Anyone wondering about the long term future of the US economy should take a look at the chart below. It shows the unrelenting growth of services’ share of American GDP growing from 25% to 45% over the last sixty years.
Far and away the fastest growth area has been in health care, and with the first Obamacare programs starting in September, that growth is set to accelerate. Financial services have also been a serious growth creator, for better or for worse. You can turn the chart upside down and the shrinkage in our manufacturing base is equally illustrated.
This is not necessarily a bad thing. Would you rather be mining coal or designing a website? These statistics make us the envy of the world, as services is where the future lies. By creating so many key technologies, our country has been the most successful in climbing up the global value chain.
Services largely comprise pure intellectual content, require no raw materials, and the end product can be transmitted over the Internet. There is a reason why nearly a million foreign students have flocked to the US for an education. Emerging nations like China and South Korea, which only see services generating 10%-15% of their GDP, are wracking their brains trying to figure out how to play catch up.