Sunday, May 1, 2011

Manufacturing and GDP


This chart is a complement to an excellent post by Mark Perry which shows and explains how manufacturing has been shrinking as a share of both U.S. and world GDP for decades, and another post of his which shows the dramatic gains in worker productivity that have enabled manufacturing to decline as a share of total economic activity, even as total manufacturing output, economic activity and living standards have boomed. The chart above highlights how China is an exception to the rule, since manufacturing as a share of China's GDP has been relatively stable for the past four decades.

In this same vein, I would add that agriculture was once about half of total US GDP, whereas now it is only a small fraction, yet we feed ourselves and are a net exporter of food. Here again we see how tremendous productivity gains have enabled us to devote fewer and fewer resources to the production of essential goods. This is as it should be.

There is no decline in US manufacturing, and China is not stealing jobs from us. Global trade is a win-win situation for all.

3 comments:

sgt.red.blue.red said...

If you could only get government to shrink that much.

Benjamin said...

Yes, I wonder why out federal government employs so many people.

Here are employment stats by federal department.

Defense 3,000,000
Veterans 270,000
H'land Sec. 208,000
Treasury 115,000
USDA 109,000
Energy 109,000
Interior 71,000

Those are the largest agencies.

We also have--

Education 4,487
HUD 10,600
Labor 17,347

Obviously, it is time to cut federal employment not with an axe, not with a chain saw, but with a bulldozer.

For taxpayers, these employees are time-bombs. They likely all will gain pensions, often after just 20 years of service. Medical care for life.

All at taxpayer expense, by siphoning resources out of the productive private sector.

TradingStrategyLetter - Weekly Summary said...

Too late to protect now anyway.