World: | $100.66 trillion |
1. U.S. | $25.74 trillion |
… [China 2, Japan 3, Germany 4, India 5] | |
6. U.K. | $3.10 trillion |
7. France | $2.78 trillion |
U.S. digital economy | $2.57 trillion |
8. Russia | $2.27 trillion |
9. Canada | $2.16 trillion |
* IMF for world and countries; Bureau of Economic Analysis estimate for U.S. digital economy.
Last December the Commerce Department’s Bureau of Economic Analysis statisticians ventured an estimate of the size of the American “digital economy.” After sifting the “digital” bytes and pixels out of the big manufacturing, services, mining, information, and other “sectors,” they then summed up the software, hardware, e-commerce, computer systems design, gaming, and other online (or online capable) industries. The arithmetic yielded a figure of $2.57 trillion for American digital “GDP” in 2022 — exactly a tenth of that year’s $25.7 trillion U.S. economy, and 2.5% of the $100.7 trillion world economy. Were the U.S. digital economy an independent country, it would have ranked eighth in the world, $200 billion below France and $300 billion above pre-war Russia.
Whether compared to the overall U.S. economy, the world, or other countries, the American digital economy has some distinctive features. First, it is fast-growing. In 2022, it grew by 6.5%, nearly double the world economy’s 3.5% growth rate. From 2017 to 2022 the gap was even larger, with the digital economy averaging 7.1% annual growth and world GDP 2.7%. Second, its population is modest: BEA estimates a total of 8.9 million U.S. digital-economy workers, slightly less than a third of the 28 million French workers for nearly the same “GDP” value. (Alternatively, the Netherlands — a high-income country with 9.6 million workers, close to the U.S. digital-worker total — had a GDP of $1.01 trillion.) Third, it is affluent – U.S. digital-economy workers earn $2,195 per week on average, about 33% more than the $1,650 average for U.S. workers in general. And finally, it is trade-reliant, earning 28% of its money from exports. This is about twice the U.S.’ overall 13% export reliance, and about equal to the world average.
For more on this last point, over to a smaller and equally cerebral agency — the White House’s Council of Economic Advisers, on the top floor of the Eisenhower Executive Office Building — whose data-heavy blogs serenely survey the U.S. and world economic landscapes each week. The latest, out last Tuesday, examines the interface between this U.S. digital economy and the outside world. Some of its findings:
Scale: As of 2022, digitally delivered services exports came to $719 billion, a quarter of the U.S. $3.02 trillion in total exports. This included $93 billion in exports of “ICT” services (telecommunications, computer services, and software licensing payments) plus $626 billion in “digitally deliverable” services, such as financial wires, telemedicine diagnoses, music downloads, Chatbot fails, memes, distance education, and so forth. The U.S. is easily the world’s largest supplier of these things — as an index, the WTO’s somewhat different overall “commercial services” total for the U.S. was $900 billion in 2022, about an eighth of the world’s $7.04 trillion total, and just about equal to the $492 billion of second-place U.K. and $422 billion of third-place China put together.
Exporters: The largest U.S. digital exporters are financial services providers, with 29% of the 2022 total. They aren’t far above labs and factories, though: manufacturers ranked second with 24%, much of it through revenue from “rights to use their patents, industrial processes, or software licenses abroad.” A 24% share of $719 billion is about $172 billion, so given 2022’s $1.6 trillion in exports of physical manufactured goods, U.S. manufacturers earn a tenth of their export money through digital services. (And to complicate things a little, the physical goods themselves often incorporate digital trade — agricultural machinery communicates with its makers to analyze soil and water conditions, medical devices send data for analysis and return it to physicians, automobiles exchange data with headquarters to report signs of wear and signal drivers of the danger of collision.) Information industries — Hollywood studios, software designers, gamers and influencers, social media and internet platforms, news and media — receive 23% of digital exports; a lengthy spectrum of service providers — architects, R&D scientists, hospitals, universities, advertisers, etc. — combine for the other 27%.
Trade Balance: As CEA notes, the U.S. is more of a seller than a buyer of digital things. ICT services imports in 2022 were $63 billion and ICT-enabled imports were $370 billion, yielding a digital trade surplus of about $285 billion.
Future: Based purely on physical investment, digital trade seems likely to keep growing fast. Digital services move through space as radio waves via satellite beam, and along the sea-bottoms as pulses of light through fiber-optic cable. The more satellites and cables there are, and the more sophisticated they are, the more services can move, and deployment of both is fast. Last year alone saw 2,664 satellite launches. Cable-watcher TeleGeography reported 550 active and planned submarine cables in June 2023, and expects another 78 to go live by the end of 2025. That all suggests a continuing boom. On the other hand, as CEA concludes, growth opportunities also require openness and policy:
“The United States is poised to lead the growth in intangible flows given that the digitally-enabled services sector is one of the highest-paying and innovative segments of the economy. The rapid growth of digital services will require careful consideration in both domestic and international regulatory regimes. While the United States ranks fifth among fifty countries in terms of having the least restrictive barriers to digital trade, African countries have the highest levels of restrictions, followed by the Asia-Pacific region. Continued consideration and consultation will be necessary to support a thriving digitally-enabled services sector in the United States.”
BEA on the U.S. digital economy.
And CEA on American digital trade.
Data:
The OECD tries to compare size and growth rates of digital sectors in Europe, Latin America, Canada, and the U.S.
Perspectives:
Geneva-based trade scholar Richard Baldwin looks at the growth of services trade and decides “peak globalization” is a myth.
Labor:
PPI’s poll of less-than-college Americans last fall finds respondents viewing ‘tech-sector’ jobs as the next generation’s best career options.
And last, on metal birds and glass wires:
Up above: Our World in Data counts last year’s 2,664 satellite launches.
Down below: Telegeography maps the world’s 600 submarine cables, and predicts 75 more lighting up over the next year.
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.