PRECARIOUS PROSPERITY: THE SIREN SONG OF THE SERVICE SECTOR
Alter, Jonathan
PRECARIOUS PROSPERITY: THE SIREN SONG OF THE SERVICE SECTOR JONATHAN ALTER THE SIREN SONG OF THE SERVICE SECTOR One thing that's clear from all the back-andforth on the economy is that lots of...
...And Sen...
...Executives of American Express tell congressional committees or anyone else who will listen that between 1967 and 1979 productivity in services increased twice as much as productivity in goods...
...But for the economy as a whole, the issue is the old eggs-in-one-basket problem...
...Between 1970 and 1978, the total American labor force grew only 18 percent, but the number of managers and administrators grew 58 percent...
...Or is there a possibility, even conceding that the steelworker can adapt to the computer, that he will end up sitting at a terminal making reservations for a convention hall that is bankrupt...
...The same point applies to national defense...
...What's so wonderful about all of this, he concludes, is that it will mean "an economy based on a strategic resource that is not only renewable but selfgenerating...
...Too much reliance on any one asset can be dangerous...
...The distinction between goods and services can be blurry, but it's important to keep the rough outlines in mind...
...The point here is that placing too much faith in the potential of services and information might limit our productivity and flexibility in ways that many visionaries of the new age have not considered...
...when he sells an old one, it isn't...
...In the U.S...
...bankers, 83 percent...
...the trend away from goods and toward the service sector is unquestionable...
...The worth of particular services can be determined by the answer to that sometimes difficult question...
...Once young Englishmen lost interest in making things, the British lost their industrial base to the United States and Germany...
...Perhaps unemployed steel workers (or their children) can sit at computer terminals making American Express travel arrangements for a convention of paralegal personnel, systems analysts, and economists with a taste for McDonald's hamburgers...
...An even larger part of the service economy is attending to people, from waiting on them in restaurants, hotels, and department stores to caring for them in hospitals and doing their legal and accounting work...
...Services can supplement production—the computer mechanic who fixes the assembly unit, the wholesaler who brings food to market—but their aim is generally less to make items than to attend to them...
...After years of smugly assuming that the expansion of legal work was immune to anything but an earthquake at the corner of 17th and K Streets, many of the city's lawyers finally are learning just how dependent they are on their client's prosperity...
...unemployed autoworkers are going out to dinner less and strapped companies are making do with fewer consulting contracts...
...Other nations don't ignore it...
...This increases personal transactions geometrically...
...Jonathan Alter is aneditor ofThe Washington Monthly...
...on the contrary, services, particularly information suppliers, will continue to help employ people and bolster exports...
...According to the International Association of Convention and Visitor Bureaus, 43 million Americans—or one out of five—went overnight to a convention in 1981...
...Gary Hart seems to agree...
...This is a disturbing development for American business, because to be socially and economically desirable, services should be a genuine adjunct to productive activity—computer-aided design, for instance, or a strategy that creates new business, or a loan for a new plant...
...And the experience of England is instructive...
...PRECARIOUS PROSPERITY: THE SIREN SONG OF THE SERVICE SECTOR JONATHAN ALTER THE SIREN SONG OF THE SERVICE SECTOR One thing that's clear from all the back-andforth on the economy is that lots of people aren't letting themselves get too worried about the decline of manufacturing industries...
...The sooner we accept that reality and move to preserve and improve industrial capacity, the healthier our services—and our economy itself—will become...
...Take banking, where productivity was once determined by the total volume of deposits on hand, thus reflecting how much capital the bank was helping form...
...Engineers, by contrast, are not even on the charts...
...Echoing Daniel Bell's "post-industrial society," Naisbitt notes that "in an information society—for the first time in civilization—the game is people interacting with other people...
...Projections by the Bureau of Labor Statistics show that the occupation with the largest percentage increase in the next ten years will be "paralegal personnel," which is expected to grow by a remarkable 108.9 percent...
...The best way for the cautious manager to insulate himself is to contract out for consultants, legal counsel, and other services that can bolster his internal position...
...and systems analysts, 84 percent...
...Do their actions radiate growth out into the economy or just rearrange...
...When a real estate broker makes possible the building of a new house, his service is productive...
...All of this is not meant to suggest that the service sector has a dim future...
...The trend for the 1980s is clear...
...In other words, if everyone is in the service economy, who is going to be in the producing economy making the money to pay for the services...
...Is reliance on all this for the future strength of the U.S...
...economy sensible...
...The evidence is not conclusive, but The Wall Street Journal reports a decline in the convention business this year, in some cases by as much as 50 percent...
...A conspicuously large number of economists and thinkers are surprisingly confident about the future, and their confidence reflects faith in what is called the "service sector," which now accounts for seven out of every ten American jobs...
...But the evidence of the last 15 years of economic performance—the same years that saw the rise of the service sector—suggests that it's too slim a reed on which to depend...
...What he calls the "gentrification of the industrialist" is instructive...
...During the 1970s, they increased a paltry three percent...
...Ditto a stockbroker with a new stock issue and a banker with commercial loans...
...Other , countries or groups of countries we have come to depend on for manufactured goods may follow OPEC's example...
...Why have productive companies been so willing to pay for the enormous expansion of these services...
...In the strange psychology of strategic doctrine, the only alternative might be a short war that does not put a strain on resources...
...Must something more concrete, somewhere down the line, stand behind the services, assuring that they are at least vaguely redeemable in the production of a good...
...Confronted with the choice between safety and maximum growth, the[y] . . . opted for safety," Weiner writes of our models in this matter, the British...
...But as Martin Weiner explains in English Culture and the Decline of the Industrial Spirit, 18501980, Britain's economic woes of recent years can in some ways be attributed to this growing sense that attractive, "clean" careers could somehow be disconnected from industrialization...
...a lawyer who gums up the process in court for a client seeking paper profits is not...
...A lot of respectable opinion apparently thinks so...
...Mark Twain once observed that no group of people can prosper "taking in each other's washing...
...If he suffers—at least if he suffers a lot—so do they...
...One of the most revealing figures is that the average stay for a convention is 3.8 nights, which means that, including travel time, a whole week of work can be consumed in colloquia, golfing, and other pleasures...
...A hundred years ago, Britain ruled not only the seas but the world's service sector...
...Conventions have been another great growth area...
...Maybe Americans really can maintain their standards of living by writing memos and interfacing all day instead of making things...
...Further down the list of top 20 growth jobs are food service workers, tax preparers, corrections officials, travel agents, nurse's aides, and, still in the top group, economists (a 42 percent increase), who presumably will keep us apprised of how the transformation is coming along...
...A bank transaction, legal brief, clever tax return, or Telex message might aid economic growth...
...On Her Majesty's Service Perhaps Robinson, Hart, and Naisbitt are right...
...public officials, 76 percent...
...Mark Twain, for one, thought so, observing once that no group of people can prosper "taking in each other's washing...
...Again, the issue is flexibility...
...Perhaps it's a reasonable desire to preserve some measure of self-sufficiency, to avoid complete dependence on others...
...They usually don't own the businesses they work for, which makes them fearful of making decisions that might upset shareholders or others to whom they are now accountable...
...The Information Revolution does not depend on finite resources such as iron, coal, copper, and oil, which powered the Industrial Revolution," Hart says...
...But how is productivity in services measured...
...And once that happened, its services also shriveled...
...It is important not to get depressed about the latest gloomy business statistics, which are strictly industrial-based measures of economic wellbeing," John Naisbitt writes in Megatrends, a new book that neatly summarizes all of the pollyannaish thinking on this subject...
...But their "productivity" is measured without regard to that worth...
...This is completely logical...
...Goods involve the production of things: cars, food, steel, oil, silicon chips...
...If Britain's service-sector dominance evaporated along with its industrial advantage, will the same thing happen to us...
...Indeed, The Washington Post says that the new Washington convention center, scheduled to open in early 1983 and originally projected to increase the number of Washington visitors by 325,000, now expects only 110,000 conventioneers next year...
...The problem with this approach is that a transaction is neutral...
...then again, it might not...
...No basic industry means eventually no capacity to threaten a long, conventional war...
...Transactions do not distinguish between rearranging existing assets—re-slicing the economic pie, as Robert Reich puts it—and expanding the economic activity the country so desperately needs...
...Data processing machine mechanics" is just behind...
...The total number of conventions grew sixfold between 1970 and 1981, from 5,000 to almost 60,000...
...Consider the practice of law in Washington, D.C...
...health administrators, 118 percent...
...Then there is the supplying of information, preferably through the use of computers, which now seems to be the most glamorous part of the service industry...
...This is a contingency we can ignore only at our peril...
...Bill Moyers of CBS recently quoted with approval the words of James Robinson, president of Shearson/ American Express, who gives speeches around the country touting the glorious future of the service and information age...
...When the goal (conscious or not) is simply to make money off paper transactions that don't create any new wealth for society, then we should rethink the worth of some of these services...
...Working for the Bank of England, Lloyds of London, and other mercantilist services seemed to the turn-of-the-century Englishman to hold a far more attractive future than managing one of the grimy steel mills of Birmingham...
...Now productivity in that industry is being measured (by the Bureau of Labor Statistics) through a formula involving the total number of transactions completed...
...When we became too dependent on OPEC for oil, they blackmailed us...
...The logic of the optimism suggests that factory closings, while painful, are really just part of an inevitable readjustment to a new, better, more competitive economy based on services and information...
...A lawyer who drafts documents to smooth the way for the construction of a new building is aiding production...
...In the last two decades, America's most highly talented college graduates also have tended to pursue careers—in finance, law, accounting, and so forth—where their hands have stayed clean and their lives have stayed unchallenged by entrepreneurial risk...
...In part because most company managers nowadays also prefer to avoid risk...
...that is, all forms of interactive communication: telephone calls, checks written, memos, messages, letters, and more...
...Is it possible, for instance, that the Japanese determination to maintain some agricultural production is not simply a cynical sellout to a specialinterest group but the reflection of something else as well...
...Transactional Analysis Perhaps the greatest danger of the service economy is the misleading sense of economic growth it gives...
...One statistic from a labor department study illustrates the transformation in a particularly striking way...
...In an employment category called "eating and drinking places," the increase in employment since 1973 is greater than the total employment in the automobile and steel industries combined...
...In 1980, for the first time, the Japanese, with an economy still half our size, produced more crude steel, more cars and trucks, and spent more on new factories, machines, and tools than we did...
...It is driven by the inexhaustible ability to generate knowledge...
...Short wars, where few conventional weapons exist, are more likely to be nuclear...
Vol. 14 • December 1982 • No. 10
