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I have heard several times that the USA has the largest GDP in the world and also the largest economy. But I hardly can remember a single thing made in the US that I ever used.

My auto is made in Germany. My computer has parts made in China, Thailand, Taiwan, by Korean and Japanese companies. My TV is made by a Korean company, assembled in Russia. The other TV is Korean too. My vacuum cleaner is made in Germany. My washing machine is made in Italy, the kettle is made in Czech Republic by a German company. My microwve oven is produced in China by a Korean company, my drill is of German origin, my refrigirator and gas oven produced in Russia. My cell phone is made in China. My razor is made in Germany.

I also never wore any clothing made in the USA. My clothing is mostly made in China or Turkey.

I also never ate anything produced in the USA, my food is mostly made in Russia, Ukraine and EU.

I can only name the following things that I used which were produced in the USA:

  • Computer programs (Windows)
  • Hollywood films
  • Airplanes (Boeing)

May be it is only my own (wrong) impression? But here is trade diagram for the US-Chinese relations:

enter image description here

I am pretty sure that for Russia the picture would be the same, with a difference that we mostly export raw materials rather than industrial production.

It seems it turns out that the US consumes a lot of goods, but exports only green paper. That said I wonder why it is considered to be the first economy in the world.

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Much of what USA produces isn't for export (too expensive to compete with Chinese manufacturing).

For example, US manufacturing sector is 4Trillion (2002 data) out of 16T GDP, and in 2014 they exported 138 Billion/month only - less than 35% of what was produced! (see details below).

Also, some of what is produced (and exported) is intangibles: finance, health care, information, scientific/technical services, administrative services, educational services, management, entertainment. That is actually growing and hard to estimate because I never saw IP broken out.

(Total US exports were $2.18T in 2014)


Rough summaries can be seen below in the first chart. (Wikipedia)

As far as tangible manufacturing for export: this is covered here in great detail. Especially download "Foreign Trade" FT900 report from Census Bureau, it has "Exibit 7: Exports of Goods by End-Use Category and Commodity".

Some rough data on exports (Monthly data Aug 2014):

Total, Census Basis                 138 (all #s are in Billions)

Capital goods, except automotive    47B
      Civilian aircraft                 5B
      Industrial machines, other        4.6B
      Telecommunications equipment      3.7B
      Semiconductors                    3.6B
      Electric apparatus                3.5B
      Medicinal equipment               3B
      Computer accessories              2.8B
      Measuring/test/control instruments 2B
      Parts-civilian aircraft           2B

Industrial supplies and materials   44B
      (largest: Fuel Oil 6B; Other petro products 5B)

Consumer goods                      17B (no breakdown)

Automotive vehicles+parts+engines   13.5B

Foods, feeds, and beverages         10B 
      (Corn is largest at 1B, then fish, wheat, juices/fruits)

Pharmaceutical preparations         4.5B (Viagra, baby!)

Cell phones/other household goods   2B

enter image description here

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  • What is the difference between the top and the bottom charts? What is a sector of economy "wholesale trade"? Is it taking Chinese goods and selling inside the US for 5 times greater price? Is this the largest source of the US GDP? – Anixx Oct 25 '14 at 14:28
  • If the most of what the USA produces is for internal consumption and given that the US is the largest economy, they should have exceptionally high standard of living, but this is not the case as the statistics indicates. – Anixx Oct 25 '14 at 14:29
  • @Anixx - bottom chart is kind of irrelevant by scale but I think it's things not produced by private companies. Persons or government, likely. I was just too lazy to edit that out of the image. – user4012 Oct 25 '14 at 14:43
  • @Anixx - See the exports part of the answer for what they export. – user4012 Oct 25 '14 at 14:44
  • I apologize that I don't have good #s for ~2013 USA sector manufacturing. I assume they didn't shift much from 2002 – user4012 Oct 25 '14 at 14:50
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I am not sure that I will be able to answer your question to your satisfaction but I will at least try to discuss a number of misconceptions that need to be dispelled to gain any understanding of the modern economy.

Tangible consumer products are only a small part of the economy. The US (or, for that matter, Germany) also produces a lot of things you will never see in your home or backyard. Machines, military equipment, legal or financial services or even cattle fodder (one thing the US not only produces but also exports).

Incidentally, you wrote somewhere that military spending is “only” 5% of the GDP. It sounds like a lot to me and at the end of the day, US production is going to be the sum of all these “small” sectors. Unlike some other countries, it's certainly true that the US is not dominated by one or two narrowly defined sectors so there is no “one thing” the US produces above all else.

Brand and production are largely disconnected and added-value can be distributed in many ways. Your very first example is your car, which you claim is made in Germany. But the truth is that car makers just about anywhere assemble parts produced in various places, either directly by themselves or by other companies (maybe not in China and India but certainly in mature economies, including Germany).

Supply chains in this industry tend to be particularly complex but it's almost certainly untrue that your car is entirely made in Germany. Meanwhile, French factory workers go on strike against French car companies moving more and more activities to other places in Europe like Romania and Toyota advertises the Yaris as a car “made in France”. It's just way more complicated than the name on the product might suggest.

More cogently, all major German car makers actually have plants in the US, producing for the US market. Much of the value is arguably provided by R&D workers and most of the profits are presumably captured by management and shareholders back in Germany but in terms of production, it's also happening in the US. So “German” cars is one thing the US produces.

Exports are another question entirely. I first thought you were located in the US and then realized you were not, which means most US-based services are not available to you and any US products you might own would have been imported. Now, why would you expect that the US necessarily exports something you might want and/or can afford? In principle, it is entirely possible for the country to produce a lot of things and be richer than any other country on earth without exporting anything at all.

As another, completely different example, let's consider the Soviet Union and its satellite states. They exported virtually no recognizable consumer products to the West and had a lot of difficulties being competitive or getting what they needed from the global market but they still produced something. In spite of all its problems, the SU industrialized Russia and became much more productive than traditional non-industrialized societies. Given its (relatively) large population, it did in fact produce quite a lot and manage to hold an arms race with the US for a few decades (before ultimately collapsing, obviously).

Now, in reality, the most successful economies are embedded in international trade and export and import many things but they also mostly produce for themselves. How this works out is a complex question in itself but there is no need for the US to produce your car for it to be rich and produce many things.

Finally, the balance of trade is yet another thing and it's closely connected to currency exchange rates. The US does export many things (not necessarily to China) but that does not mean it will have a trade surplus. In fact, the US has a large trade deficit but that's not because it does not export anything, let alone because it does not produce anything, that's mostly because China holds large amounts of dollars and keeps its products cheap that way.

Germany is a mirror example. Its economy has many problems, it has not seen any impressive growth or productivity gains of late but it's still quite successful at exporting some high-end tech products and because its main trading partners are locked in the euro, it can easily maintain a large trade surplus. None of this is directly connected to the size of the economy as a whole or the wealth of the country.

And as a matter of fact, as @DVK remarked in a comment, the US does still produce many cars, only for itself. So products for local consumption (including food!) would be another part of what the US produces, and quite efficiently so.

Services are a major part of mature economies. In the US and a bunch of rich European countries, somewhere between 70 and 80% of GDP. In Germany, it's 71%. Why that is and what that means is also a complex matter but you cannot completely ignore services (like you did in your question) and say anything meaningful about the US economy.

These services come in several guises. Some of them (legal or financial services, business consulting, etc.) are actually high-value services that the US exports. You dismissed Hollywood and software but those are not negligible either. Even if you are not personally seeing any of it, all this is part of what the country produces.

Other services might seem completely unremarkable to you. It's a well-known and quite interesting fact that even low-productivity sectors see an increase in wages as the economy as a whole gains in productivity. So hairdressers and sale clerks in the US might not be doing anything special but they sell their services for a higher price and they have a lot of purchasing power compared to people elsewhere in the world, just because they do what they do in a rich country.

You remarked somewhere that it seems that many US people are simply selling and reselling goods produced elsewhere and to an extent, it's completely true not only of the US but also of all other advanced economies (but they are also cleaning, cooking meals and selling houses). Furthermore, because these sectors are labor-intensive and have a low productivity, they represent an even bigger share of the workforce.

As a though experiment, imagine that soon robots will completely replace factory workers (something many people have been announcing for some time). Obviously distribution and ownership could be a problem but, as far as the economy as a whole is concerned, we would all be extremely rich without anybody doing any of the production. We could all pay each other to do seemingly simple services (which would become more valuable than manufactured goods which would then be plentiful) or maybe not do anything at all and still have a lot of the things produced by the robots.

In fact, it's an expected result of productivity gains in other sectors and it's a good thing. A lasting split between a competitive export-oriented sector and lack of growth elsewhere is a major problem in some countries (it was a concern in Ireland for example or in countries exporting valuable raw materials). A minority might be able to enjoy imported products and cheap services from the rest of the population but most will remain poor and the country is hugely dependent on the vagaries of international markets.

You might never set foot in a US fast-food and think that massages in Thailand are better but it's still a fact that none of the richest, most productive economies in the world are export powerhouses centered on manufactured goods or heavy industry (although one of the biggest, China, is, see below for more). Incidentally, full-time domestic servants, the most exclusive type of service you can imagine is common in poorly performing, highly unequal countries but virtually inexistent in mature economies.

All this might sound counterintuitive and anticlimactic but it's a fact that low-productivity services that have to be sourced locally are a large part of what the US currently produces. And because other sectors (from agriculture up) are extremely productive, those services are valued higher and everybody can be richer than in an economy without such productivity.

There are a few other things that makes the US seem richer but might not reflect any actual structural difference. For example, US workers tend to work more (over their lifetime) than, e.g., Europeans. Because of that they do produce more “stuff” (to quote a recent advertisement) that shows up in the GDP calculation but they have less time available for other endeavors.

By contrast, what makes both Europe and the US much richer than they were a few centuries ago is increased productivity. 300 years ago a shoemaker could make perhaps a few pairs of shoes a day. Now a handful of workers with the right machines can make thousands of pairs of shoes. We can choose to use this increased productivity to have more shoes or to have more free time while still having the same number of shoes but we are much richer in any case.

Another thing is that domestic production is difficult to account for in the GDP. If you cut your family's hair, there is no monetary transaction involved. If a state hairdresser cuts hair for free, you can't easily put a price on that either (OK, I don't know if there ever was something like that). Statisticians do have a few tricks to take those things into account but it's not a perfect science.

To the extent that the US went further than Europe in moving some things outside the realm of domestic production and to the private sector (eating out at McDonald's compared to cooking at home to use a cliché), it could have a seemingly higher GDP while producing essentially the same thing (e.g. a meal).

US healthcare, in particular, is a bit like that. It's good but it is extremely expensive compared to healthcare in similar countries with no obvious benefits in terms of outcomes (you can cherry pick a few statistics to make it look better but there are really no large differences, e.g. in life expectancy). And it does appear in national statistics at the level it is paid for so that is a not-insignificant part of what the US “produces”.

Finally, don't forget that the US is big (and China is even bigger). You mentioned GDP (not GDP per capita, purchasing power parity, productivity or whatever but just GDP). One factor behind it is obviously population size. There are a few countries that might be richer than the US on a per capita basis and quite a few that are only slightly poorer but all those that come close are smaller in terms of population. In total, the US also produces a lot because it is simply bigger (the EU is keen on lumping all its member states together to produce impressive stats but those are still independent countries).

But China has or is going to take over no matter what. You might debate the details of its statistics or the exchange rate, it might face a serious crisis at some point in the future and it's still much poorer than the US, Japan or Western Europe on a per capita basis in any case but it is mind-bogglingly huge. And so it already has a very large GDP. That's all it takes to be the world's first economy.

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    Great answer overall! To your comment that healthcare in the US is more expensive without obvious benefits, I would like to mention that the US leads the world in medical research and pharmaceuticals... work that is done by the individual scientists "for the greater good" but which often has only a slight impact locally, and which is exported essentially for free through the medical journals. – elliot svensson Oct 18 '18 at 18:39
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While I'm not going to argue with what others here have written, I can't really give anyone a passing grade since I don't see any references to military production anywhere. Any discussions of this sort that don't include the military are dropping the ball.

What the U.S. produces and spends on the military dwarfs just about everything else. Note, that you could probably say that for many countries internally (i.e. within their own economies). The U.S. however, is a juggernaut when it comes to this type of spending.

On this Wikipedia page, you can see the top ten producers (but not all countries are represented). Of those, seven are U.S. companies and just those seven companies produce about $140B annually. The U.S. defense budget was about $640B last year (equal to the next nine countries combined). Not sure what they imported as these numbers don't look very solid but here it suggests <2%. While I'm sure that military labour and other costs are significant, e.g. maintaining bases, ships, etc…, I think it's safe to say that a lot is spent on production as well. I'll give just one example, the Gerald R. Ford carrier, which cost an estimated $12.8B and is still perhaps a couple of years from duty. I believe that there were plans to run ten such ships in the coming years. Consider as well that an aircraft carrier doesn't go to sea on its own. It will be joined by missile cruisers, destroyers, supply ships, subs, and the proverbial kitchen sink (and don't forget all the aircraft that the carrier hauls around).

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    Possibly, but officially military spending is just 5% of GDP. – Anixx Nov 2 '14 at 2:49
  • Only? Industry makes up 19% of U.S. GDP. What does the U.S. produce that exceeds this? Your question was about why you didn’t own anything made in the U.S.A. Well, a huge chunk of what is made there isn’t available in your local Best Buy. – mockman Nov 2 '14 at 5:46
  • On a separate note to someone else’s point… If you own an iPhone/iPad, it may be assembled in China but much of its financial value flows to other nations’ economies (e.g. Korea, Taiwan, and of the course, the U.S., etc…). And while the world is changing, a significant portion of the value in most computers went to Microsoft. And everyone who uses Google or Facebook, et al, is also adding to the GDP of the U.S. Finally, their largest trading partner is Canada. Lots of natural resources (e.g. lumber, oil, actors) flow south, get processed and return as finished goods. – mockman Nov 2 '14 at 6:00
  • I've already mentioned Windows, but fairly speaking Windows is now made in India. Regarding Canada... well, I never used anything made in Canada either except a U.S.Robotics dial-up modem in the 1990s, gifted to me at a birthday (and it was much more expensive than other options available but many believed those times that Canada's modems were the best, actually it worked quite below average). – Anixx Nov 2 '14 at 6:29
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    Military spending is big in comparison to the federal budget of ~4T, it's almost irrelevant to the GDP that is over 16T – Ryathal Nov 3 '14 at 15:12

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