Over the past several decades the weight and the role of services in the global economy have steadily gained importance. Originally, services were primarily seen as a residual category of economic output that could not be attributed to either agriculture or manufacturing. The more or less continuous growth of the sector throughout the twentieth and early stages of the twenty-first century however, has led to a gradual reappraisal (Daniels, 2004; Elfring, 1989). While interest in the role of services in economic transformation goes back to at least halfway the previous century (see for example Clark, 1940; Kuznets, 1957; Stigler, 1956), it has intensified notably from the 1970s onwards, spurred by developments such as the rapid growth of producer services and the heightened recognition of producer servicesâ role in innovation and competitiveness (Hertog, 2000; OECD, 2000; Wood, 2002a). More recently still, the digitisation and advances in information and communication technologies (ICT) that in combination with services trade liberalisation have allowed for the unbundling and drastic reorganisation of services production have fuelled further debate (Baldwin, 2011; Blinder, 2006; Lambregts et al., 2015). According to the latest estimates, services account for no less than 62.5 per cent of global GDP and about 43 per cent of global employment (CIA Factbook, 2015). Moreover, a wide and rapidly growing variety of services has become tradeable in the past decades, enabling countries across the world, including in the Global South, to bank on services exports as an economic growth strategy (UNCTAD, 2004). Services now feature firmly alongside commodities and manufactured goods in global and regional trade agreements and their potential role in development has started to gain the full attention from academics as well as international development agencies such as the World Bank, UNCTAD, UNESCAP, IMF, ILO, OECD and ADB. Services, in sum, have evolved from a dependent and largely neglected economic category to the worldâs largest and arguably most dynamic generator of value added and jobs (ILO, 2015), a major driving force of globalisation (Blinder, 2006, Bryson, 2007; Dossani and Kenney, 2007), and â possibly â the next engine for growth in countries across the Global South (Ghani and OâConnell, 2014; Kleibert, 2015; Lambregts et al., 2015). This naturally makes the world of services an increasingly relevant field of interdisciplinary scholarly enquiry, with a number of issues vying for attention. This book concentrates on the question how the global reorganisation of services production alters the relation between and generates different sets of challenges and opportunities in the Global North and the Global South. It examines and provides empirical accounts of how changes in the geography of service delivery generate new interdependencies between services producing and services consuming regions across the globe; how services help to mitigate the impact of and contribute to recovery from economic crises in the Global North; and how the unbundling and relocation of services production fosters economic development and service sector-driven modernisation processes in new locations in the Global South. The remainder of this introductory chapter further sets the scene, identifies some of the major issues at stake, defines the bookâs objective and outlines the rest of the book.
The ongoing shift towards services
The world of services, as noted, is rapidly changing. For considerable time services have been overlooked as central to the global economy. Services were regarded not to be capable of driving economic growth since labour productivity in services tended to grow slower than in manufacturing (Baumol, 1985) and production and consumption took place in close proximity to each other, so limiting the potential for trade in services. However, with more types of services becoming tradeable and notably advanced business services having developed the capacity to create substantial added value and spread productivity gains across an economy, this view has gradually changed. Globally, the growth of employment in private sector services has outperformed growth in manufacturing for many years and it is expected to continue to do so for years to come (ILO, 2015). Today, in most countries of the Global North the share in GDP of producer and consumer services combined is between 70 and 80 per cent (World Bank, 2015a). Beyond the Global North, the importance of services has risen dramatically as well, especially in the most globally connected metropolises of the Global South and in the Asia-Pacific region. Here, knowledge-intensive producer services (Daniels and Harrington, 2007; Taylor, 2004; zhang, 2015) as well as more generic but highly tradeable low-end business services (Kleibert, 2015; Lambregts et al., 2015) have found fertile grounds shaped by a combination of booming markets for high- and medium-end producer services and favourable production conditions for low-end business services.
The rise of services over the past decades can be linked to two key driving forces. The first and perhaps most obvious concerns the rise in disposable income enjoyed by many â first in the Global North and now increasingly also in the Global South â and generated by ongoing labour productivity gains in agriculture and manufacturing. Initially, in the first couple of post-WWII decades, a substantial part of that income was spent on household appliances, actually reducing the demand for various personal services (Gershuny, 1978; Gershuny and Miles, 1983). However, in due time and in line with classic economic development thinking (Kuznets, 1973) other categories of services started to benefit, and some of them even benefitted greatly. Between 1960 and 1987 the share of services in total employment in France, Germany, Japan, the Netherlands, Sweden, the United Kingdom and the United States increased from 46 to 65 per cent, with notably social services (healthcare and education in particular) and the then still smallish producer services sector growing fast (Elfring, 1988). This trend broadly continued into the new millennium (OECD, 2000; 2015a), with producer services and health and education being joined by the leisure and hospitality sector as a major contributor to services employment growth (BLS, 2015). The latter, together with producer services (but now excluding financial services) so far have also shown the strongest signs of recovery after the 2008 financial crisis (BLS, 2015; OECD, 2015a), notwithstanding the fact that the same crisis â certainly in the Global North â has put pressure on real wage growth (OECD, 2015a) and thus householdsâ financial ability to purchase services.
A second important driver of services growth relates to the production system in general and the environment in which it is embedded having become more complex and subject to rapid change. This has stimulated demand for transactional, managerial, analytical, consulting and design activities in production processes, and boosted the growth â again first in the Global North and now increasingly also in the Global South â of an increasingly versatile and knowledge-intensive producer services industry (Castells, 1996; Daniels, 1993; Sassen, 1991; Wood, 2002b). An additional source of growth more recently has presented itself in the form of IT-enabled outsourcing and offshoring of services from the Global North to low-wage economies in the Global South. This trend (discussed in more detail below) keeps the production cost of routinized but tradeable services in check and allows for continued delivery of low value-added services that at Western wage levels would no longer be economically viable. For instance, labour-intensive and low value-added services activities such as the digitisation of paper archives, certain types of transcription work and certain types of customer relations management probably would not be produced (anymore) or had become fully automated if offshoring to low-wage countries was not an option. The rise, even more recently, of online platforms for the trade of micro-services (i.e. small to very small electronically transferable services tasks) is likely to make even more services tasks economically viable and thus to further expand the market for services (Lehdonvirta and Ernkvist, 2011). Platforms such as Upwork and Freelancer enjoy increasing popularity and if this trend continues its impact on the world of services production may well become tangible (Beerepoot and Lambregts, 2015; World Bank, 2015b).
In the process, services have come to represent an enormously variegated array of activities. The diversity of services, Castells argued, is âin fact so extreme that it forbids considering services as a single, homogeneous sector of economic activityâ (1989: 129). Services, however, can be classified into different categories. For starters there is the distinction between âtraditionalâ and âmodernâ services (Bryson, 2007), where traditional services are defined as requiring face-to-face interaction tying the time and location of production to that of consumption. A classic example of a traditional service is a haircut or a restaurant meal â examples of a modern service would be the translation of a document or the development of an app, which can be conducted over distance. A second common distinction is between consumer services and producer (or business) services. The latter are intermediate inputs into further production activities and usually (but not exclusively) transacted among and between firms and organisations. Consumer (or personal) services in contrast are services sold to individuals or organisations for final consumption (OECD, 2000). A third distinction is between market and non-market services, where the former are services produced for (profitable) sale on the market and the latter provided to the public at no or reduced costs. Yet another way of categorising services is by the amount of knowledge that goes into the production of the service (UNCTAD, 2004). This produces the distinction between high-end, knowledge-intensive (business) services (KI(B)S), and low-end or routinised services at the other end of the scale. The former for instance include R&D, financial, legal and engineering services while the latter contain for example services related to administration, customer care and data processing services. Another useful distinction still is between tradeable and non-tradeable services, with the former covering all services that can be traded across space and the latter referring to those services for which production and consumption necessarily coincide in time and space. The different typologies show different degrees of overlap and frequently are used indiscriminately. None of them comprehensively grasps the diversity and complex nature of services alone.
Further complicating matte...
