A long term healthy economy requires a strong manufacturing base that supports the services sector not one that is falling behind transferring more resources to services and away from manufactureing.
Growth in absolute numbers merely reflect inflationary & population growth effects on the statistics, it is growth in relation to the whole that is the true measure of a healthy economy.
There is alot more going on than your simplistic view to preserve your sense of security in the world allows. I would suggest you get out and look around instead of poking your head in the sand to avoid what you prefer not to recognize.
| http://mwhodges.home.att.net/reserves_a.htm
TRADE DEPENDENCE OF US ECONOMY - - up, up and away !!
(America, with less than 5% of the world's population, consumed nearly 20% of world imports in 2000, according to Morgan Stanley Economist Joe Quinlan - - meaning much of the rest of the world over-depends on America's debt-driven over-consumption of goods produced by others). Now look at exports (black curve) of goods. After rising 2.5 times faster than national income in the 21 years prior to 1980, proving America's competitiveness, the export ratio came to a screeching halt - - now declining. 2005 goods exports totaled $890 billion. U.S. exports have not had an upward impact on our economy's national income for 20 years, proving U.S.-produced goods are less competitive and less of interest to foreigners than before - - and/or we are too busy consuming to produce. A comparison > Germany's export ratio of 35% of GDP is 8 times higher than America's ratio. Notice the widening gap between the two curves - - that's the exploding trade deficit, as we import faster and faster than exporting to others. Prior to the 1970s there was a net balance in our favor (exports higher than imports), but not any longer. NOTE: Exports lagged imports despite the reduction in the international value of the dollar between the 1970s and mid 1990s (and 2001-2004) which reduced our wages relative to others. So, a weaker dollar does not guarantee a trade surplus - - perhaps the opposite, as imports become more expensive. This suggests that if the U.S. dollar should fall in its international value the U.S. will not become more competitive - - which further suggests the reason is both our declining manufacturing base (chart below) as well as the fact we do not produce (or want to produce) enough goods to meet our needs, let alone produce those desired by others. This is clear evidence that we are competing less well than before, and trends are in the wrong direction by far. Perhaps Americans are too interested in consumption and piling up debt and in speculation, instead of production and savings - - too interested in financial paper instead of producing goods. This chart shows exports at about 8% of the US economy. This compares to exports being about one-third of the Euro-region's economy, indicative of that region's relative manufacturing base strength compared to the US.
The left chart looks at imports of goods, as a percentage of total goods in our GDP. America's Gross Domestic Product (GDP) is made up of 3 components: goods, services and structures. Here we look at the goods portion of GDP, and the percentage of same represented by imports. This means > > whereas in 1959 the U.S. produced 94% of the goods it needed (just 6% were imported), data note: in 2005, total GDP was $12.4 trillion. Of this, its goods portion was $4 trillion, or 33% of total GDP. The non-goods portion of GDP was 67% of total GDP (58% for services, balance for structures). In that year, goods imports were $1.7 trillion, or 42% of total GDP goods - - as shown in the chart. - source: Dept. of Commerce (BEA), table B-8, etc. of the 2006 Economic report of President.
Imports make up 17% of all consumer goods bought in the US, or $407 billion in 1998, up from only 5.4%, or $19.2 billion, in 1970. Since the above chart shows imports soaring after 1998 we can assume the consumer goods ratio is now higher. In any case, this chart shows we are more than 3 times more import-dependent for consumer goods than before. This shows much of U.S. imports are not for investment purposes to help earn national income into the future, but for consumption purposes which are gone forever. (data source: Time Magazine, 11 Oct. 1999, page 54)
The following chart shows that world GDP growth has become two times more dependent on global trade during the recent past, while those trade deficit charts above show the U.S. is becoming less and less productive/competitive regarding U.S.-produced products. About this chart : "By our estimates global trade in goods and services now amounts to 25% of world GDP, up dramatically from the 19% share just ten years ago and an 11% portion in 1970. Over the past 17 years, 1987 to 2003, surging global trade has accounted for fully 33% of the cumulative increase in world GDP. By contrast, over the 1974-86 period, trade accounted for about 17% of the cumulative increase in world GDP. In other words, since the late 1980s there has been a virtual doubling of the role that trade has played in driving the global GDP growth dynamic. There can be no greater testament to the power of globalization. (Morgan Stanley Global Economic Forum, 11/24/03, Stephen Roach, chief economist http://www.morganstanley.com/GEFdata/digests/20031124-mon.html#anchor0 It is clear the U.S. must implement policies that reverse its decreasing interest to the world regarding products and services it produces of interest to others.
The left chart shows the trend of the number of manufacturing workers as a percentage of all U.S. employees (non-agriculture) - - from 26% in 1960 to 10% in 2004, a 60% drop in the manufacturing ratio. On a GDP basis the trend is the same negative > the U.S. manufacturing base declined from 30.4% of GDP in 1953 (when we had a trade surplus) to 12.7% in 2003 - a 58% drop in the manufacturing share of GDP - and more is foreign-owned than before. (Bureau Economic Analysis table b-12, Economic Report of President, appendix table) As shown by the merchandise trade chart above, whereas in 1960 U.S. goods manufacturing produced a $5 billion trade surplus - - 2004 merchandise trade had a $666 billion deficit. A powerful negative swing. As America's production of goods has become a much smaller share of the economy the export share of national income stagnates and declines and the import share soars. Bottom-line > manufacturing base shrinkage is a major negative regarding trade balance, and a major negative impact on U.S. economic and national security independence and future living standards. Note that the down-sloping trend of this chart far pre-dates the opening of China as a major world manufacturer. Loss of price competitiveness has even affected high-technology goods, with resulting large deficits in those industries as well. Examples include office equipment and automatic data processing equipment (a 1999 deficit of $36 billion) and telecommunications equipment (a 1999 deficit of $23 billion). Source -Trade Deficit Commission. There are zillions of items on which America depends on foreigners to supply. Most know America is dependent on foreigners for 60% of its oil. However, few realize that America is 100% dependent on foreigners (British and French) for flu vaccines needed by senior citizens. A nation that will not produce its own flu vaccines is not a very smart nation. |
When we speak of competing in a global economy, 
Notice imports (red curve) of goods - - zooming higher, as a share of our economy, 
Consumer goods are more and more fueled by imports, not local production. 
WORLD GROWTH DEPENDENT MORE UPON GLOBAL TRADE
Causes of Trade Deficit =