Chapter 6: Towards the Service Economy

9. Non-monetarised Activities
The Industrial Revolution was able to be born and develop thanks to a decisive number of social, cultural and technological factors. Some books have highlighted how at the end of the Roman Empire or later during the Middle Ages, there had been notable progress and innovations too.
The rest was missing, especially the great spread of money, stimulated by the explosion in local and international trade. There was no money, no monetary savings and without savings no capital for investing in new machines and technologies, even though at the beginning this investment was limited to about 5% of the turnover of new entrepreneurs. They too had to make a cultur­al leap, from tradesman to industrialist.
Money is often despised (especially as some cynics say, by those who do not have enough of it), but without it there would be less freedom and less wellbeing in the world today. Certainly, it is a means of power and human nature knows how to become diabolical. Nevertheless, the whole structure and working of the Industrial Revolution revolves around money as the most efficacious means for fighting poverty. The goal is still a long way off, but without money it would be even further off.
Let us now take a small step forward: In Samuelson’s book, from which millions of students have learnt the basics of economics, he states right from the first page that economics deals with business and transactions (exchanges) that can be based on money or without money. Be careful not to misunderstand this. I have thought about it. Actually it is necessary to understand that value (almost always monetary) depends on an exchange. Now, in certain exchanges money is not used: we are speaking here of barter.
In this case too there is an implicit value that can be reduced to money, even though it may not be explicitly used. Three books can be exchanged for a kilo of chocolate. A transaction has taken place just the same and the value of the books can be deduced indirectly.
Why this discussion? Because in the service economy, the production and utilisation part carried out without recourse to money is increasingly important.
Value is not derived from the exchange alone. When one pays attention to the notion of utilisation (of a product or of a system), one understands that this depends in large measure on the activities and the efforts related to self-production and self-consumption. And in this case there is no exchange.
Let us think of all the self-service or do-it-yourself activities. It can be about a restaurant where we go to get our dishes, or a table or a wardrobe that we ourselves build at home. The total value is given by the final result and it is not possible in most cases to quantify the work done by ourselves in monetary terms. A senior manager who earns 100 euros an hour, and even more, and goes to get himself a glass of water cannot quantify the value of this act: three minutes computed on the basis of his salary (the time taken to look for the glass and fill it) cannot be compared to the value of a glass of water on the market. Let us think of all the time necessary to learn by ourselves how to do all kinds of things, to cook, to use a computer, carry out small and medium repairs, change a baby’s nappies. If there is no exchange, there is no benchmark, not even an indirect one that offers any indication as to a price on the market.
An important corollary in a service economy, therefore, is that which states that there are not only directly or indirectly monetarised activities (i.e. monetised or non-monetised, making use of money or not for a transaction), there are also non-monetarised (and non-monetisable) activities that are not linked to an exchange but that are decisive in ensuring that utilisation of goods over time give the best results. Results that are not flows but stock, as we have already underlined.
The measurement of results (by means of indicators) will also take into account the quality of every performance. If something is made well the costs will be less and the product will be better. It is necessary, however, to measure the results during utilisation. A well maintained car will require minor repairs. Perhaps the global repairs industry’s turnover will decrease, but its productivity in terms of individual profit will be greater.
In the service economy, there is therefore a whole research sector waiting to be set up to explore the effects of activities that contribute to increasing the wealth of nations and that are not “monetised”.
The other fundamental aspect of this question consists in defining the passage between what is “monetised” and what is not. Let us imagine that a new technology, for example in the communications sector, reduces all its costs to zero. At that point, every communication could become free: a great step forward for our material wellbeing. On the other hand, let us suppose, as is already happening in the case of water, that in the centre of some cities we have to acquire air in a bottle, in order to breathe normally. In both cases, the disappearance of the monetised turnover or its increase indicates only the variation in the monetisation of an ac­­tivity that has nothing to do with the real increase in wellbeing. For this other measurements are needed (of result, of utilisation).
Monetisation, in the service economy too, remains an important foundation, often even decisive, of economic activity. However we will be forced to account adjacent areas where non-monetised activities, caused or not caused by technological evolution, become an increas­ingly important, or better, very important, strategic aspect of economic development tout court.
From this viewpoint it will be possible to assign value, even as economic and social activity, to all the work undertaken in our society by the various voluntary organisations. Let us measure the true benefit, i.e. the result of monetised and non-monetised activities, and we will reduce some irrational aspects of our economics. Allocations are very important in the modern world but they are not enough to guarantee a good economic result, whatever it may be.
I was convinced of this one day when, in my Geneva office, the young Xerox technicians who came to check or repair the photocopier suggested that I should organise a drink after work. The machine in question was the first in its category to have reached a million copies in the Genevan canton. There were five technicians. They had also invited their boss and brought some bottles of champagne. The crowning moment of the evening was when they amused themselves by comparing the booklet that recorded the number of service visits with that of the copies that had been made before another visit had been necessary. “See,” said one of them, “after my visit that day the machine made almost 50,000 copies, while after your visit it made only 40,000”. And they made fun of each other comparing the figures. A beautiful example (still exemplary) of the Swiss taste for quality of work. But what is there to be said about its economic value?
After the Second World War GATT (General Agreement on Tariffs and Trade) con­tributed widely to economic development, avoiding the disastrous protectionist experiences that had characterised the period following the First World War.
It was a matter of a negotiating mechanism between the different States to limit, sometimes abolish, the obstacles to international trade, (customs tariffs, the imposition of quotas at different levels for imports, and a whole series of other bureaucratic obstacles). Trade of course concerned the import-export of products, in the purest and most orthodox Industrial Revolution style.
Services quietly appeared in the GATT negotiations. During the Tokyo round obstacles of a non-international trade tariff type began to be spoken of. In effect, these concerned a certain number of service functions (for example quality control). During the following round successively named the Uruguay round, negotiations began to take place specifically dealing with services, in a separate area or hall. They were not yet dignified with the term “products”. The experts in the subject tried for a long time to explain that services were nothing other than “immaterial” products. The reader knows what I think of this definition.
Whatever the case, at the conclusion of the Uruguay round some principles were agreed for the liberalisation of world trade services, that underlined the need to avoid discrimination in one country against the commercial activities of another country that had established itself there. Seen more clearly there were means that in the end opened up the way to investment. Economic reality had begun to prevail.
Actually in a modern economics based on service functions every product or item export­ed to another country needs a whole infrastructure in place for distribution, financing, maintenance and finally for waste disposal. This is without counting activities such as assembly and training. All this requires investment. Consequently in our new service economy, trade and investment are no longer alternatives. They are complementary and each needs the other. In a predominantly manufacturing economy, it could be said that it was possible to choose between exporting cars to a third country or investing in creating a car factory. This is always possible, but the most important part, even in the most traditional exportation, is that relating to investment. An investment that constitutes an ever more decisive condition for making exporting possible.
One also has to understand the political and social advantage of this transformation. In the case of the industrial or traditional manufacturing economy, it could be stated that investment sometimes became foreign tampering in a country. In the service economy, investment is more and more linked to onsite utilisation of products and goods, especially for the local population. We are dealing with a great opportunity for development that can be realised at the local level, with the specific contributions of the place.
Studying and understanding the significance of the service economy, therefore, could offer very favourable opportunities, not only for WTO (World Trade Organisation) negotiations but for the spread of a positive and realistic perspective on the globalisation process.
Economists have a great responsibility in the process of understanding and identifying the necessary means for the development of civilisation based on world interdependence.
About 20 years ago, in order to stimulate some thought on this matter, Jacques Nussbaumer (now deceased), Raymond Krommenacker and I founded the World Science Forum in Geneva. It organised a series of conferences and distributed some books. The Forum then moved to Paris and Dublin. According to me it wasted a little time in discussing the idea that services were “immaterial” products that, “if they fall on your feet, you don’t feel anything”. Not even in your head!
Obviously we hesitated a long time over launching the debate on a crucial point, the adapting of economic analysis to what really are the functions of services. Some initiatives parallel to the Forum are now very active, such as The ASEC (Applied Services Economic Centre programme – a network of experts in various types of services) programme which relies on the Geneva Association.* For some years now it may be observed that there is a flood of conferences, congresses, publications, that begin to spread a little everywhere, from Hong Kong to Paris. The train is on the move and is speeding up.

* See also and the “Wealth of Nations revisited” project, promoted by members of the World Academy of Art and Science – SEED, South East Europe Division.

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