Overview of Service Economy and Deindustrialization

An economy where a significant portion of the workforce and GDP are involved in providing services rather than producing goods.

The decline of manufacturing industries in an economy, often accompanied by a rise of the service sector.

Services that can't be physically touched or seen, but rather experienced or used.

A historical trend where the proportion of people employed in service industries has increased, often alongside a decrease in those employed in manufacturing.

Technological advancements make it easier to trade and provide services, thereby increasing their contribution to the economy, especially in developing countries.

Detroit's population decreased significantly, from 1.8 million in 1950 to 700,000 in 2010, due to the decline of the automobile industry.

Pittsburgh's steel industry experienced a sharp decline in the 1970s and 1980s, leading to job losses, plant closures, and a significant population decrease.

New York, London, and Tokyo became major hubs for advanced services like finance, law, and accounting in the 1980s, powered by communication advancements.

A company's practice of relocating its production facilities to a foreign location to manufacture goods for domestic markets.

A company contracting with a foreign independent supplier for goods or services, instead of creating them domestically.

Healthcare, education, and finance replaced manufacturing industries as leading employers in the US, especially following job losses in manufacturing.

A business strategy of spreading different stages of production across multiple countries based on factors like market, politics, stability, and technology.

FDI involves building facilities to operate in a new country, while offshoring is using a different country as part of a global production chain.

Institutions (e.g., GATT, IMF, World Bank), technology (transportation and communications), and economic factors (lower labor costs) fueled the growth of offshoring.

Improvements in transportation (ships, planes, ports), and communication (cables, telecommunication, satellites) made global production significantly easier.

American companies moved electronics production to East Asia in the 1960s, specifically to countries like Hong Kong and Taiwan, due to lower wages. 

Global production systems can be fragile (e.g., strikes, plant breakdowns), inefficient due to coordination issues, and make offshore research and development difficult.

Offshoring wasn't just about manufacturing; services like customer service and payroll processing were also outsourced due to competitive pressure.

Managing finances in a favorable jurisdiction, often for tax benefits or to avoid regulations.

A country or jurisdiction that doesn't impose corporate taxes, duties, or withholding taxes on money entering and leaving their country.

Companies might use offshore finance centers as part of their offshoring strategies, but they have different purposes.

The end of the Bretton Woods system of currency controls and the end of decolonization in Africa and Asia.

The part of the economy focused on providing services like transportation, haircuts, or restaurant visits, rather than producing physical goods.

Services cannot be physically touched or seen, but are experienced or used. Example: Haircut

Services are produced and consumed at the same time. Example: A spa treatment

Services can't be stored for future use. Example: A concert ticket