New service economy: trends and characteristics

New service economy is an economy that is based on knowledge, services and communications between people. This is an economy where there are relatively few manufacturing jobs, and most people work in the service industry in some capacity. The new service economy reflects the dominance of this type of industry in our economy. This newfound dominance of the service economy has an impact on our ability to have a sustainable environmental management approach.

Sound environmental management practice implies the prevention of environmental catastrophe and the strong stewardship of the environment, within the context of a functioning, growing economy. In part, the new service economy facilitates a higher level of environmental stewardship inherently, because most people earn their living without producing very much in the way of physical goods. People trade on knowledge, experience and skills, things that do not cause much waste.

These new knowledge industries can play a strong role in preventative environmental management, in particular when the focus is on innovation. Finding ways to do things differently is one of the most powerful applications of knowledge. If the information that we have can be turned into usable knowledge by the knowledge workers within the new service economy, this can result in new techniques and technologies that protect the environment. For example, engineering is a service whereby an engineer instead of building something (using resources) can instead re-design something that already exists so that not only does it create value by using markedly fewer resources, it can function at a higher level of efficiency in the future, then the new service economy would have reduced waste, benefitting the environment.

Government can facilitate the new service economy in this task. Government has the ability, with laws and with taxes, to create incentives for investment in particular areas. Thus, governments have the power to create incentives to invest in knowledge industries. More importantly, these incentives can be tailored towards specific industries. An example of this would be tax breaks given to firms engaged in research, creating incentives to develop new products or new processes. The government can measure the impacts of its policy on specific deductions taken, or simply on the number of new patent applications that are filed, indicating successful innovation.

There are obstacles, however, to government setting policy in a manner that encourages growth of the new service economy. The main obstacle is that at some point, there must be a tradeoff for firms engaged in other industries, because there are limits to the tax breaks and incentives the government can give. In addition, if these breaks favor one industry over another, the industry that is currently the beneficiary will object, and some industries have considerable political power. The oil industry, for example, has stifled government promotion of alternative energy. In contrast, the German government promoted solar energy and now that country is a world leader in solar power.

When it comes to preventative environmental management, there is likely to be opposition, but perhaps not much support. Generally, if business does something bad to the environment that is an externality, and the cost is applied to all of us. "We," as a collective unit, do not have a lobby, whereas specific companies and industries do. This is one of the most significant obstacles to getting more government help for the new service economy at the expense of traditional industry.

However, changes are feasible, for a few reasons. The first is that the new service economy is large and growing, so there is a good economic case for additional government protection of this industry. The second is that the older industries can still maintain the level of government assistance that they receive. It is worth noting that firms in older industries can still enter the new service economy, but many simply choose not to.