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?
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.
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.
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.
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.
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.
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.
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?
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?
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?
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?
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.
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.
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?
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?
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.
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.
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.