Shane Wright is doing a decent job at Domain recently. Today he peers into the anus of the services economy and does not like what he sees:
According to the ATO, in 2016-17 (the last year for which there are a full set of figures), 360,000 firms used the [instant asset write-off] scheme with the average claim $11,000.
…Small construction firms were the most likely to use the system, maybe on a new trailer to carry around their gear or for an on-site generator or for new electric saws.
Farmers were the next most likely.
Then came people in the professional and scientific space (that’s a lot of laptops and software getting written-off) then our healthcare sector.
…It may not be as politically sexy as our builder with their new trailer or a farmer with a small silo to hold seed for next year’s crop, but the massage table is just as much a part of this “economy enhancing” instant asset write-off.
…The Productivity Commission, in a new report into trends in our productivity, has found it is “mediocre” and slipping.
Warning that Australia is going through a period of “capital shallowing”, in which the ratio of capital to labour has fallen, the commission found a particular weak spot in research and development.
“Growth in R&D capital formation is even more subdued than capital formation generally, so that the R&D investment share of total investment has also fallen,” it found.
This will come as no surprise to MB readers who long ago probed the anus of the services economy:
It struck me as I sat there that it was wonderfully convenient to have a Thai massage joint just around the corner, especially given my local shops are not very large. I briefly surveyed the other shops and realised swiftly that what I was looking at was the lion’s share of the Australian services economy supply chain. Nearly all of it was directed not at the production of anything, nor the supply of anything, nor the inputs to some factory, but at servicing my person. Specifically, it was mostly targeted at various components of my body. There was an inordinately expensive organic grocer for my stomach. A retro barber for my head. A manicurist for my nails. A tatooist for my ink. A specialist wine purveyor for my tongue. A gift store for my birthday. A shop front personal trainer for my flab. An Asian tailor and presser for my clothes. Any number of cafes of course. And a real estate agent on every corner.
I realised that it was I that was the factory. My body, or more to the point, my mind, my intellectual property, was being supported my an extensive supply chain of services that plumped, fattened, thinned, preened, pressed, fluffed, trimmed and massaged me into the ongoing production of ideas.
There was one thing more that was obvious. These various services were not just the slapdash Aussies of yesteryear. There were no lackadaisical loafers working for the man and hanging for a smoko. Each of the services on display was a finely crafted specialist, an artisan in his and her craft, immensely serious with extraordinary attention to detail. The massage offered a limitless array of options right down to your chosen incense and its specific impact upon your chakras. The barber wore a perfect replica suit from the 1920s and sported enormous mustaches to match. The personal trainer rippled in the window. The grocer glowed with ruddy peasant health and one could almost smell the fresh loam on her fingers. The cafe’s were a rival for Tate Modern in their timberwork and ceramics, and one could literally choose a vintage decolletage in which to hang as if riding in a time machine.
The amount of effort and innovation going into finding a competitive edge for the privilege of servicing my sagging flesh was spectacular.
And that’s the thing. All of these local shops are a hive entrepreneurial beavering. But all of them are directed inwards in an endlessly dividing paradox of insignificance. None of them is tradable, as services mostly are not, so none has the chance to flower much beyond the local shops, let alone nationally or internationally. That poses a problem for the economy because if all you ever do is service one another in more elaborately infinitesimal detail then there is no actual wealth generation going on. There was no organic capital generation, no capital deepening nor breakthrough’s in efficiency. The capital that drives this machine by definition comes from outside of it in the form of a visitor, a new buyer of a local asset or someone that has borrowed to invest.
In short, this bulging prolapsed anus economy is based upon population growth to supply illegally cheap labour, more warm bodies in the absence of income growth and debt for houses to create wealth. It is a near complete waste of everybody’s time and effort other than for a very few oligarchs that can milk the prolapsed anus from above.
There are jobs but they all lead nowhere beyond the confines of your own date. Corrupt authorities’ answer is to back-fill this lack of income growth and demand with ever more people, intensifying the “capital shallowing” and slicing the income pie into ever thinner pieces.
It is a prolapsed anus doom loop that will eventually see the low rent services rectum distend outwards and upwards until it engulfs and smothers the entire host.