Service Economy

One often hears polemics against the fact that our country is now dominated by the “service economy”. It is one of those phrases that gives a strong impression, yet is oddly difficult to pin down.

If I may be indulged in an open-ended post:

1) How would you define the “service economy”? (with examples)

2) Is the service economy new, or merely expanded/changed, versus what you would consider a more traditional time? (Whether that is 100 years ago or 500 years ago.)

3) Is it a problem that the service economy is so large, and if so why?

14 Responses to Service Economy

  1. Paul says:

    To me, “Service Economy”, or “Service Industry” is as opposed to manufacturing””. 60 Years ago, when manufacturing was a large part of the over all U.S. economy. Before the world economy became so powerful, driving American manufacturing to foreign countries, where wages were lower, in order to meet the price competition, the highest wages were in the manufacturing sector. In search of profits, the American economy turned to other industries. One of the industries that offered increasing personal and corporate income is the financial industries. In my mind,this was a tragedy. The finance industry produces profit through the use of the savings of other people. This can go on only so long, until all the available savings have been totally consumed by the financial industry. I liken it to the Biblical “Money Changers”, and lawyers. Neither of these actually “create” anything but wealth for the bankers, investment advisers, sales staff, stock brokers, and government administrators (bureaucrats). Other than that, there are many true “service”industries; such as janitorial, yard maintenance and repair work. These service industries include those tasks that the everyday worker once performed for himself, and have always been traditionally low-paying. While 60 or more years ago, there were true “custodial”workers, whose jobs were not so much to create goods, but to conserve what we had already created.

  2. restrainedradical says:

    “This can go on only so long, until all the available savings have been totally consumed by the financial industry.”

    Because there’s a finite amount of savings? Well, then manufacturing can go on only until all the money available for consumption is used up.

    “Neither of these actually “create” anything but wealth for the bankers, investment advisers, sales staff, stock brokers, and government administrators (bureaucrats).”

    And investors like anyone saving for retirement. It also provides capital for companies like Ford. Commodity futures allow farmers to manage risk. The benefits are countless. But who cares? It’s much easier and fun to demonize the bankers.

  3. Blackadder says:

    My understanding is that “service jobs” is just a kind of catch all category for employment that doesn’t fall into the manufacturing or agricultural sectors. Doctors, plumbers, teachers, accountants, actors, waiters, salesmen, etc. Lumping all these types of jobs together made sense when most jobs were in manufacturing and/or agriculture, but I think it makes less sense today. I suspect that a lot of hostility to the idea of a “service economy” comes from the fact that when you say service jobs most people think of the guy who mans the drive-through at McDonald’s, and obviously a country where most everyone does that isn’t going to work out very well. There is also, I think, a sort of atavistic temptation to think that a lot of service jobs are somehow unreal or valueless because there isn’t some tangible material object that is produced in the process.

    As the above comments suggest, I don’t see having a large service sector as being a problem.

  4. American Knight says:

    1) Service economy is the delivery of intangible benefits or tangible goods. This would be in contrast to the manufacture of goods or agricultural work. These are different facets of man cooperating with that which God has given us and all are designed to benefit mankind and primarily for the sanctification of those involved in the labor, whether it be service, manufacturing or farming/ranching.

    2)Service has always been around, but it used to be more closely associated with agriculture and then manufacture. Now it has grown, primarily due to the fact that information has become one of the primary commodities of a modern economies.

    3)The service economy’s growth is testimony to the advancement of man’s economic activity. This has a very practical function; however, the economy has to be ordered toward benefiting God’s children for His glory. Clearly we are lacking in this area as we have progressed toward utilitarianism with little to no regard for God’s primary role in our economic activity. Homo Economicus is a myth – we are integrated creatures (body/soul) and our end is supernatural – our economic activity must be ordered toward our supernatural end (Heaven with God); rather than merely our comfort here and now.

    The chief tool, other than man’s labor mixed with God’s creation for economic development is the invention of money. Money can be a commodity, yet it is the utility of money in service of economic exchange that gives it value. So service has been part of our economic development from the moment we got beyond bartering. As for financial services being nothing more than a parasite on the economy, I disagree with Paul. Authentic financial services are essential. I do agree that the financial services, in their present form, are severely twisted, but that is symptomatic of perversion by the cartelization of that aspect of the economy under the banking authorities. The chief culprit being the private banking cartel whose arm in the USA is the Orwellian Federal Reserve System.

    All banking is subject to this monopoly. All firms on Wall Street are bank holding companies under the same umbrella. The next and final target are the insurance companies. The first salvo in that hostile takeover is the so-called health care reform (law) – the next will be the so-called financial re-regulation that we can expect to pass concurrently with amnesty for illegal aliens (the Demoncrats buying 17-25 million votes to secure their oligarchy).

    Insurance companies, when mutually owned or when they are fraternal organizations like the Knights of Columbus, are an invaluable benefit for the economic development of mankind. They are proficient at risk management, which helps create stability and reduce uncertainty allowing entrepreneurs to take risks and innovate and develop. Life insurance companies are especially helpful for creating financial stability for all actors in an economy, most notably the bedrock of civilization and economy – the traditional family.

    So, while most of the financial services are perversions of what the true purpose is, it is erroneous to paint this important aspect of economic development as parasitic. We just need to allow the authentic financial services to operate for the benefit of all without coercive interference from cartels, cabals, monopolies and duopolies of the elite, transnational financiers and banking interests. It is well beyond time to end the Fed and return nearly all regulation to the state level – where it is most efficient, most consumer friendly, conducive to business activity and beneficial to society at large.

    As for the Money Changers reference, that applies to usurers and that is exactly what the Fed is. Jesus was angry with them because they defiled His Father’s House, the Temple. They continue to defile His Father’s House. Profit is a necessary feedback to measure the effectiveness of entrepreneurs out-competing each other to best serve their customers. What we have to do is return our culture to good morality and re-Christianize our country. By ordering our economic activity toward God, we will help with inviting God to sanctify us through our work. Interest charged to compensate for the opportunity cost for allowing others access to capital reserves is legitimate in order to direct capital to where it can provide the most good. The proper function of regulation, with respect for subsidiarity, is to curtail man’s disordered appetites. This is a delicate endeavor as libido domonandi will tempt those with the power to use it to advance their own interests. For example, when bureaucrats award non-compete, no-bid contracts to their buddies instead of the most efficient and effective producers. Conversely, a local community preventing the manufacture and distribution of pornography or narcotics is the legitimate use of regulatory authority.

    A danger in the growth of our service economy is that we are too reliant on unskilled, low-skilled and poorly educated laborers. One may think that this is what crowded out the manufacturing economy; however, that is incorrect. What has crowded out the manufacturing economy is a poorly run, intentionally bad, dumbed down government monopoly known as ‘public education’. In conjunction with managed trade agreements with the Orwellian name of ‘free trade’ and excessive taxation and regulation, which stifles innovation – we are left vulnerable to all sorts of dangers, not the least of which is national defense. If we cannot make our own war materiel than we will be overrun by foreign competitors in a hostile takeover known as conquest. The barbarians will not be able to resist the temptation to cross the Tiber and sack Rome.

    Economic prosperity is a byproduct of the pursuit of sanctity through work – that work can be agrarian, industrial, service, religious, child rearing, home keeping or any number of activities – yet, they become a complex tapestry when naturally woven together by the Invisible Hand of Divine Providence. When God is the director of the economy it will best serve man in a spirit of Charity. When the economy is directed by men, with no reference to God, it will eventually and always lead to ruin.

    The distorted growth of our service economy is a result of men and their lust for power, worshiping the total return of idols with no reference to God.

    An authentic service economy will allow each and every actor in the economy to serve all the others in a spirit of Love. For even the Son of God came to serve and not be served.

    Sorry for running so long, it is past midnight, I can’t sleep, Mass is in six hours and my brain is squirming in my skull. I take no credit for any of the above that make sense and I apologize for all of it that seems like nonsense.


  5. Art Deco says:

    is just a kind of catch all category for employment that doesn’t fall into the manufacturing or agricultural sectors.

    Agriculture, manufacturing, construction, or mining.

    I doubt the change in the country’s productive mix is much of a problem bar that there are transition costs for localities and regions (as Mr. Price will attest). The alacrity of adjustment is a function in part of public policy. I think you might also argue that reasons of state mandate physical access to certain raw materials and productive capacity.

  6. Pinky says:

    Economists sometimes talk about primary, secondary, and tertiary industries. Primary industries deal directly with raw materials: agriculture, forestry, fishing, hunting, mining, utilities. Secondary industries use those materials. Generally that means manufacturing and construction. Tertiary industries are services: trade, transportation, finance, education, health care, et cetera.

    When people complain about the US becoming a service economy, they need to remember that half of that is education and health care. We’re the world leaders in those fields. In fact, I don’t think it’s possible to overestimate how dominant we are in higher education. We’re huge in software, entertainment, and finance.

    I have no concern about our becoming a service economy. We’re the fourth largest producer of food, and we’ve got a lot of natural resources to fall back on if we ever need to.

  7. Foxfier says:

    Much much late….

    “Service” to differentiate from “goods” industry.
    If it makes something, it’s a “goods” industry; if it involves doing something (even if that is “moving goods” or “teaching a skill”) then it’s a service industry.

    Expanded or changed, definitely. Unlikely to be new, since I can’t think of any business that is really new– internet is information, teaching isn’t new, moving stuff isn’t new….

    Yes, it is a problem. Service requires demand for the service, and while it can be fudged for a little while, it doesn’t respond very well on a human level to changes in demand. I’m not sure WHY, it’s just what I’ve observed– for example, every shop I was in when I was in the Navy was undermanned, because demand for our service wasn’t steady. This was a Navy-wide problem for our job, when the opposite wasn’t true. (I believe it caused at least one helo-crash that killed some two dozen folks because someone incorrectly checked some gear.)

  8. Paul says:

    Service Economy:
    From all the other comments I have read, it sure seems to me that; 1) In the beginning of any economy, there must be industrial production. Without industrial production from raw materials, all the “Service Industry” can “service” is itself. 2) some people think servicing non-productive assets, like shares of stock or other ways of manipulating money someone in an industrial capacity has earned (and saved or invested) has become too much the “service Industry” of the U.S. If nobody is willing to get their hands dirty as a laborer, we will shrivel up. Even engineers who automate manufacturing are merely supporting industry. Even in industries where most every stage is automated, there is still the production of something tangible. “Money Changing” and lawyering are about the same in regard to the creation of real wealth as far as I am concerned. They both work in the same “temple”, taking their “cut” off the labor of honest workers.
    Credit default swaps are one of the most highly paid trading ventures I can think of. Million dollar bonuses go to those who shuffle other people’s money.

  9. Tim says:

    World leaders in higher education and healthcare? You need to check some rankings, because we are neither. We might spend the most on healthcare, but our coverage is no better than countries that spend much less.

  10. Art Deco says:

    but our coverage is no better than countries that spend much less.

    How ya figure?

  11. Tim says:

    Simple. We operate the health industry as for-profit. There are many, many other reasons, but the simplest reason for why we pay more is that for-profit companies will want profits.

    (As opposed to non-profit corporations & state run service)

  12. Foxfier says:

    Plus, those pesky old, sick or disabled folks just insist on BUYING health care, rather than being “allowed to die” (if they wish it or not) by the Liverpool Pathway.

    Then theirs our insane insistence on legally defining a “live birth” as any baby that breaths or shows other signs of life after delivery, rather than calling premies that don’t make it “miscarriages.”

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