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    Last modified 10/07/08


        Copyright © by Nila Gaede 2008

    1.0   The service economy produces neither wealth nor children

    In his book, The Origin of the Family, Private Property and the State, [1] Friedrich Engels explains that
    once the communistic society is in place and economic equality is attained, humans would finally settle
    down to essentially monogamous lifestyles founded on love rather than on wealth and live happily ever
    after. Perhaps he yearned for a day when people would not be pressured into unholy marriages by
    economic forces and social caste.

    Both of these noble goals are wishful thinking. Not only will economic equality never come about as
    Engels envisioned, but the correct trend is the total destruction and phasing out of all types of marriages.
    The patriarchal family of the agricultural age gave way to the nuclear family of the manufacturing period
    which has recently shifted to a service economy represented by single parents and bachelors. There is
    no room for children in an urban society. Without children, there is no future for the human race.

    So how does scarcity (economics) manage to steer the evolution of the family towards childless
    bachelors?

    Orthodoxy has for some time maintained that large families are a result of ignorance and poverty. [2]      
    We instinctively associate high fertility with a nation’s backwardness. The vision that comes to mind is a
    destitute African woman holding in her arms several famished kids with bloated bellies. We have been
    conditioned to believe that only a poor, uneducated woman allows herself to get pregnant ten or fifteen
    times.

    However, the European experience tells a different story. The population in the old continent expanded in
    the 19th Century during the Industrial Revolution, a period in which wealth increased and the middle class
    expanded. Therefore, high fertility does not necessarily have an inverse relation with the quantity of
    material goods in circulation (i.e., poverty) as orthodoxy would lead you to believe. Quite the contrary! The
    demographic and economic history of Europe shows that tangible goods go hand in hand with
    population.

    Indeed, an intuitive review of how population relates to the quantity of goods in circulation should lead us
    to conclude that they are directly proportional. Assume you travel to the distant past, say, to the Mayan
    Civilization. How would you estimate the number of inhabitants in the Mayan heyday? Would you
    determine this by the number of barbers, dancers, or priests that they had? Or assume that you traveled
    to another planet to find that human-like beings went extinct long ago. You discover in a rusty computer
    somewhere that there were 10 insurance companies insuring people for a total value of 1 trillion dollars
    and that the 10 banks that operated had deposits for a total of 5 trillion dollars. What would this tell you
    about total population? How much was a dollar worth? Just consider what would happen today if I wave
    my magic wand and double the money in circulation in the U.S.? What would that tell us about its
    population?

    The point that I am trying to make with these examples is that the service sector is not a reliable
    demographic yardstick. We can generate and maintain millions of more bank accounts with the same
    companies we have today and with more or less the same personnel. If I told you that the Mayans had a
    hundred priests, this would not give you an idea of what their total population was. One priest can service
    10 as well as 100 parishioners. One TV station can broadcast to millions or to billions. One politician can
    represent thousands or millions. Conversely, if you went to a planet were life went extinct long ago and
    you collect a total of 1 billion cell phones from the ground, you would not conclude that this was a tiny
    colony of 100 individuals. A colony of 100 men has no ability to use a million TV sets or a million beds. It is
    the level of tangible goods that gives us an indication of total population and not the level of abstract
    services.

    Only two of the segments of Man’s artificial economy produce tangible goods: agriculture and
    manufacturing. Services certainly do not. Manufacturing delivers nouns. The service sector provides
    verbs. I will use the words wealthy or wealth to refer to the possession of a tangible product. I will use the
    words rich or richness in the context of an abstract good (e.g., money) or of a service, whether actual or
    potential. I will not include land within wealth because this is simply an abstract division of something that
    remains constant. The land was already there before any of us came on board; we did not create it.
    Humans merely parcel out existing land to particular individuals based on arbitrary criteria. Therefore, if
    you own a house, a yacht, and a cell phone you are wealthy. If you have a bus ticket and a lot of cash, and
    can buy the services of a prostitute or that of the electric company, you are rich. If you inherit a stunning
    castle on the Rhine, but are penniless, you are wealthy, but not rich. If all you own is a bunch of gold
    coins valued at $100 million, you are rich but not wealthy. Of course, the current economic environment
    allows you to sell the castle and become rich or exchange the coins for a castle and become wealthy.

    Manufacturing contributes to wealth: it produces a physical product. The more products you have, the
    wealthier you are. Services contribute to richness. When the barber shaves you, he has performed a
    service and become richer. You transferred money from your account to pay for his services. This is
    simply an accounting transaction. The barber does not have a physical object to show for his efforts, and
    this becomes evident when we do inventory. I wave my magic wand and make all the money in the world
    disappear at this very moment, including checking, savings, credit, stocks, and bonds. The barber may
    not have too much trouble convincing the jurors that he owns the TV he has in his apartment. He will have
    very little luck persuading them that he owns the shave you just walked off with. Likewise, if I destroy all
    the information in the world in a single swipe, all the checking and credit accounts vanish. You are
    suddenly worth as much as what you have in the form of tangible assets. Money doesn’t have an intrinsic
    value like a bicycle or a chicken.

    Global fertility seems to follow the trends of manufacturing and not of services. The greater the proportion
    of GDP that the service sector takes up, the fewer children we put out. The history of 19th Century Europe
    also followed this trend. Population increased geometrically in proportion to wealth (tangible goods).
    Food kept pace with population. Today, the global population is still rising, but it is doing so at a slower
    rate. Predictably, wealth (the number of tangible goods) is still increasing worldwide, but at a slower rate.
    For all practical purposes, this symbiotic relationship between material goods and population can also be
    seen in reverse. The day you constrain real wealth (goods), you can expect fertility to decline as well. The
    decline in global fertility as a function of the overall decline in manufacturing can be seen in this light.
    If we concede that fertility goes hand in hand with wealth (i.e., manufacturing) as opposed to richness, we
    must conclude that services have little to no chance of triggering a fertility spike comparable to what
    manufacturing did in the 19th Century. The decline in manufacturing and a shift to services is a sign that
    we are no longer accumulating wealth. If anything, we are just becoming richer:

    " It’s hard to imagine how service-sector expansion can play a role in wealth
       creation… Currently, growth in service jobs appears to be increasingly
       dependent on government spending, a connection not normally correlated
       with sustainable wealth creation." [3]

    If the decision of woman to have a family is based on authentic wealth, the decline of manufacturing
    presages fewer and less numerous families. The macro-trend from large agricultural clans first to the
    industrial nuclear family, then to proletarian single mothers, and finally to childless bachelors was   
    already in the cards. Those economists and demographers who argue that women have the option of
    reproducing again in the future have no idea what they’re talking about. Assuming we grant this
    hypothesis, it first destroys the constant population hypothesis. The economists cannot maintain these
    mutually exclusive arguments simultaneously. Either we will attain ZPG and oscillate forevermore around
    a constant global population or we will continue to expand forever.

    More importantly, the proponents have to show how a service economy would stimulate fertility in the first
    place. Not only does the service economy have no need for labor in the long run, but the structure of the
    family unit is moving in the direction of bachelorhood and childlessness. Therefore, what remains to be
    settled is whether our artificial economy can be maintained by a population that oscillates around
    constant magnitude. If it can’t, we are guaranteed to decline into extinction.


    2.0   The ideal economy: exponential demand and no labor

    What do contemporary businesses look for year after year?

    In a natural economy, the end of the population explosion is a blessing. If the number of wildebeest and
    lions would remain more or less constant and low enough to give the grasses time to recover, this state of
    affairs could theoretically last forever.

    In an artificial economy, on the other hand, a constant or declining population is a curse. Our ‘civilized’
    economy is founded on the concept of profit. Businesses look forward to increases in demand year after
    year, preferably in an exponential mode. A company can make profits by selling more, by eliminating
    costs, or by putting out new products. In practice, these goals are attained through a combination of
    technological or methodological innovation or by reducing the labor force. The ideal business
    environment consists of an unlimited increase in consumers paralleled by an unlimited decrease in labor.
    The perfect artificial economy consists of an entirely mechanized labor force (robots) producing goods
    and services for an ever increasing pool of buyers (humans).

    Unfortunately, our contemporary economy works in reverse. The more efficient corporations become
    through technical or methodological innovation, the more they reduce labor. This part we have no trouble
    with. However, as unemployment increases, disposable income decreases. A reduction in consumption
    leads to further layoffs as competitors vie for a shrinking pie. Increases in unemployment also contribute
    to a decrease in fertility. Nevertheless, a high fertility rate has no purpose in such an environment.
    Increases in unemployment coupled with a reduction in birth rates contribute to further decreases in
    demand (Fig. 1). The entire spiral is self-sustaining and exponential.
Adapted for the Internet from:   Why God Doesn't Exist
The robot in the
suit will replace me
at the office. The
one on the left will
help you around
the house. And the
one in the middle
will be the father of
your babies.
The service economy
cannot be run on a
constant population

    Note that these trends constitute a significant departure from the early days of manufacturing when more
    widgets required more workers. The high fertility of the 19th and early 20th Centuries had a purpose.
    Today it doesn’t. Hence, there is no incentive today for women to put out babies because these will not be
    absorbed as producers. As we all know, until baby grows and can produce, she is just an expensive
    investment. She is all cost and no profit. In the service phase of Man’s artificial economy both manufac-
    turing and services have little demand for workers and employees, and the new generation is predictably
    frustrated that it cannot find jobs within these sectors. The bottle neck is depressing fertility and
    constitutes a structural trend in our global economic development. This is not a temporary phase within a
    business cycle as the relativistic economists would have you believe, but a terminal illness. We never
    went back to agriculture or to hunter-gathering. Therefore, long-term economic history does not repeat
    itself.

    Hence, assuming that the demographers at the U.N. are correct and implementation of family planning in
    third world countries is responsible for curtailing fertility, the programs are working against the interests
    of our artificial economy. Corporations absolutely need more consumers in the long run if they intend to
    stay in business. Without more humans, there will not be profits. And without profits, corporations close
    their doors and our entire economy collapses. The day that population comes to a halt, there is no
    purpose for corporations to hire people or to sell anything. In fact, the economy runs into trouble much
    earlier, before projected ZPG occurs, meaning that ZPG also ends up occurring much earlier than
    forecasted. An ideal, artificial economy running on a constant population is wishful thinking.

    To recap, the global economy is gradually distancing itself from agriculture. Food is becoming an ever
    smaller component of GDP and the labor force dedicated to this line item is disappearing. Yet food is all
    we need to stay alive. Manufacturing is also dying. Day by day, firms are increasingly trimming their
    payrolls and shrinking by attrition. Workers are increasingly being displaced towards service jobs or end
    up relying on the State. This is not a phenomenon that affects only developed nations. This is a global
    megatrend.

    The relativistic economist argues next that innovation and technology will keep manufacturing and
    service businesses churning out new products. Humans will invent unimaginable gadgets that will catch
    the fancy of future generations, and new manufacturing and service industries will continue to sprout
    until the end of time.

    I reply that this vague proposal is an empty promise. We have invented all the relevant technology that we
    will ever invent. Without revolutionary products and, more importantly, new categories of products,  
    manufacturing will grind to a halt. Then it doesn't matter anyways because manufacturing is a small
    percentage of the economy and getting smaller by the day. We are so efficient and becoming even more
    efficient by the minute that we need ever fewer blue collar workers to produce ever more goods of ever
    higher quality. In regards to services, there haven't been any new service categories created in the last 50
    years. In fact, labor intensive service categories such as telephone operator and office clerks have been
    largely eliminated

Fig. 1

Paradox in our artificial economy
Improvements in technology and
methodology lead to reductions in
labor. Unemployment leads to a fall
in demand and to a lower fertility rate
which in turn contributes further to a
fall in demand. Corporations reduce
costs in response to a fall in demand
by laying-off workers. Over the long
haul, the effect is to make busi-
nesses ever more efficient as global
population inches towards ZPG. This
process is not only self-sustaining,
but also exponential.