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you are here: > Self > 5.
Society and ME
| 5.10 | Common component-Secondary elements of an economy |
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| The 12 primary economic elements are enablers to the secondary economic elements- a far vaster and richer variety of activity that owes its existence to the healthy existence of the primary elements. | ||||||
| We can summarize the secondary elements as: | ||||||
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| Manufacturing- domestic/business/government | ||||||
| Manufacturing is heavily dependent on the relative abundance of fuel, people and materials for the right prices. | ||||||
| In an ever increasing global market, the most expensive resource of the 3 has been the increased quality of living standards of people in developed countries. As a result, large manufacturers have re-located factories to countries where labour rates are as cheap as possible. In developed countries, this has meant the exodus of hundreds of thousands of jobs previously available to low skilled people. | ||||||
| Services- business/domestic/government | ||||||
| It is the service and communication sectors that have been the largest creators of new employment in the past 100 years. From limited professional services 100 years ago, industries such as entertainment, financial services, marketing & advertising, health, fitness, legal, accounting, psychology, cosmetics and personal beauty, have all exploded in jobs. | ||||||
| Unlike manufacturing, service industries are sometimes difficult to pinpoint as wealth creators ( e.g. tourism). For the most part, service industries are wealth absorbers and therefore are ultimately reliable on wealth creators of the primary elements and manufacturing secondary elements to prosper. | ||||||
| As has started to be experienced, countries and cities that have become centres for service industries risk strong economic down-turns if manufacturing or the primary elements change. | ||||||
| Tell-tale economic signs of an economy in dangerous position of over-reliance of service industries at the expense of manufacturing is rising business debt ( in the form of current account deficit). While the dollar of a country's exchange rate may remain relatively strong, mini recessions can still occur as certain service industries feed on themselves to stimulate economic growth- an element of mergers and acquisitions is such an example. | ||||||
| Countries that show these tell-tale signs of over-reliance on service industries (vs declining manufacturing) are Australia, US, Canada and many European countries. | ||||||
| The risk as manufacturing locally is allowed to decline versus increased expenditure on services, is that any major shift in the primary elements causing a downturn, can result in catastrophic job losses as service industries go into deep recession. A global downturn of significant proportions is yet to be felt in developed countries. | ||||||
| Product sales | ||||||
| Product sales (often defined as retail) is the industries that deliver end manufactured products to domestic markets. Increasingly as global companies shift manufacturing off-shore in search of cheap labour means that imports of products has skyrocketed in most developed countries. | ||||||
| Added to this is the fact that countries that have liberalized their trade tariff barriers means that large corporations are able to distribute cheaper stock, or compete against against local manufactured product, often happy to sell at a loss. While anti-dumping laws are in place, most are reactive (after the fact) rather than pr-active (tariffs before market). Thus many economies have seen shrinkages in both domestic secondary manufacturing and primary economic elements. | ||||||
| In many countries, the lowering of trade barriers has had the effect of stimulating economic growth from domestic demand, particularly in employment in product sales and services, thus creating an effect of economic prosperity. however the signs of misaligned economic policy reveal themselves in stagnant levels of long-term unemployed in geographic densities, rising crime in these former centres of manufacturing and rising current account deficits. | ||||||
| Further, the lack of real wealth retained in these economies is revealed in the declining tax proportion of business as value-add primary and secondary manufacturing declines. A sharp change in conditions, causing a sharp lowering in consumer confidence can cause a massive drop in economic activity- as experienced in the global shift in Asia at the end of the 20th century. | ||||||
| Communication/Information | ||||||
| One industry of specialized manufacturing and services that has grown dramatically in the past 20 years is communications. Unlike many other secondary manufacturing, communications information requires skilled labour. Intelligent governments around the world have recognized this as one of the examples of having high-skilled workforces and developed valuable employment and wealth creating industries. The United States is the best example of this, playing a dominant role in the communication/information influence of the world. | ||||||
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