At US$55 trillion, could nature be the core of the world's growing 'service economy'?

The global economy has transitioned from product centric to service centric, are we about to see the same revolution in our economic relationship with nature?

US$58 trillion of the global economy has a high or medium dependence on nature. That means that over half of the economy depends on a service from nature, whether a provisioning or a regulating service.

The other day, I was reading an article on the service economy and it got me thinking about the intersection between our economic dependence on nature’s services and the global shift we’ve seen in recent decades from a production towards a service economy.

The Cambridge Dictionary defines a service economy as,

An economy based on providing services rather than manufacturing or producing goods.

The services sector today generates more jobs (50 per cent share of employment worldwide) and output (67 per cent share of global GDP) than agriculture and industry combined – and is increasingly doing so in economies at earlier stages of development (World Trade Organization).

In the mid 1900’s goods-producing sector employment was roughly equal to that of the service-providing sector, but that has rapidly changed.

The growth and anticipated continued growth of the service economy is nothing new. But it got me thinking…

If we transitioned nature from the product-based economy of the past into the service economy of the present and future, how would that change our fundamental economic relationship with nature?

Are the economics of nature about to catch up with the evolution of the global economy?

Over the last few centuries, we’ve seen the global economy transition from one that is based on the transaction of products towards the transaction of services. In the 19th century, the global economy was predominantly focused on agriculture and manufacturing, meaning the proportion of the global economy that was a service economy was very small, likely less than 10%.

But over the last couple of hundred years we’ve seen the transition of the global economy to one that is predominantly service based with a prediction that this trend will continue to grow.

So my question is, will we see the same trend with nature?

If we look at our (western) relationship with nature, similarly to the global economy up until the 20th century, the relationship has been physical and product based. An economic relationship that values nature as much as nature provides physical natural resources that humans can transact as products. Timber, minerals, fossil fuels, etc…

Regarding our economic relationship with nature, are we currently where the global economy was in the 19th century? IE, are we in a paradigm dominated by natural resources and products but on the cusp of an economic revolution where we transition towards an economic relationship with nature that is predominantly service-based rather than product-based?

To sustain human life, we need to continue to produce goods from nature. But we also need to value the services that nature provides that underpin the production of those goods that sustain human life, let alone sustain the breadth of non-human life on this planet.

How we can make nature a core pillar of the service economy?

First, we need to be able to measure and quantify the services that nature is providing. Groups like the Stanford Natural Capital Project have been doing these types of analysis for many years, but I’m shocked that we haven’t seen more efforts in this space. And I am not recommending the measurement and quantification of these services as a step towards commodification, we must measure and quantify the local and regional flows to incorporate them into the function of regional economies, not create global markets (with the one caveat perhaps being GHG sequestration where the unit is fully fungible no matter the location on the planet).

Second, we need to translate the measurement of that service into a value. This is where we have struggled. Translating nature’s services, ecosystem services, into a business case for corporates to invest in those services and an economic case for governments to invest has not been easy.

We are starting to make significant progress on the government side as at a larger scale, it is often easier to measure and translate ecosystem services to an economic case. But on the private sector side, where those services are more acute and the willingness to pay is highly context specific for different private sector actors, there is still much work to be done. How to translate the measurement of ecosystem services to a ‘business-value-at-risk’ is key for integrating nature into the service economy linked to the private sector.

Nature service jobs at the center of green growth

I believe that we can have economic growth without consumption growth. And I believe this entirely depends on a continued shift towards a service economy. If we begin to value and integrate nature’s services into a service economy, how many new jobs would be created to protect and restore those services? Thousands, Millions, more?

Could we have an entirely new pillar of the service economy that is humans providing a stewarding service to nature that in return provides ecosystem services to other humans that pay for those services? One could see how we could kickstart a positive feedback loop that begins to make the unit economics for nature protection and restoration (paying for services) as attractive as the unit economics for extracting natural resources from nature (paying for products).

The service economy of the future, with nature at the core

As we enter into an era of climate change, transitioning our relationship nature from at 19th century product centric economic paradigm into the service economy of the 21st century will be absolutely critical to increasing local, regional and global resilience.

I am sure I’m not the first person to make this link between nature and the service economy. If you know of others that are writing on this topic, I would love to learn more about their thinking.

This article, I hope, is just the tip of the iceberg. There are so many pieces of this transition that I haven’t thought through and I hope you all can take this and run with it, taking it from an idea and making it reality.

- Eric