America’s future: Service industries
April 18, 2012
These days I find myself reading more and more about business and economics – two subjects that I have avoided as much as possible all my life because their language held no charm for me. But I’ve taken myself in hand. The world is changing, and it’s costly to not be informed.
In the past whenever I read or heard anyone referring to a “service” industry, I automatically thought of someone who stands behind a counter, either to take my money for something I’ve bought or to collect a form I’ve had to fill out. This is, of course, a woefully inadequate and inaccurate image.
Recently I read an article in the New York Times, “Never Mind Factories. Think Services” (April 11), that speaks of engineering, law and finance as “high-skilled services” and states that services “increasingly dominate the economy.” Today, for instance, 70 percent of Americans work in service industries. This is an acknowledgment that the U.S. has an educated workforce. We do not really rely on manufacturing (on cheaper labor) to pump up our economy.
In fact, we export “more services than any other country in the world,” and in 2011 that added up to $612 billion. J. Bradford Jensen, an economist at the Peterson Institute for International Economics, says that we can do even better than that if we as a country (as a government) push more of our “tradable services.” At this point, I wondered how in the world one “exports” a service. We export cars, cookies, wheat. But a service?
Jensen gives examples. Countries that have been primitive, but are booming now economically, need to build roads, sewers, factories, airports, telecommunication networks and more. All these projects need “armies of architects, engineers, project managers, financial insurers.” In other words, these countries need educated, experienced people to help them, and we’re perfectly positioned to do it. If we were to go after these opportunities, this would mean about 3 million jobs for Americans. Since these jobs pay more than manufacturing jobs, it would help our own long-term economic goals.
Perfect, I thought. Why aren’t we moving in this direction? Global trade, whether it is cars or “services,” involves international diplomacy and interests. For example, in India foreigners are not allowed to own more than 26 percent equity in an insurance company, regardless of how much work they do. This is one way a country protects its own economic interest. It’s similar to the way tariffs work, except that tariffs are on goods and involve an across-the-board duty, or tax.
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China, for instance, makes it difficult for UPS International to do as much business as it could by tightly restricting the routes accessible to airplanes operated by foreign delivery services. China also restricts how much health insurance Cigna can sell there by allowing Cigna to expand into only one new province a year, and Cigna (with a Chinese partner) has been selling insurance there since 2003.
One economic study done in 2010 estimated that discrimination against service imports in the major new markets like China, India and Indonesia was effectively equivalent to a tariff on these imports of more than 60 percent. Gregs G. Thomopulos, a past president of the International Federation of Consulting Engineers, simply says: “It’s not a level playing field. We’re using American money, and we need to showcase American experience.”
There are businessmen who see retaliation as a solution. Economists point out that we need to have more-open borders with other countries so businesses can operate efficiently at home and abroad.
What strikes me is this: Japan has acknowledged that it can no longer rely on manufacturing to maintain its economy because China and South Korea are undercutting it by making cheaper products, and it shows signs of moving toward selling its service-industry skills. Japan has enlightened thinkers, and we need to take note.
Even here in Carson City, we can’t forget we’re part of the larger world. The old way of thinking about business, libraries, schools and our downtown is just not going to do it.
• Ursula Carlson, Ph.D., is professor emerita at Western Nevada College.