A blog by A. Michael Noll, presented here with the author’s permission.
It is the provision of services – not manufacturing – that matters in today’s economy. The manufacturing of things is the way of the past.
The United States has been primarily a service-based economy for many decades now. The huge Western Electric factory in Indianapolis that made telephones, with raw materials coming in and telephones coming out has been long gone. So too are the steel mills of Pittsburg. Yet, AT&T had such a strong belief in the manufacturing of things that it held onto Western Electric at the time of the Bell breakup around 1965 – a huge mistake.
The manufacturing of cars is highly automated today, with few humans on the assembly line – robots have replaced human workers. No one wants to return to the smokestacks of steel production, or the labor problems of unionized assembly-line workers. Tariffs to promote inefficient and costly American manufacturing are a return to the past.
Agriculture is a form of “manufacturing” – yet today is highly automated on a massive industrial scale. The US feeds the world – and this industry is at risk from retaliation against US tariffs as countries seek other sources. The one US area of manufacturing that seems successful is military weaponry: fighter jets, ships, ammunition, bombs, and missiles. Yet that too is at risk as countries seek independence from relying on the United States for defense and turn to their own national defense manufacturers – French fighter planes, German tanks, British missiles. Unintended consequences can be a surprise.
The US service economy is huge – health care, management, engineering, law, politics, restaurants, to mention just a few. The up-front investment for a modern factory is large, with a long time constant taking years to create. If some foreign country wants to make that investment and hire all the workers, let it. The cheap products benefit American consumers – and all the service work remains in the US: shipping, marketing, sales, inventory. My guess is that the vast majority of the income is from services – unless the customer service is outsourced – tariff free.
With telecommunication, services flow across borders from country to country – tariff free. Customer services are outsourced from the United States to the Philippines, India, and other countries. American jobs are lost. The company Consumer Cellular is one of the few that emphasizes customer support that is US based – Apple does well too. Verizon seems to have outsourced everything – it seems to ignore that it is US based, with its sprawling headquarters in New Jersey.
My motto is: keep services home – and tax foreign outsourcing.
A. Michael Noll © AMN 2025
April 4, 2025
A. Michael Noll is professor emeritus of communications at the Annenberg School at the University of Southern California. He has worked in basic research at Bell Labs, in science policy at the Executive Office of the President, and in marketing at AT&T.
A. Michael Noll