Since there is much talk today about outsourcing jobs, I thought this piece might be of interest. I first posted it about 18 months ago, so please forgive if any of the stats or other is dated.
The United States is racing to be the first post-industrial nation in history. This journey is being driven by social theorists using our great Country as an experimental lab to test their socio-economic theories. This theory holds a large and complex country such as America can exist and prosper as a services economy. In support of this notion there exists no empirical data, just theory since we will be the first post-industrial nation ever. Such thinking will surely drive us to become a third world banana republic that does not even have any bananas.
Until a few decades ago, we were the most powerful, proficient, innovative, entrepreneurial and dominant manufacturing juggernaut the world has ever known. We instituted mass production of most major products. After discovery we developed applications and efficient techniques to manufacture the light bulb, the automobile, airplanes, radio, television, trains, transistors, lasers, computers, weapons and the whole of space hardware. Now, we have essentially no manufacturing sources for shoes, clothes, consumer electronics or steel for example. Cell phone sales are over one billion units a year. We manufacture exactly zero of these devices although we pioneered the concept and implementation of cellular phone service.
Our balance of trade deficit is presently running in the area of $600 to $800 billion a year with no reduction in sight. This, of course, means we import this amount more than the value of what we export. This is not sustainable. Carried to its obvious end, all our money will be sent abroad and we will not have the means to buy further imports. We can only pay for imports with exports. For the United States to buy imports, we must have tangible products to sell abroad. Such products are manufactured goods, agriculture products and raw material we mine within our borders.
As we ship jobs overseas we not only increase unemployment here, we also export our technology. By so doing we insure that long term, developing countries will expand their manufacturing capabilities by using our technology. For example if we manufacture automobiles in a foreign country we obviously teach those countries involved how to efficiently make automobiles. This carried to its ultimate will offer usually cheaper products, but with each wave of jobs exports we weaken the ability of our citizens to buy the imported goods at any price so the exporting countries will lose the biggest consumer market in the history of the planet!
While countries like the Cayman Islands, Bahrain, formally Hong Kong and others may be able to survive and prosper as a service economy, we as a large, diverse and complex society cannot. Imagine if you will what would have happened in WWII if we had not been a highly industrialized and efficient manufacturing country. Imagine we have to import all manufactured products. As is well established, every manufacturing job creates two and a half to three and a half service jobs. We must have a manufacturing base of 25-30 percent of GNP. Services are necessary in our economy, but we simply cannot export haircuts.