Austin

Drive around your average American suburb on an afternoon and you'll see people engaged in the daily busyness of life.  Approximately 7 out of 10 of them are engaged in providing services, rather than in producing goods.  Driving around my town of Keller, Texas, I'll see many examples: the waiters at the Chili's restaurant on Main St., my doctor on Keller Parkway, and the UPS guy who drives around my neighborhood about 4 o'clock.  A noticeable exception to the 70% majority of service providers includes construction workers who are technically goods-producers (according to the way economists account for economic activity).  The framers building a new house down the street are placed within the goods-producing sector.

What is not as noticeable is the amount of goods/commodities that are being utilized or consumed by the 70% of Americans engaged in providing services.  From the Middle Eastern gasoline that's burning in all the cars driving up and down the street, to the Chilean blueberries being stocked on grocery shelves, to the Chinese-manufactured telephones being sold at the local cell-phone outlet.  These are goods that are being produced or extracted from other parts of the world and then shipped for local consumption and on the face of it, neither the local waiter at Chili's nor my very competent doctor on Keller Parkway have anything to offer in their services that could be of the slightest benefit to the Middle Eastern oil magnate, the Chilean farmer, or the Chinese worker who have each decided to contribute to the comfortable local lifestyle.  In short, they must be expecting to get something from us in return for the goods they produce, but it doesn't appear to be anything that the 70% of service-oriented providers can provide.  A practical consequence of a persistent imbalance in the desirability of exports versus imports can be seen in the balance of trade statistics, and the American balance of trade has been negative (i.e., importing more than we're exporting) for a number of years and is indirectly contributory to the present financial distress here in the US and across the globe.

No this is not another blogger/post rant about the decline of American manufacturing or a rejoinder to a national self-sufficiency.  (In my opinion, the former is merely descriptive and the latter is at best an arbitrary ideal and likely a mythic destination point of questionable desirability.)

Rather, my point is very simple.  The future of our service-sector dominated American economy, the new "new economy," is exportable services.

Exportable services are services which can be delivered remotely for use or consumption.  Financial services is among the leading examples of this type of exportable service.  A client in London can request the service of a trader in New York City to purchase XYZ stock on the NYSE at the touch of a button and the trader in New York can oblige that London customer while seated (or standing) comfortably in the depths of Lower Manhattan.  Similarly a wary record producer in Los Angeles, California can call up his Lloyd's of London agent and syndicate insurance for Celine Dion's vocal cords (non-fictious example) in the London re-insurance market.  The service (i.e., insurance) is provisioned from a tawny Lime Street in London, across the world to a palm tree-lined Los Angeles, California boulevard using nothing more sophisticated than perhaps a long distance telephone call.

Ironically, Financial Services is not likely the early-adopted exportable service because of some quality of its inherent necessity, but rather because of the extremely low density of information required to project it over telecommunication lines.  FS was projecting over telecommunications lines back when telegraph lines first connected New York City to Philadelphia allowing ticker quotes to be streamed between the exchanges in the respective cities.

Before our current telecommunications infrastructure existed, exporting services was a potentially cumbersome process.  The real revolution of technologies such as the Internet lies in its ability to project increasingly complex services from one location to another.

Perhaps an intriguing example involves the transformation of medicine into a potentially exportable service.  Already doctors are experimenting with e-mail based and chat based "appointments."  Regardless of physical location, one can potentially be examined and diagnosed and receive medical advice and/or a prescription sent to one's nearest pharmacy.  While prudence dictates an incremental approach to the virtualization of doctor visits, a more radical step is being taken with remote surgical options.  In a not-to-distant future, a "world-renown" surgeon in Houston, Texas could perform life-saving heart bypass operation via a tele-presence operated robotics to a patient in a hospital in Munich, Germany, for example.  If that surviving patient happened to be a worker in a certain Bavarian-based automaker's 7-series plant, then it seems not too far-fetched to see how the exported medical service (i.e., surgery) could be easily exchanged for a manufactured good (i.e., fine Germany sedan).

Another category of exported service straddles the boundary of what we think of as products and services- intellectual property.  While retaining that intangible substance-less essence that we associate with services, intellectual property has a replicability that emulates a product.  Among the common examples today include music recordings and video clips.  An MP3 or their subsequent proprietary variations (e.g., AAC's made popular by Apple's iTunes) represent a fixed instance of service by a series of artists and producers (i.e., the performance) that can be projected both over space as well as over time.  This sort of IP has been around since the first phonograph tunes were etched on metal rolls in Thomas Edison's Menlo Park, NJ laboratory, but the level of projection of this IP-service has reached a current (and evolving) apex.  By allowing a service provider in a Burbank, California recording studio to provide "services" to a listener in Osaka, Japan, the cycle of economic repayment for the Japanese-manufactured microphone used in that recording might perhaps be made to come full circle.

The essential implication for American competitiveness in the 21st century is this- it is vital to invest in the growth and development of the exportable services sector.  This effort can be divided into three categories:

One, expand the capacity of existing exportable services.  The United States has a global dominance in key exportable service sectors including Financial Services, Media and Marketing, Business Advisory services, and Systems Engineering.  An expanded national priority on supporting these industries will further reinforce US leadership in the global marketplace, especially through this present time of economic re-adjustment.  Expanded support for Financial Services in our day and age is perhaps necessitated by its equivalent export-significance in our era to the significance of the post-WWII auto industry.  Rather than de-crying the diversion of US college students into fields such as finance, marketing, or the creative arts, these should be considered majors of vital importance to expanding US economic sustainability.

Two, convert localized services into exportable services.  The potential for a localized service to be exported depends on many characteristics. In some cases, a local service can be projected internationally if the service-provider is willing to travel.  This is especially true with business consulting.  Management consultants are famous (or infamous) for their globally itinerant ways, but the practical fact of the matter is that bringing high-value advisory services to an overseas location is a practical and effective way to export services.  Other localized services will have to be re-thought at their essential levels, like secondary education.  In this case, the present model is for foreign consumers to travel to the US to consume world-leading US secondary education - the exact opposite of our management consultant example.  Though effective, this model is market-limiting.  Wide-band electronic communications may enable a new level of context-rich experience to be projected overseas enabling US colleges to deliver educational services worldwide in a new value-creating way.  Another category includes our prior tele-presence surgery example- services which are made exportable by a radical jump in technology.  A fourth category may be a type of reverse-offshoring.  In essence, utilizing lower value-adding service providers in a local (overseas) market backed up by expertise from a higher-value adding US-based service provider.  In the case of computer technical support, much has been made of "calling India."  Irrespective of one's view of the quality of this execution, the practical fact is that several major PC manufacturers actually end up retaining high-value add tier-2 or tier-3 support in US-based call centers who may end up supporting not only US-based customers, but overseas customers.  Re-thinking how service is exported, even to the degree of partnering with local-based service providers for those pieces of service-delivery that may absolutely require physical presence, will likely lead to continued breakthroughs in the conversion of localized services into exportable services.

Three, create new and valuable exportable services.  Though pregnant with possibility, this eludes practical policy implications and is perhaps best left to serendipity.  Yet perhaps at least an export-oriented mindset will predispose inventors, entrepreneurs, creators, artists and innovators to explore the opportunities for globally exporting what may be locally developed.

A final and critical element of expanding exportable services is to develop simple and sensible approaches to international payments.  In this arena, the United States again finds itself with a home field advantage- the dollar is the most universal currency on the planet.  Whether developed in the public sector, private sector, or a public-private partnership, a harmonized system for receiving payment for exported services that is free from convoluted or confusing tax and export restrictions would provide the critical underlying infrastructure for unleashing a significant portion of the 70% of Americans engaged in the provision of services.

The nuance of language possibly captures the indeterminant inclination of Americans to our present economy: "post-industrial."  That is to say, we orient ourselves as if the Industrial era were our economy's true north.  A new "new economy" needs to be affirmatively positioned by what it is, rather than what it is not, and I would offer that the inhibitor to that place of solicitude is the absence of a conception of how services contribute to the American economic balance-- how an economy that consumes goods can simply live by providing services.  A re-visioning of services- exportable services, may contribute to moving the US to that next step.

-Austin Kim