The Dangerous Rise of ‘Services’

The business world and many national governments obviously know which way the winds of change are blowing, with great attendances at the China International Fair for Trade in Services (CIFTIS). A six day event just finished yesterday and which attracted “22,000 enterprises and institutions from 148 countries and regions, including 199 Fortune 500 companies” from around the world.

A great success by all accounts.

Xinhua Headlines: “China’s unwavering opening up infuses confidence into global economy”

A word of warning though, to which the whole world should listen.

The move to a ‘services’ based economy is a shaky basis by any standard.  A move which will not stand the test of time.  And the fact that the Chinese economy is now dependent on a services sector that represents 59.4% of its economic growth and 53.9% of its GDP as quoted by this article, is very worrying.

The services sector produces nothing and is basically just a way to employ excess people for whom there is no other productive task.  That’s Ok in a world that is continually growing economically, in a capitalist sense, as long as it is backed by an adequate production sector which provides all the hard goods to meet the growing needs of that society and other related societies.  Being basically the world’s factory, China has such a production capability, for now, and has had that as a backstop for many decades.  This is essentially why we have seen the rapid growth of the Chinese economy on the world stage.

But that can only be maintained for any length of time in a world of continuous growth which has at its disposal unlimited abundance in all the necessities to maintain complex societies. Otherwise those societies have to manufacture facsimiles of abundance and growth. Such facsimiles can be seen in the manipulated growth of stock markets, the creation of continuous conflict to feed a military industrial complex and a consumerist philosophy maintained by the stimulated ‘service’ demands of a bored population with nothing that is real on which to anchor their wasted and ill-informed lives.

We also have seen that kind of rise before in both the growth of the British empire in centuries of past glory and also perhaps most strongly in the rise of America over the previous century.  Both of which empires are now waned or waning and will become increasingly impoverished and less influential as a result.

Can we not read history to find out why?

The main reason for the ongoing decline of the West, there are many others of course, is that they forsook their capacity to make products (armaments excepted) for both themselves and the world and concentrated their economies on the provision of services – their people having nothing else or better to occupy their time and still ‘make a living’.  Resulting in a hollowed out society, a hollowed out economy, and a bare-bones future.  And to whom did these nations sell out their production capacity?  Why, to China of course.

OK, granted this is a fairly simplistic view, but not I think an incorrect one. Near future events will, I feel sure, bear that out.

Has China followed suit?  Well, it appears to be headed that way.  But China still retains its capacity to produce, for now.  Will it hold on to that?  Is China now attempting to steal what little value there remains in Western economies through the growth of its own services sector?  There is little hope for the West if that is so. Other than following a path of mutually assured destruction.

There is little hope for the West anyway since the world is entering a phase where growth, economic growth at least, will become impossible due to the impinging factors of resource constraints, energy constraints, health constraints, and physical constraints resulting from the effects of global climate change and an impossible to manage population growth in a world where food production and energy production may not be sufficient to maintain even basic levels of society as we have come to know it.

But I will tell you who will be better placed to cope with that newly constrained world.  Not the West.  I see no hope for Western nations being able to hold themselves together in that world.  But China might.  And perhaps Russia.  Both of which have pretty broad based independent economies and the abilities to make stuff.  Even though the kind of stuff they need to make may be very much simplified and more tied to co-existing in the very different physical environment of the near future.