Paul Krugman rediscovers Marxism--what's next? Fire? The wheel?

[Spike89]

67. Because we don't track it correctly

Apple is a perfect example. Which company generates more wealth from an iBook, Foxcomm or Apple? The answer is easy--Apple generates nearly all the wealth, but they don't actually manufacture it. When Apple brings it over here to sell it at say $1000, that $1,000 is entered into the import/export equation.

That is absolutely wrong--Apple maybe sent $300 to Foxconn and got $1000 in wealth back--in real world terms, that single transaction should be considered a positive $700 in the trade balance and of that $700 all of it is service. However, our old way of measuring this considers the transaction to be for hard goods, but it isn't really.

The same basic economic model happens with shoes, clothes, you name it. We've been farming out the manufacturing process because it is NOT where the wealth creation happens any more. The wealth creation happens when Nike convinces people all over the world that $5 worth the materials is worth $100 when they design (service industry) the shoe--the whole world knows Nike doesn't actually make the shoe--and they don't care.