Murray Brown*, one of my professors (and a mild if convinced leftist) shocked my about 20 years ago by noting in an interview that we shouldn't knock the fact that "we don't make anything in America" anymore, because a service economy is a rich economy.
I even lectured on this in principles just last week.
Now, Our Word Is Our Weapon has posted about this stunning chart:
It shows precisely how industrialization has been a path to some level of riches for a variety of countries, and how deindustrialization is a path to even more riches.
For those not up on the data or arithmetic, the chart shows a doubling of U.S. per capita real GDP over the last 40 years, corresponding to our average growth rate of real GDP of just under 2% per year.
For those who worry about everything this chart should be reassuring that the U.S. is neither doomed nor abnormal.
* Murray is retired now, and appears to be just about absent from the internet.
A mild leftist (or a devil's advocate) might contend that real GDP per capita is not the only measure of a country's economic success. Perhaps service economies tend to concentrate wealth in the hands of those at the top of the pyramid, while relegating a larger and larger percentage of the population to low-paying service jobs.
Posted by: Pelkabo | September 22, 2006 at 01:22 AM
Agreed that they would do that.
Agreed that it is plausible.
I have doubts about it being probable. For recent evidence see Hal Varian's piece in the September 21 New York Times (http://www.nytimes.com/2006/09/21/business/21scene.html?_r=1&oref=slogin). It turns out that most of the "evidence" of inequality goes away when we remove 4 of the over 3,000 counties from the U.S. data. So, it sounds like claims of increasing inequality are not robust.
Further, why the focus on income inequality? Shouldn't we be concerned about consumption inequality? Ah, but there's the rub - there isn't much, so it is hard to make an issue our of it.
Posted by: Dave | September 22, 2006 at 08:55 AM
Surprised about this quest for equality on this site! Inequality is the only source of progress, arts and science, and innovations in consumer sector. Not "almost all" but ALL consumer products first entered markets as luxury items affordable to the rich only. Then they trickled down to the masses. The reason of eternal bleakness and grimness under communism was the absence of the rich. The only demand for arts was propaganda purposes and they got degenerate art, the only demand for innovation was in the military and they got an economy where they could send people to space but even today 36% of hospitals in Russia do not have indoor plumbing.
Posted by: laissez-faire | February 06, 2007 at 02:46 AM
Ah ... well ... just playing the devil's advocate.
I'm not yet convinced of the trickle-down version of innovation just yet.
But, I will wholeheartedly agree that inequality tends to be a constant motivator. Think about it: you go to the store, and they offer products of unequal quality at unequal prices, and you rejoice when you can exploit that to get a bargain.
Posted by: Dave | February 08, 2007 at 04:30 PM