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The Physical Nation vs The Digital Nation

• November 13, 2016
• Michael Mandel

Here are some bullet points on the economics of the election:

1. America is divided between the Digital Nation and the Physical Nation. The Digital Nation includes tech, entertainment, publishing, telecom, finance, and professional services such as management consulting, accounting, computer programming, design. The Physical Nation includes manufacturing, mining, construction, retail, transportation, health care, and the rest of the economy The Digital Nation makes up about 25% of private sector employment, the Physical Nation 75% (we first laid out this division of the economy in a March 2016 report).
2. While there are many factors going into Trump’s election, on the economic side, there was one reality:  The members of the Physical Nation finally got tired of suffering  while the Digital Nation soared. And since the Physical Nation outnumbers the Digital Nation 3-1, that’s the election.
3. For the past fifteen years, the Digital Nation enjoyed strong productivity growth, stable prices, high investment in IT, rising employment, and higher (and rising) incomes. By contrast, the Physical Nation has suffered from weak productivity growth, rising prices, weak investment in IT, weak employment growth (outside of healthcare), and lower (and barely rising) incomes.

4. The Digital Nation is concentrated in blue states. States that voted for Clinton in this election averaged 35% digital, while states that voted for Trump are 23% digital on average. Here are the top states, measured by share of private sector GDP coming from the digital sector.

Next: How trade and productivity growth have affected the Physical Nation