Collapse of the Service Economy - Part 2

Posted On: Monday - December 28th 2020 3:38PM MST
In Topics: 
  Immigration Stupidity  Economics

The comments in Part 1 went along with what I'd been asking myself while thinking about the subject, "what is wealth creation, exactly?" and "is service wealth creation?" Mr. Blanc's concise comment was pretty much what I want to continue with here.

It's hard to picture a pure service economy. Though America has moved from a mostly production economy, at least in terms of GDP*, to a mostly service economy over the last 3-4 decades, we're not a pure service economy. The big and successful agricultural industry in this country, that supplies the gourmet burger and craft beer joints from our example, is a big creator of wealth via production. So is residential construction, as we depict in the image above.

Was the transition to a service economy just a side effect of the fact that the elites wanted to make more money by outsourcing any industries that could be outsourced? Agriculture and residential construction is impossible to outsource, well, the latter only until you've got everyone living in old Cosco shipping containers "manufactured housing". Keep in mind that during the beginning of all this, say in 1985 or so, there was no internet. Therefore, many clerical service jobs, the ones that computers had not made obsolete already, could not be outsourced easily, at least. (Could you mail legal briefs or healthcare records back and forth to old Bombay quickly enough to conduct business?)

I'll get back to the last point in the next post, but let me also mention immigration here. If you can't outsource the work to save money, you can always flood the market with labor ... as long as the people don't rise up about it, or anything ... which barely started to happen about 20 years too late (maybe 25, when you think of VDare's Peter Brimelow's book Alien Nation having been written in 1995) and is not "taking", so to speak, anyway, as we have recently noted.

The low pay levels in the service industry, not nearly keeping up with inflation, are largely due to immigration having flooded the market with labor. One can see that this also has happened in a big way in the two production-economy industries we've just mentioned, agriculture and residential construction. One of the guys in the image looks like he might be black, but, when's the last time you saw a black guy, or many white guys other than the contractor himself, in residential construction? Agriculture had been, as we all know, the prototype of the immigrant cheap-labor influx.

It's hard to think about this basic economic issue, service versus production, because the immigration effect has been so large. Is there some economic principle that says service industries in general are inherently lower-paying?

After that digression about immigration, let me go back to this: To use the same major simplification, can an economy in a place the size of America run with people selling each other food and beer, or to be more realistic, serving each other? Were the hamburger imported too (cattle sent to China to be processed, and sent back in refrigerated containers with all the fix-ins in large jars as ready-to-sell hamburgers - you never know what's next) and same with the barley/hops into beer, no the economy can't run like this. Someone has to pay for the imported burgers and beer** and where does that excess money come about. There is no permanent wealth, or wealth that can be ITSELF used to make more wealth, involved.

Let's say all of the lumber is sent from China. (This one is closer to reality - look at the furniture business - logs are sent overseas, lumber is milled, and furniture is manufactured in China and that heavy and bulky product is sent back over here in containers and STILL they come out ahead!) Many other residential building products (at least the fixtures and what not) already come from there. This doesn't work so well as a thought experiment due to housing being "assembled", so to speak, on site. OK, imagine mobile homes coming over on the ships too. Were we all be real estate agents and mortgage brokers financing each other's, and selling each other, these "homes", it's not sustainable. Where does the wealth come from to pay for these actual products (as opposed to those "loan products" and "real estate products" - the financial shenanigans, spreadsheets, paperwork, and direct-mail postcards)?

It's really helping me to understand this all when I read the comments and then write this out. The simple examples of the service industry that I bring up make the point, but even with a more comprehensive look at the myriad modern service industries, I think it holds true that all service and no production can not work to keep an economy sustainable. Did the bright folks who told us that a service economy is America's future 30 years ago really understand, and just not care? I don't know, but we'll get into that more in the next, more politics-oriented part 3.

One more thing: I can see a pretty good rebuttal to this post that simply goes "Switzerland!" I'm not saying there isn't any production there, but just as another thought experiment, can't the Swiss economy get by fine with the banking, running of expensive ski resorts, and fixing of watches***? What happens there is the exporting (if you can think of it this way) of their services around the world - the banking being the big one. Were they to just serve themselves, back and forth, I think, no, it'd be the same story. A country can not be sustainable by with a domestic service economy only. Our Globalist elites were thinking along the lines of having a huge service sector export surplus, but that was before the internet, and before China and India got their, mostly in the first case, shit together.

* Measures of Gross Domestic "Product" (formerly Gross National Product) are subject to debate themselves, as the services involved in the calculations of it often don't represent wealth creating by my definition of it.

** Maybe the beer is a pipe dream for the Globalists, as, sorry, but the Chinese don't know squat about beer - there's only Tsingtao because that was a German concession back in the day.

*** Forgive me, commenter Dieter Kief, as I'm of course being very simplistic. I hope you can write in some more on this from your Swiss perspective.

Tuesday - December 29th 2020 9:49PM MST
PS.Mr Alarmist. I bought two Swiss watches this year, so I’m trying to help!
Tuesday - December 29th 2020 5:21PM MST
PS: RAHFan, see, now that's exactly what I'm talking about. Which Heinlein book or story is that from?

This has nothing to do with that really, but in his "Sleep Book", Dr. Seuss has this creature called the Chippendale Mupp, who bites his extremely long tail before going to sleep. It takes 8 hours for the pain signal to get to his brain, and that's when it's time to get up!
Tuesday - December 29th 2020 4:01PM MST
PS Heinlein's cat and rat farm. Cats eat the rats, owner kills and skins cats, sells cat skins, rats eat the cats. Closed cycle, no other food needed, lasts forever.
The Alarmist
Tuesday - December 29th 2020 3:55PM MST

For me, the bottom line definition of wealth generation is the application of human capital to add value to capital and other resources to produce goods and services valued and desired by others in the economy and willing to trade the accumulated value of their own unlocked human capital. You will never have a pure services economy because someone will have to grow the food or make the stuff you need; however, when a country debases the value of its human capital, which the US has done in spades, you start to reach a point where you are not producing the wealth you need to import the cheap products and food that your populace can afford. You are one dollar collapse away from living the US’s version of the Great Leap Forward.

Switzerland to you and me is called “Die Schweiz” in German in recognition of it being a confederation of relatively free cantons allied by oath in the Old Swiss Confederation. That’s not the official German name, BTW. If you drive around Basel and Zurich, you’ll see plenty of evidence that they still make things of value there, though the watch industry has had a tough couple of years (thanks, Apple?).
Tuesday - December 29th 2020 9:45AM MST
PS It doesn’t take much mental horsepower to suss that a global economy with billions of poor people in Asia and Latin America* does not bode well for the formerly prosperous folks in Europe and the European diaspora. It is especially alarming when the populations of those places have been snookered into supporting the policies that are impoverishing them. It’s possible that there was never a way to stop the process that is ruining us. There’s just too much wealth for Our Betters for them to pass up. But if it is still possible to stop it, time is running out.

* I leave out Africa, because it’s very difficult to assess just what the potential of Africans is, but if there is any potential in them, there’s another couple of billion to take our jobs.
Tuesday - December 29th 2020 8:03AM MST
PS I guess, Mr. Moderator, your argument had some holes in it...

From NatLamp Radio hour’s episode, the Immigrants, Part1, “ The Hillbillies”:

“I don’t like it here in Switzerland. The Cheese got holes in it,....and I’m a Baptist,, I don’t wanna guard no Pope.”
Tuesday - December 29th 2020 7:23AM MST
PS: Thanks for the correction, Mr. Ganderson. I originally knew he was German, but he has written a lot about the Switzerland lately in regards to the Kung Flu anti-panic going on there. I thought that maybe he was Swiss after all. Well, he can give more details.

Saying "the Czech Republic" all the time was getting old for us (we visited), but Czechia works too. "The Ukraine" always puts that Seinfeld scene in my head in which Kramer and Newman are playing Risk on the NY City subway.
Germanystan Über Alles
Monday - December 28th 2020 9:20PM MST
PS As part of the Great Reset leap forward all comrades will be free of job lock on Traitor Joe's CCP serf plantation.
Dope and video games will be provided by mommygov and the money will roll right on the EBT/EFT gravy train.
All comrades will have the exact same amount in the interest of fairness and equality.
Think of it as the ultimate participation trophy.
Comfort and convenience will commence under the magic fountain of unity.
Mandatory good feelz for all except those deplorable kulak untermenschen scum.
Invest in printing press manufacturers for a great ROI.
Monday - December 28th 2020 4:43PM MST
PS. I think Herr Kief is German, although he lives on the Swiss border.

Fun fact: in German Switzerland is a ‘the’ country; it’s called “Die Schweitz”

I ( with apologies to Mister Derbyshire, like ‘the’ countries- the Ukraine, the Czech Republic, etc
WHAT SAY YOU? : (PLEASE NOTE: You must type capital PS as the 1st TWO characters in your comment body - for spam avoidance - or the comment will be lost!)