I have embarked on a rather ambitious book project with the focus of the material footprint of money. We will see if I can manage it all the way to completion. In the process of doing so, I might write some articles on the theme. I will not stop writing about food and agriculture, climate and environment, but perhaps a bit less the coming winter (and we have looong winters where I live, or rather we had long winters). Anyway, this article is about services and to what extent they are or could be dematerialized.
In most developed economies services’ share of the economic value added (i.e. the Gross Domestic Product, GDP) is two thirds or more. A transition to a service economy is one of the paths that allegedly can accomplish a simultaneous economic growth and a lower ecological footprint (i.e. less greenhouse gas emissions, loss of biodiversity, other environmental impacts, resource use).
If we look at the bigger picture, however, a transition to a service economy doesn’t lead to a lower footprint. Between 1991 and 2022, the share of global employment in services increased from 35 percent to 50 percent. In 2023, services composed 77 percent of the GDP of the USA while it was 65 percent in Sweden. Meanwhile the material footprint of the USA is considerably bigger per capita. Services’ share of the GDP of China doubled between 1970 and 2022 while resource use increased 12 times in the same time. [1][2][3] How come?
Obviously, there are some personal services, such as household cleaning, hairdressing or massage, which have a very low footprint (I will use this as the generic term for all sorts of impacts). Many services do, however, use much resources. The travel industry is a very good examples where air travel, hotels and cruise ships all are much more resource demanding than many industries.
Most services are in one way or other directly linked to manufacturing, mining, forestry or farming. In most industries big chunks of the work have been outsourced to service contractors. When a job is done within a manufacturing firm it is seen as part of manufacturing, but when the same job is bought in externally (i.e. outsourced) it is classified as services. If you consider the whole value chain, services are often an important part of the production, 24 percent of the production value in the Swedish automotive industry goes to services. In the food industry, service costs corresponds to 20 percent of the output value [4]. Real estate, rental and leasing services is the most important category of services in the USA and they are obviously closely linked to high resource use.[5] Finally, a big portion of services is trade and distribution, and their link to resource use is quite obvious as it is the huge flow of goods that necessitates all those services. After all, it is only because Walmart, Carrefour or Amazon sell a lot of stuff that they can employ a lot of people. When Chinese shoes are sold in the EU, 50 to 80 percent of the added value of is from service in Europe.[6]
Personal services, constitute a very small share of services. It is also apparent that such services are dependent on wage inequality as it is basically impossible for most of those who provide personal services to buy personal services themselves. Alternatively, society must raise taxes in order to subsidize them, which is exactly what states do to provide for health care, schooling and higher education (the extent this is done differ, but all states to my knowledge has some level of subsidized services). In relation to growth, personal services contributes very little to economic growth and it is quite easy to realize that there will be no growth in an economy made up of personal services. If we all cut each other’s hair and hang the laundry of our neighbour and teach the neighbourhood children math, there will be no economy, no market and no capitalism.
If we look in the rear view mirror we can also see that cultural services have had a huge material footprint. A look at the pyramids, churches, temples and mosques, the Great Wall of China, Roman road networks or the Stonehenge gives you an idea. Modern entertainment is also resource demanding. Nobody has been able to summarize the climate impact of Taylor Swift’s Eras tour, but here is at least a try to assess one concert. Her personal jet flights are almost a piss in the ocean compared to all other impacts. War is another ‘service’ with a huge environmental footprint.
And you say that culture has a low environmental footprint? Ricardo Liberato, CC BY-SA 2.0 <https://creativecommons.org/licenses/by-sa/2.0>, via Wikimedia Commons
In the article Dematerialization through services[7] Blair Fix explains why economies with a high share of services use more resources than those with a low share of services. On the consumption side there is no indication that people will buy less goods as incomes increase and the share of services increase. On the production side, services can therefore only increase if the workers remaining in industry and agriculture will produce more per person. That is almost always accomplished by using more inputs, machinery and more energy, i.e. using more resources. In addition, the emerging services will also consume resources. This applies also within industries. Between 1950 and 2018, the share of non-producing employees (bosses, marketing, lawyers, designers, HR etc.) in the American industry went from 12 percent to 28 percent. Meanwhile the energy use per employee doubled.
The illusion that a transition to a service economy would lower our material footprint is caused by the inability to look at the system as a whole and the feedback loops that exist. Many seem to believe that a worker can stop making cars and become an artist instead or that you don’t buy new shoes but instead go to a local concert (not Swift!). But that is not how the economy works. There will be no less shoes consumed because people consume more music and the car industry will automate if people don’t want to work there. A transition to a service economy will only have a smaller ecological footprint if both production and consumption of goods will shrink. But a reduced production of goods will rather lead to lower overhead, less taxes and less need and space for services in their current form. There are also very strong forces in the capitalist market economy that makes such a transition highly unlikely, if not impossible.
[1] World Bank, 2024, Services, value added (% of GDP), https://data.worldbank.org/indicator/NV.SRV.TOTL.ZS
[2] West J, Schandl H, Heyenga S and Chen S (2013). Resource Efficiency: Economics and Outlook for China. UNEP, Bangkok, Thailand.
[3] Our World in Data (2024). Data adapted from United Nations Environment Programme. Retrieved from https://ourworldindata.org/grapher/domestic-material-consumption-per-capita [online resource]
[4] World Bank, 2024, Employment by sector, https://data.worldbank.org/indicator/SL.IND.EMPL.ZS
{5] Kommerskollegium 2012, Everybody is in Services.
[6] https://www.statista.com/statistics/1233657/us-service-sector-value-added-gdp-industry/
[7] Fix, B. Dematerialization Through Services: Evaluating the Evidence. Biophys Econ Resour Qual 4, 6 (2019)
Thank you for your undertaking. As an american citizen who is a biologist/ecologist/energy management specialist, I can tell you that predatory capitalism rules the western world. Sales to drive consumption via propaganda-driven advertising is the thick goo that slimes all of reality. At the very outset of any production of any product or service, there is ZERO mitigation, especially one-to-one, real-time mitigation, of ANY deleterious impact created by the creation of that product/service.
The gory truth of these imbalances, either industrial/technological/service, is that they all are parasitic, both at the beginning and running through to the end use – toxic pollution that cannot be eliminated from Earth environment. And as you point out, there are multiple layers of multiple spinoffs, all consumptive and unmitigated, regardless of where/who is delivering the industry/tech/service product.
Much of the drive to permanently obliterate consciousness of our reality is, as you point out, in the entertainment/sports/fashion/vanity fitness/pseudo-health 'industries.' Then, as if we did not have enough of this, the preposterous consumption of the transportation sector in all these industries is staggering. When you throw into the mix the 24/7/365 social media drama/trauma soap opera, now on AI, you have a consumption factor that makes melting iron ore look like kids lighting matches behind the garage.
The over-arching truth is that Homo sapiens, in all sectors except nearly primitive, highly rural societies, is a biological entity completely bereft of conscious intelligence and self-awareness. Most all human behaviors are STILL fear-driven, testosterone-flooded, adrenaline-powered narcissism, whose outcome always finishes in violence, and that violence has a massive energy consumption and pollutant creation.
All of this is channeled into action via brain chemistry addictions that are the result of reactions to trauma, either positive or negative, pain or pleasure, reward or punishment, success or failure, as defined and sanctioned by the oligarchs of fortune and power and malignant narcissism.
As my oldest daughter put it so succinctly, only overwhelming traumas that stun or punish humans so absolutely can break these addictive cycles. And whatever void that ensues MUST be filled with a rare energy – kindness and selfless compassion – that points the way to the innocent beauty of Nature. Only by re-integrating humans into the real world of natural phenomena and providing them with valid examples of how the natural world handles complex problems, can humanity avoid extinction. I fear, yes fear, that this is highly improbable, if not impossible.