Trade My Brain, Please! Why We Don't Need to 'Make Something' to Export It

What do Harvard University, an architecture firm, and a hotel have in common? They're all potentially thriving exporters. So why does the president focus so much on making things?

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Reuters

"I don't want stuff made there and sold over here. I want stuff made here and sold over there," a sing-songy President Obama told a U.S. auto plant today. "The key now is to keep this economy churning. That starts with American manufacturing. That starts with you."

One doesn't begrudge the president a good political bumper sticker -- "Built to Last!" -- but he's mistaking the building of things for the fulcrum of the economy.* This economy doesn't begin with manufacturing, unless you're listing major industry sectors starting with letter M. Its share of GDP has fallen by two-thirds in the last 40 years. It now employs one in 12 workers in the U.S. We still make lots of stuff -- more than we did in the 1990s, even. But making stuff doesn't define us, anymore.

MAKING MORE

To be fair, manufacturing has had a really nice recovery in the last two years, after getting creamed in 2008, 2009, and 2010. Manufacturing employment in the durable goods sector -- "durable" meaning stuff that lasts, like cars and furniture and computers, as opposed to "nondurable" goods like paper, leather, and oil -- have increased by about 230,000 jobs in the last year. That's about 11 percent of all jobs added over the same period. An important contribution, but not quite a foundation.

Screen Shot 2012-03-09 at 4.05.36 PM.pngAs for the car-makers: The "motor vehicles and parts" sector employs 750,000 people today, 50,000 more than it did one year ago. This is fantastic news for 50,000 people, whose jobs have multiplier factors that I won't even try to approximate here. But mining, which employs a similar number of people, grew by twice as much in the last year. Would you believe a politician who said that the U.S. recovery begins with "support activities for mining"?

GOODS AND SERVICES

The president is onto something. Exports matter. A good reason to fetishize manufacturing is right in the president's first line: "If we do stuff here, we can sell it there." As you might have caught on, I changed the word "make" in the president's speech to "do" in this paragraph, because we don't need to make something and put it in a box to sell it to foreigners. We can do stuff and sell it for foreign money, too. This sort of thing is called a "service exports." It means selling our work, or brains, and our resources to other countries.

"Services exports" sounds like a rather silly or impossible thing -- like putting an American doctor in a small box, shipping him across the Pacific to hospital in Mumbai, and shipping him back with the rupees. In fact, services exports are much simpler than that. Simpler, even, than selling actual manufactured goods. If an Argentinian student goes to Harvard, that's an export. If a Korean uses a Kansas architect to design a building, that's an export. If Bain Capital advises a British investor getting in on a Moroccan start-up, that's an export.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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