America’s Trade Cannot Rely on Services
Foreign Companies Are Buying Out The U.S. Through Our Trade Deficit
Over the past 37 years, we have been giving dollars to foreign countries and they have been giving us finished consumer goods. We can directly see the result of this in our trade balance, which has been negative since 1975. Regardless of whether the funds went toward the foreign buyout of U.S. firms or to fund the expansion of foreign economies, it is clear that America’s wealth has transferred. This has been particularly evidenced by the massive increase in foreign direct investment over the past 15 years which has resulted in an equally large net international investment deficit by the U.S. over the same period. Basically, they have given us luxury cars; we have given them the keys to our factories.
The U.S. Must Invest In Domestically-Owned, Tradable Production
When foreign countries decide to stop accepting dollars in exchange for consumer goods, what guarantee is there that they will come to this country to buy goods and services? We don’t make anything that they want now or fail to do so at a competitive price (as evidenced by the trade deficit).
Will our labor rates and working conditions need to recede to those of China, India, or Mexico before America finally sees a resurgence in jobs? How will we pay for this? What will Americans have to sacrifice?
We were competitive with the rest of the world when the rest of the world was not functional after WWII, the rest of the world was destroyed and we were the only game in town. Things are very different now.
Massive Amounts of American Dollars Are Being Spent On Imports
To say that too many of our dollars are spent on imported manufactured goods is an understatement. In some industries such as electronics, computers, transportation equipment and machinery, the amount spent on foreign goods gets even higher.
The U.S. Service Economy Cannot Keep Our Country Afloat Indefinitely
Many feel that the transition to a service-based economy heralds a new and prosperous future for the U.S. As far as services vs. goods industries, there are many differences that are clearly obvious. Regardless of these differences, however, it should be noted that our services surplus with the rest of the world only accounts for less than 10 percent of our goods deficit. In other words, our goods deficit is 10 times larger than our services surplus which should indicate our ability to sustain global trade on the basis of a service economy.
- Services don’t export as well as goods – retail, hospitality, health care, government, and education are all local businesses. These make up much of the services industry.
- Services are labor-intensive and not capital-intensive, therefore easy to relocate and outsource. Computer and electrical engineering, R&D and science, law, advertising and accounting are all being outsourced. This has been seen as our jobs have been outsourced to India.
- Services require tremendous training and expertise – to be an expert in a field of service it requires expensive training for a long period of time and requires a high level of intelligence – not everyone will be capable of being an “expert.”
- Services are not as “value added” – compare retail workers in WalMart to factory workers at GM: one is ringing up a finished product at a check-out counter and the other is helping to turn raw materials into a finished product that can be sold anywhere in the world.
- Services cannot leverage capital – the amount of machines and technology used in goods production is much greater than in services these machines have the benefit of hundreds of thousands of hours of refinement and efficiency and can be run night and day whereas services businesses are limited by the productivity, efficiency and skill of single-generation humans.