On Oct. 20, The Hoya printed a viewpoint (“Downsized American Productivity,” A2) written by professor Michael Duggan proposing that the decline of the industrial manufacturing economy in the United States and our movement toward a primarily service-based economy, represent an inherent flaw in our economic system. Duggan concluded that our lack of tangible output will perpetuate the economic recession in which we find ourselves entangled.
I disagree with Duggan, however, seeing as many of his main premises are flawed.
The idea that manufacturing economies are somehow more real than service economies is misleading. If one considers the history of any developed nation, one will note that it began with an industrial base and gradually moved into the service sector as the general population became richer, smarter and more skilled.
The United Kingdom was the first industrial economy to follow this progression and the United States was not far behind.
Though the idea of physical products in transactions may be psychologically more pleasing to some, a business transaction is no less legitimate whether it involves manufactured goods or intangible knowledge. In fact, Duggan should note that he is employed by a service industry – education – which accounts for 1 percent ($130 billion) of our gross domestic product. Knowledge cannot be produced in a factory, and you cannot hold it in your hand, but I think we all can agree that it is an essential product.
any of the best-known Fortune 500 companies in the United States are service-based corporations and they still make “products worth buying.” The historical success of Google or the financial sector, for example, proves that there is a dearth of possibilities in the market for services. Let us not forget that the service sector also includes security systems, computer technicians, pest control, waste disposal and lawyers, among other things. Without these basic services, the country would be unable to function.
Another myth that Duggan propagates is that during the industrial era, businessmen were noble and honest, caring to manufacture quality goods and pay their workers high wages, no matter the cost – and now, in the modern era, we have inexplicably lost that concern for workers and quality.
The reason the change is inexplicable is because it never happened. All the CEOs in the country did not wake up one morning and suddenly decide to stop caring about workers and product quality. Good business has always been about minimizing production costs. The notion that businessmen of the 1940s were not trying for the lowest production costs is naive. There have always been businesses that make quality goods and those that do not. In addition, there are firms that provide quality services and those that are less than reputable. Quality is reflected in the market price for those companies’ goods.
Jobs are being outsourced, but this is not because of changing business philosophies. Globalization, because of increased communication and decreased travel time, has made this practice possible. If the Internet had existed in the industrial era, the globalization trend would have begun much earlier.
A key part of the globalization movement is trade. The gray area between protectionism and free trade that Duggan promotes is ill-defined and a bad idea. The reality is that all tariffs and quotas have adverse effects on the world economy. They incite tariff wars and derail the working principles of economics. Forcing the world to “pony up” to do business will not work. According to the basic laws of economics, countries will just go elsewhere to buy their goods. We cannot single-handedly raise the market price of goods in the global economy. Those prices are controlled by forces beyond our control: the demand of every buyer on earth. Increased globalization means increased competition. And that means the lowest price will prevail. If we refuse to compete, we will lose.
Our industrial roots are far from dead. We remain the second-largest manufacturer in the world, running a close second to China. Nonetheless, the shift in the U.S. economy to the service sector is a mark of its strength, not weakness. Only rich countries can have service economies. The service sector requires skill and education, luxuries that only can exist in healthy economies.
If our economy had remained based in manufacturing, the United States would be a different country. We would have a small, weak economy that would be unable to compete on a global level, producing overpriced products that could not be sold. Despite this current economic decline, America has a solid foundation from which to recover.
Glenn Russo is a freshman in the College and an editorial assistant for The Hoya.
*To send a letter to the editor on a recent campus issue or Hoya story or a viewpoint on any topic, contact [opinionthehoya.com](opinionthehoya.com). Letters should not exceed 300 words, and viewpoints should be between 600 to 800 words.*”