DOC TAYROC'S [UNSOLICITED] ECONOMICS HOT THOUGHT

Marx and the Death of the Author XIV: Services: The afterlife of manufacturing?

Most of my life has been spent in and around 'post-industrial' cities, they're a common sight in the UK, Europe, and the US. One of the many effects of neo-liberal capitalism has been the 'off shoring' of manufacturing jobs to China, leaving considerable parts of their former home nations behind with 'rust belts' full of industrial decay, because of course when deregulation hit the responsibility for cleaning up these industrial sites fell to local governments who were also experiencing severe budget cuts as the hammer of neo-liberal austerity hit these 'secondary cities' just as hard as the initial job losses. This one-two punch left behind a lot of bitterness, poverty, and a general feeling of economic collapse, contributing to the growth of far-right movements everywhere that, ironically, right-wing politics had already hollowed out, as the bourgeois controlled media ensured that migrants, leftists, unions, and the rise of 'the gays' and other moments of sexual liberation were actually to blame for this feeling of societal decay. More rounds of the powerful blaming the powerless for the economic misery caused by the adoption of neo-liberal economics.

Of course, in order to maintain power long enough to extract all remaining economic surplus, and because of the deep-held belief that 'marketplace solutions' should always be attempted, the economies of these post-industrial countries would need to adopt to something else. The old Lewis model of the 1950s had dictated that sufficiently advanced economies would adjust the bulk of employment from agriculture to manufacturing. For a variety of reasons, countries like Britain and the US could not well and good shove all these former factory workers back into agriculture. So what's next for an economy when manufacturing moves on?

This is where we begin to add the third, and most nebulous and controversial sector to Lewis-style sectoral analysis. Welcome to today's topic for discussion, the 'services' sector.

Discrete variables, when doing any sort of statistical analysis are fairly deceptive. This becomes even more true when dealing with categorical variables. Continuous variables are, mathematically speaking, fairly straight forward. According to the weather widget on my desktop, it is 30 degrees Celsius right now. It can warm from here, from 30.1 to 31, and indeed is expected to warm to 32 today. This can be expressed more precisely, perhaps it is 30.4281234 degrees. I can add and subtract from it and measure it using a probe. It is, in all ways and forms, a scientifically provable and calculable variable. The temperature is the temperature, and no amount of opinion will shape that. We have all, internationally, agreed on the measurement of Celsius, and 1 degree Celsius in the UK is equal to 1 degree Celsius in Burkina Faso. There may be other variables, such as humidity, UV index, presence of rain, etc, that may alter how 1 degree Celsius 'feels', or how we got to the temperature we are at, but that does not alter in the slightest the meaning of the fact that it is presently 30 degrees Celsius.

Categorical variables, on the other hand, as well as all other discrete variables, have a defined parameter, and usually defined by the person doing the measurements. Further, when doing calculations around them, especially the increasingly popular linear regression models that make AI and modern academia tick, all numbers generated will be based around probably of A occurring given B, or some other Bayesian set of assumptions, rather than a number nearly as concrete as you'd get from a continuous variable. Pr(A|B), as it is typically rendered, has its uses, don't get me wrong, but it's not as useful as a 'fact' as saying that in the time it took me to write these paragraphs it rose from 30C outside to 31. Especially since probability has a nasty habit of losing meaning once the predicted event either occurs or, more the point, doesn't.

The other nasty habit of discrete variables are points that defy the stated parameters of your categories. In the case of the Lewis model, what is banking? It is neither agricultural nor manufacturing, and in the case of capitalism it also takes on an economic factor outside of mere storing of money and directing of resources. Banking is, in capitalism, where capital is actually created and assigned value. Outside of banking and finance, capital loses its meaning, and therefore potency. Capital isn't necessary to convert a log into a plank of wood, it is only necessary if the person doing the conversion needs to satisfy the needs of capital to retain the right to perform the labour, i.e., pay for the land and the tools. Further, is software development manufacturing? In a better world, perhaps it would be, unfortunately much of modern software development is held up in the owning of licences and other forms of intellectual property, which are handled by corporations, lawyers, share holders, and countless other 'middle men' of dubious value to the process of software creation. Where do the jobs of said middle men reside in the Lewis model? On the less dubious side of things, what of restaurants, barbers/salons, medical care, etc., etc.?

Into this we bring the services sector, a problematic sector as it is full of even more contradictions than the previous two. It holds your banker as well as your barista. The value added of your barista is self-evident as without coffee, many of us would not make it through the day. The value added of your banker, that is up for debate. Of course, of the two it is also of little doubt who is paid better. All this to say that the problem with the 'services' sector is that it is a 'catch all' that catches all the industries not adequately described by the other two sectors. Further, it is the sector that is home to all the jobs described by David Graeber as 'bullshit jobs' that provide dubious 'value added' to the larger economy. Finally, it is the sector that holds much of the monopolisation of things such as 'intellectual property rights', which have been identified by economists from Schwartz to Dyer-Witheford as sources of 'hoarding' and considerable stagnation in our present economy. Finally, it is the constant meddling of companies in the 'services sector' in the other two sectors that have caused a non-insignificant amount of the present problems in the sectors we have seen so far. 'Vertical integration', a concept dreamt up by American oil magnate John D. Rockefeller, is driven from this, as a financial 'holding company' seeks to monopolise, in the case of Standard Oil, the 'primary' sector, in the monopolisation of the extraction of oil, either through outright ownership of the wells, or using the monopolisation of the secondary sector, the refining of oil, or the monopolisation of the tertiary sector, the selling of oil to force small oil fields to sell at a rate dictated to them. The 'free market' is killed by so-called vertical integration. Standard Oil might have invented it, but the modern-day oil monopolies continue the practices today, and have been eagerly studied in business schools and copied by countless monopolies in countless industries. The 'free and perfectly competitive market' so often promised in economics thought experiments never stood a chance in an unregulated, 'laissez faire' liberal democracy. Especially since the news media would be one of the monopolies.

In the UK and the US, and most other 'Western' countries, the services sector is also the leader in both percentage of labour employed and percentage of GDP generated. Again, the GDP is unsurprising, as GDP is a measure of capital produced, and as identified, banking and finance, which 'live' here are the only real generators of capital. Everything else is down to 'return on investment', which is, again, dubious in terms of actual value added. This is to say, statistically speaking the majority of people reading this are probably in the services sector. I'm in the services sector, since this is where the 'industry' of higher education lives at present. In many ways, I'm emblematic of the transition I discussed above, since my father worked in manufacturing. A manufacturing job that disappeared when I was a kid, and left me with little alternative to seeking employment in the services industry.

If we go strictly by Lewis logic, since the richest countries on the planet are all dominated by services, does it make sense for other economies to also chase this? Or perhaps, is this service based understanding of the source of wealth of the top countries fundamentally flawed? After all, do we really want agriculture and manufacturing to be so undesirable and undervalued when they are as necessary, if not more necessary to the functioning of modern life than a public relations expert or a marketer? Should we treat price-inelastic 'services' like healthcare, education, and research as 'industries'? Is Britain rich because it's so dominated by the services industry, or is it so dominated by the services industry because it was already so rich, and so the bourgeois class could afford to off-shore manufacturing and agriculture, at the expense of the workers? When an economy is so dominated by bankers, investors, and landlords is it really surprising to have a largely artificial 'cost of living' crisis as the bourgeois class seeks to extract as much surplus value as possible in as little time as possible?

Does this have to be what a 'post-industrial' society looks like?

We seem to have primitively accumulated more than enough to go around. Even if we go by pure capitalist logic, and take Britain's current GDP, roughly £2.8 trillion as of 2025 according to the Office for National Statistics (ONS) and divided it evenly amongst the roughly 70 millions persons here (again, ONS), we get roughly £40,000 per person ($53,973). And that's only looking at liquid (cash) income. This isn't including the money not counted when we look at capital gains, and holding in non-liquid assets such as property and assets hidden in any of the many tax havens readily available to the British elite, including every single British Overseas Territory, all listed by the World Bank as known tax havens. For many, £40,000 annual income is a loss, but for a depressingly high number of people in Britain, that'd be a major raise. If we assume GDP is accurate (it isn't), the sudden influx in spending would still cause the GDP to increase substantially, as local economies that have been deprived for years would suddenly see a dramatic influx in cash.

Of course, the simple task of GDP per capita, which is the calculation I did above is deeply flawed. But it still goes to show that there are considerable resources available to spend, if we should so choose. Of course, the ways that socialism actually would work would be beyond the limited grasp of a capital-centric measurement like GDP, especially as the Soviet GDP or the Chinese GDP would not have, nor could have covered the full extent of the programmes that uplifted citizens inside them, nor could GDP even cover the benefits to the people and the economy that Britain's more robust social housing programmes of the 1950s and 60s. Under our current system, £40,000 doesn't sound like a lot to live off of, but that's also because for a great many of us, the cost of our rent/mortgage, food, psychological therapy, pet care, energy, water (!), and other facets of the current capitalist 'cost of living crisis' make £40,000 seem like a small amount. Of course, if we nationalised all those and did away with much of those profit-driven costs for the average consumer, £40,000 would start to feel like a lot more. But again, the £40,000 isn't the point, since the maths en route to that £40,000 are flawed. (I promise, one of these days I'll write a whole blog about how deeply flawed GDP is as a statistic).

No the point is the relative recency of the 'services' sector as a vital part of any 'developed' economy, and the fact that even many 'undeveloped' economies have leapt into the 'services' without developing a manufacturing base in-between, such is the case in India and Nigeria, two economies I have spent a considerable amount of time studying. Both have had 'services' overtake the agricultural and manufacturing sectors, but few would say they've 'developed' economically to be as rich as Britain, a country for which 60 per cent of the GDP is tied up in banking and finance. Further, of course, many modern Britons of certain ages, Millennials, Gen X, and Babyboomers, that is, are financially worse off than they were in the 1980s when the 'services sector' came to dominate.

Perhaps this sectoral model of development doesn't work. Or at least, doesn't work under capitalism. The population of Britain today is the largest it's ever been, a statement that is true of all of the countries I've studied. There are more Nigerians, Indians, Sri Lankans, Kenyans, Americans, French, and German people than ever before. There are more people than ever before, full stop. Because of this, we cannot ever return to a strictly agrarian society. Those days are past, and the tendency of certain people on both sides of the spectrum (this is one of the few times 'both sideism' actually works) to romanticise an agrarian past and wish for our return to it are woefully out of touch with the brutal realities of those economies as well as the present demands of the global population. Manufacturing, even factories, are here to stay, but we also cannot just build factories like we did in the 19th century and assume they'll be the job creators they once were. Technology has moved on. My dad could build a career as a steel man, for a variety of reasons I cannot and would not. I'm much more comfortable behind a computer. We also can't just keep pushing the masses towards individual industries, as that reduces the wages.

The problem with the current 'services sector' is its leech like capacity to grab onto the other sectors and install copious numbers of middle men of various levels of utility. One of the points of Graeber's Bullshit Jobs is most of the people working the Bullshit Jobs know their jobs are useless to the wider economy, but because they pay well, and we live in a capitalist society, they do them anyway, collect the (usually handsome cheque) and live their best lives on the weekends. Nothing ventured, considerable amount gained. Many of these jobs exist because we keep building space to 'middle men' to seek profit in spaces that really should not be profit driven. Venture capital can't turn a log into a chair, but they can own everything the artisan uses, and extract value from them, without benefiting the artisan or the person buying the chair. Venture capital will also employ numerous people to help make sure they're pulling the maximum amount of profit out of the sale of that chair, without adding anything of value to the chair. As we've seen in the 'enshittification' era, they may cut value out of the chair to maximise surplus value. This isn't a surprising modern development, this is a tale as old as the capitalist system.

This is all to say, the problem with the services sector, both today and in the days of British colonial expansion is one and the same, many of the jobs in the services sector exist for the sake of funnelling as much capital to as few people as possible, a measurable and obvious inefficiency on the part of the 'free market'. The only benefactor of Jeff Bezos being a billionaire is Jeff Bezos. His billionaire status might, through several statistical flukes, make the American GDP seem more robust, but that means little to the rotted out parts of Detroit, or the parts of Mississippi that you'd be forgiven for not realising they sit in the richest country in the planet, since they've been rotting since the American Civil War (1861-65). The average Briton may have 'gained' access to tea from the East India Company, but the profits did not benefit the average Briton, nor was the only or most efficient way of getting tea to the British isles. The main benefactors had been the owners and investors in the EIC. (Up to and including the Royal family). Indeed, the average Briton couldn't afford to consume tea until after William Pitt the younger began the process of breaking up the EIC's trade monopoly in tea. If you're making an early 19th century Tory with a name ending in 'the younger' look progressive, you're really doing something wrong.

And maybe that's where my present frustration is coming from. William Pitt the younger might've been more progressive than 'Centre-Left' Keir Starmer.

The sectoral model for economic development, useful until it isn't, and maybe we've finally broken it.