Efforts to revive national manufacturing sectors get a lot of airtime. After all, the sector propelled many East and South East Asian economies—the so-called “East Asia Miracle”—and was a gateway to the middle class for millions of workers. However, for all the obsession with manufacturing, economists for their part seem to be more preoccupied with services.
To confirm this, we combed through thousands of IMF reports on countries’ economies from 1978 to 2019. Using 113 distinct terms related to growth theory and policy—ranging from “infrastructure” to “liberalization”—we computed the relative weights of each term across countries and years. As shown in our chart of the week, “services” is used more than any other term.
In fact, across all countries and years, “services” comprises about 20 percent of the occurrences of all terms, with tourism in particular getting more attention. “Agriculture” and “agricultural” are the second most frequently used terms, followed by “industry” and “industrial.” By contrast, “manufacturing” comes up only 2 to 5 percent of the time, depending on the income group (5 percent for advanced economies). “Manufacturing” appears even less often than terms such as “institutions,” “privatization,” and “infrastructure.”
The results show that contrary to all the fervor around manufacturing and the industrial sector, discussion of services is much more prevalent than other industries in IMF country reports and has been for more than four decades. This is the case across income groups, and includes periods when manufacturing was a much larger sector in terms of production and employment in many countries.
The question is, will this trend continue?
COVID-19 has dealt a heavy blow to the service sector, especially tourism. Many companies have adapted by taking their services online. With the shift to digital, the service sector will no doubt play an increasingly vital role in many countries’ economic growth post-COVID-19.
For the foreseeable future, it seems services will continue to be a talking point—turns out, that has always been the case.