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Service Economy

Updated on June 16, 2016


Services and its implications

In the previous hubs I have said that it is the service economy that we have now. I said agricultural and manufacturing economies are dead. How is it different?

What are services? It is a simple question. In economics, a service is an economic activity where an immaterial exchange of value occurs (Wikipedia). In other words, service is where no wealth is created. And service economy is where services jobs are the most predominant. In an agricultural economy majority, more than 90% are employed in farming while in a service economy less than 4% is in farming (taking America as an example). In manufacturing economy, most people were employed in manufacturing jobs like building cars. What made service economy possible, technology, especially computers. Modern financial sector is the product of computers. Now most people work in an office instead of factories or fields. Even in factories automated robots do most works.

What will an ideal service economy look like, or what is its aim? The aim of service economy is to liberate humans from doing work. Once the “ideal” service economy is in place, humans only have to sit in his home doing nothing. Robots will do all works and we will be free to pursue our interests. We are free to roam around the world or sit in our living rooms watching TV and munching snacks. Do not think it is farfetched, as I said robots do many works humans used to do in factories now. Now robots are being developed that can sit in reception desks of hotels. Soon robots will take over all the works.

What is the downside? Or what happens in a “real” service economy? If you were paying attention, you might have already guessed it. As service economy advances, it gradually shed jobs humans need to live. If this transfer was in one day were all humans were provided robots, all have brought robots nothing would happen. However, as this is a gradual process, the loss of job will be so great that our whole economy will collapse before we reach the ideal stage because of the heavy unemployment. Studies indicate that for the last thirty years technology is not producing new jobs that it replaced in the beginning of industrial revolution. That was approximately the time of birth of service economy. A single computer can serve many. An ATM machine can service more people more efficiently. More and more people loss jobs. As more people loss jobs, especially high paying jobs (because that is where the capitalist is forced to make more technologies to reduce labor cost) the middle class shrinks. As the middle class shrinks, economic activities shrink. The whole economy stagnates then contracts. We are in the stagnation stage and is the reason why we see frequent recessions.

There is one more thing to consider. In an agricultural economy, children were assets. More children meant more farm hands. They were useful as soldiers too. The trend continued through manufacturing economy. Something else happened then. In our quest to prove Malthus wrong, we invented ‘family planning’ that is birth control. When we invented birth control, we found out that having fewer children is better, as we can look after the remaining kids better and race more children to maturity. We also got more time with us and started enjoying ourselves. In a manufacturing economy education was that brought advantage. So we started educating our children. Children was our insurance in our old age. Then came the service economy. In a service economy education has more role but it became more costly. Even after an education because the unemployment that sometimes accompany it we found that more children became a liability than asset. Service economy gave insurance by other means, hence we no longer have to rely on our kids.

We further reduced the number of children and found out that our freedom and financial well being increased as we do not have to spent everything on our children. The fertility rates decreased. As our fertility decreased population pyramid start inverting. Even though it should have reduced the unemployment rate, it actually did not because of population velocity, the phenomenon of increasing population in spite of decreased birth rate, which is caused by the decrease in death rate. Businesses were expecting a profit as the employees decreased, but because the population did not grow as expected the profits actually contracted. Those who got, got everything, the rich became richer and poor, poorer. Large inequality was created which further depressed economy because of a decrease in consumer base created by unemployment. Countries take debt because they expect that there will be future population that is going to absorb the debt. We replaced Insurance with children without realizing that we are placing the insurance on someone else children (by them paying the taxes). We did not realize that the ‘someone else’ is also doing the same. We are there by reducing the future taxable people. There won’t be anyone in future to buy the government debts/bonds.

Therefore, we will never reach the ideal stage. When the economy contracts, more people loss jobs. Jobless people are hungry people. When people get hungry, they get to the streets. There will be agitations and mass demonstrations. After some time it will get out of control and the law and order collapses. We cannot go back to agriculture, because there will not be enough land. In addition, technology made it sure that a few people are enough to supply the required food for all. Government cannot give free food for all, which will make more people leave jobs, which will reduce the value of money further, deteriorates economic condition. Also government cannot force the companies to give for money that has lost all value. Nor government will have money as there will be none to by its bonds. In a collapsed economy, the only thing that has value is money, as people cannot eat gold or anything else. It will be ‘jungle raj’ where everyone is everyone else enemy. What the outcome will be is unpredictable.

In short, expect huge riots and widespread poverty as the services advances and expect it soon. Fasten your seat belts. The only solution to stop this progress, or shall I call it regress, is to stop all the research on new technology and abandon some of the new ones. Are we willing to do that? Our future is at stake.

But what is future for a society that has decided to commit suicide by population decrease. In all the developed nations, the population is now decreasing. If it is increasing, it is due to immigration. We hope that they will take care of us, though they have different agendas. Not only is that, the immigrants themselves taking our habit of having fewer children. Therefore, no one will be looking after us. Our consolation is that we will not have to see our children die of hunger and violence as we have none.


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