. There is nothing that escapes careful analysis. To let that die would be a horrible mistake. [Previous page](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571.md?page=3) [Next page](https://boards.straightdope.com/t/whats-so-bad-about-a-service-economy/475571.md?page=5)