Quick question here.
Why is everyone going off the assumption that services are not the way to grow and distribute wealth? Why is so many people I've seen so focused on manufacturing primarily?
Step back and think about the concept abstractly for a moment. Start simple. What is economics? Very simply glossed into to economics 101. The reason I am putting this bit here is because I think too many posters here have their heads wrapped around talking points, ideology, personal stakes, and maybe whatever agenda they are trying to push. As such, I beg forgiveness for the length of this post I am about to make, but I think it's warranted considering some of what I've read.
Definition - Economics is the social science that is concerned with the production, distribution, and consumption of goods and services.
Goods and services are listed in the definition. However, does it have to be primarily focused on one or the other or even both? Economics is societies way of making as many individuals that make up the society productive, able to contribute, and happy. Whether it was the old barter system of haggling how many chickens a cow was worth, or using money as basically IOU, the purpose of the system is that no one person can completely provide everything in life they possibly need and do it efficiently. Some people are inherently good or better at doing one thing that may be used or desired by someone else who has something they can do back. It may be a simple exchange, but in today's economy it usually is not.
The problem with any economy is determining value. What is anything really worth? An obvious answer is something that is needed or wanted by more people is worth more. Hence part of the foundation for our current economy. The laws of supply and demand. I won't go into text book details, but suffice it say, when it comes to the interaction of human beings in society, there is always a supply and a demand. Not every interaction is monetarily based or has assigned values, but every interaction between two humans is a subset of supply and demand. Just talking with someone else is taking away someone's supply of time.
The biggest problem with supply and demand is that it works best based on trust. That means there is a weakness to the supply and demand model in that it can be manipulated. If I have a supply of something I want to sell, but there is no demand, it is technically worthless. But if I can figure out how to drum up demand, then I increase it's value. If I then pretend the supply is less than what it is and can successfully do so while increasing demand, I can increase the value even more. This is what causes imbalances in the economy and economic system. Especially when others try to do the same thing with the same product. More and more creative ways are conjured to keep demand high and supply "low" to give the illusion of more value than something is really worth. This is were laws and regulation come into effect to prevent imbalances to a certain.
Anyhow, back to my original question. Why must the economy of a society be based on tangible products only? The point of a healthy economy isn't what the supply is, but that there is a supply of something and that it has a demand so things get exchanged. A perfectly healthy economy can subsist on services only.
I will state that people need and want "things" that are tangible goods. Demand for goods doesn't go down. It just changes over time of what goods are in demand. One day everyone wants a blue shirt. The next day green. This comes to the second hard point of dealing with tangible goods as a basis for an economy. Change. When people want blue shirts and someone makes them for the demand, all is gravy. If the demand changes to green and the supplier can switch easily enough from producing blue to green, all is still gravy. But if demand for shirts goes away and everyone wants spoons the next day... well the shirt maker is looking forward to a tough time if he can't convert. I know I'm being overly simplistic here, but the point I'm trying to make is manufacturing is not as adaptable or flexible as services. Not only that, the person that makes the worlds first Thingamabob to sell to the world needs to figure out how to sell it in the first place. Where is demand for a brand new product? How does it enter the economy? Basically, goods, while important to an economy can causes many ups and downs as demand and supplies fluctuate much more rapidly for them. Not only that, there is always someone out there looking to provide the same goods cheaper, better, and faster. Great in some ways and bad in others.
Intangibles are harder to give a more objective designation on value than goods at least. That is their failing. There are methods in place to help narrow down the value to related services though. Does it take more education? What is the time factor? How many others are willing to provide the same service? There are other problems with services in a supply and demand based economy, just as there are problems with tangible goods.
The point I was trying to make out of all of this is there is nothing inherently good or bad with having an economy centric on services, goods, or both. Demand drives all in the end. If Americans want to stay competitive with Chinese in a goods based economy, they will have to find a way to drive up demand for what they offer. Arbitrary regulation forcing American only goods or services does no one any good in the long run. Sure other countries are getting some money sent their way from goods and services we are buying from them. But if the problem is too much is going out and not enough is coming back from them, then we just need to find something they want to buy. Again, the economy in action. Oh by the way, many foreign countries pay America tons of cash for various things from authentic "American" clothing, to our music, to our movies, to using our military to help protect them.
Also, America does have a fairly healthy manufacturing side to it still. We make tons of desktop computer chips as an example. If you want America to be a manufacturing center of the world again, it is not going to be from making cheap lead painted action figures or spoons. It is going to be making very complex goods that other countries lack the skilled labor to produce.
Now back to the regular discussion about the shrinking middle class.
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