Monday, October 13, 2014

Services as Growth: A Response for Dani Rodrik

Dani Rodrik is understandably concerned, in a post which asks, "Are services the new manufactures?" In spite of the services growth of developed nations in the 20th century, services potential for the 21st century has become somewhat uncertain. Both healthcare and education have largely evolved in fiscal settings. This in turn, leaves much of their sustainability subject to the ebb and flow of industrial patterns. Consequently, the fiscal nature of any nation's most vital services, makes them a difficult driver of growth when it is most needed. That is particularly the case, when governments also have limited access to international monetary flows.

Manufacturing growth is beginning to plateau in developing nations. And as Rodrik stressed, a new model for growth is needed, in order to move forward. At first glance, services seem as though an obvious candidate. However, he questions the ability of services to provide the productive framework which would be necessary. One could say that even though services are greatly needed, they do not yet have the internal drivers to make them capable of dispersing throughout populations under their own steam. Fortunately, there are ways to make this happen.

I believe that services formations can eventually become a central component of stable economic environments. Indeed, knowledge based services could eventually provide growth on more substantial terms than what has already been achieved. To be sure, a lot of services production reform would be involved, to make it happen. Just the same, populations today have the digital capacity to make these transitions at local levels, if they are willing to try.

What, then, would be the primary stumbling block for many governments? In services based terms, there is a great need for decentralization, for services involve intricate knowledge use at local levels. Decentralized or local service patterns which match resource availability, would remove many services from government control. Still the impetus is needed, for that is the same control which puts hard limits on present day services capacity. These limits have also meant that some cities and regions are continuing to lose their economic viability, in the U.S. Services have simply not been amenable to centralization in the same ways as product which is separate from time.

When it comes to time use that's necessary for unique and individualized product, more time participation (by all concerned) in production and consumption is better - not less. That's also the path to renewed growth. However, matching time use for production and consumption, needs to be approached in ways which do not leave residual debt, in aggregate. After all, it is that residual difference between time value, which has limited service formations unnecessarily. To be sure, many differences exist in skills aptitude. But these can be coordinated in the digital age, in ways which would not have been possible, before.

Knowledge use decentralization would be capable of generating economic growth where little currently exists. What's more, this growth would be capable of involving local citizens in locations around the world, at high skill levels. Most importantly, this form of decentralization can positively impact government budgets, to the degree that they are willing to monetarily back local systems for services growth.

How can this activity take place on monetary, instead of fiscal terms? One's matched time use choices are backed through local coordination, which takes place throughout ongoing schedules. In order to capture productivity in services, each individual hour becomes a central point in arbitrage networks. This makes it possible to track local knowledge use in community efforts, through time. Education is built into knowledge use systems so that high skill services and production become possible in relatively small population densities.

By matching aggregate time use directly - hence no residual time "debt" involved - human capital becomes a direct wealth formation instead of being totally dependent on production residuals or government redistribution. More services are possible through this method, in that participation (consumption and production) is better dispersed. This provides the production efficiencies that in turn allow services to become self supporting.

Because services provisions are directly provided, citizens only need to pay for them once, through the (individually) planned use of their time. This makes a tremendous amount of taxation unnecessary for services. Also it would take much of the uncertainty out of aging, as local support systems would remain in place where one lives. Knowledge use systems makes it profitable for all to be directly involved in productive time options. As a result, no longer would extremely limited numbers of service providers need to take care of the many.

Services can be directly linked with local production factors, so that local citizens would come to understand monetary flows that both are capable of generating. This in turn would prevent various factions from setting up consumption specifications that do not match local resource options as they presently exist. One might say that local forces of cost push inflation versus demand pull inflation, would become better understood within the same local context.

Until now, decentralization has often not been seen as a positive, in that it tends to be associated with informal and unproductive economies - i.e. those where individuals do what is necessity to scrape by. While developing nations are most often thought of in this context, examples abound in developed nations as well. These informal economies often do not have direct connections to the already existing equilibrium, which is what can also make them vulnerable to terrorism and other destabilizing activities in general.

Hence it would be advantageous for any government, to utilize local services coordination systems for knowledge use, through direct monetary means. These coordinated services and production systems could provide economic access for all local citizens who wish to take part. What's more, such systems could eventually prove capable of providing the services they need most.

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