Don't Cut Out The Middleman

He's a high-tech growth leader

The Bureau of Economic Analysis has just released a report that breaks down economic growth by industry--and the new data paints a surprising picture of how the high-tech revolution is affecting the economy.

The figures show that the growth impetus for the economy in recent years has been the distribution industry--retail and wholesale trade and transportation. Between 1989 and 1994, distribution made up one-third of economic growth, far outranking any other growth source.

The biggest gainer was the wholesale industry, which has contributed 15% of the economy's growth since 1989. Wholesaling calls up images of decrepit warehouses and dusty showrooms. But wholesalers--the middlemen between manufacturers and retailers--have been some of the main beneficiaries of computerization. Using technology to reduce the costs of ordering, shipping, and inventory-holding, they boosted output by 23% without increasing employment.

Another big contributor to growth was communications. Since 1989, the communications sector--which includes telephone, radio, television, and cable TV--has been responsible for almost 8% of growth, far more than its 3% share of the overall economy.

The biggest disappointment, according to the new data, is manufacturing, which has contributed only 11% to economic growth since 1989. That's far less than manufacturing's 18% share of the total economy. Indeed, virtually all manufacturing growth was concentrated in two areas: industrial machinery, which includes computers, and electronic and electrical machinery, which includes semiconductors. The rest of manufacturing, dragged down by defense spending cuts, added almost nothing to national growth.