Replacing the services sector and three-sector theory: urbanization and control as economic sectors

ABSTRACT

Developed during the Second World War, ‘three-sector theory’ popularized the notion of the ‘services’ sector. It has quietly underpinned understandings of economic structure ever since. The limitations and influence of this basic breakdown have led to many critiques and extensions, but no replacements. Inspired by Henri Lefebvre’s The Urban Revolution (1968), we develop a four-sector model that replaces services with sectors focused on urbanization and control. We argue that this model is a better reflection of material economic life, and a more useful way of approaching the 21st-century economy. It also offers scholars of urbanization and regional development a creative new way of seeing urbanization.

KEYWORDS:

• urbanization
• Henri Lefebvre
• economic structure
• economic sectors
• industrial economics

JEL:

• B22
• R0

ACKNOWLEDGEMENTS

The authors thank Desiree Fields, Max Nathan, Sandy Tubeuf and Suman Seth for their helpful comments on early drafts of this paper; Danny MacKinnon, Renaud Le Goix and Tom Sugrue for invitations to present earlier versions of this paper at seminars at Newcastle, the Sorbonne (Paris) and NYU-Florence respectively; and the attendees at various international conferences who similarly tolerated earlier versions. Thanks also to the journal editors and in particular the two anonymous reviewers who truly engaged with the paper and helped separate the wheat from the chaff.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the authors.

Notes

1. ‘Tertiarization’ is now a term in both English and French.

2. The World Bank’s primary data portal (data.worldbank.org) provides value-added data only aggregated into the three-sector model.

3. Multiple academic journals focus entirely on changes in the sector, including Service Business (Elsevier), Journal of Service Management (Emerald Insight), and The Service Industries Journal (Taylor & Francis).

4. Ours is obviously an alternative use of the urban revolution hypothesis, focused on his proposed change in the dominant mode of production from the industrial to the urban. The two most prominent interpretations are Harvey’s (1974, 1985) theory of capital-switching and current work on planetary urbanization (cf. Brenner & Schmid, 2014; Merrifield, 2013).

5. Fisher’s (1939, p. 33) idea of the tertiary sector included being founded on ‘direct satisfaction to the consumer’, a consumption-centred understanding that is closer to our understanding of the urbanization sector.

6. For a review, see Herrendorf et al. (2013).

7. In many ways, the definition of the urbanization sector is rooted in consumption, and the framework overall rooted in the need to valorize consumption and not just production. What do we do with the things we pull from the ground? What do we do with all these widgets we make in factories (or office buildings that are actually factories)? Fisher’s (1939, p. 33) original understanding of the tertiary sector actually provides a clue. He argued that the there was something critical about providing ‘direct satisfaction to the consumer’. In Fisher’s day, the point of interaction between consumer and widget was not considered nearly as important as the manufacturing of this widget. This has begun to change, as facts on the ground slowly changed the perception of consumption. Urban and suburban space have been reconfigured around consumption throughout the world, in both de-industrialized and still industrializing regions. Retail giants now hold power in the supply chain, a radical shift from a century ago. But the centrality of consumption in this framework is ahistorical. Online retailing or informal retailing may change the spatiality of consumption, but it does not change its sector, nor does it obviate the need for a broader economic framework that considers consumption more central to the economy.

8. Following Brenner and Schmid (2014) in this instance, we disregard the arbitrary, culturally specific and scientifically indefensible definition of a city as somehow separable from a suburb or a rural area, and instead define the city as a form of human settlement of any size or density. This does not mean we do not recognize the fact that the notion of the city as a political creature (Roy, 2016) or the many other differences that the size and scale and spatiality of human settlements have accrued over the years are not real.

9. Including real estate in the urbanization sector, rather than the control sector, is not done without hesitation. The financialization of the real estate economy (Fernandez & Aalbers, 2016; Fields, 2017) suggests that real estate corporations may belong more in the control sector. As the takeover of real estate by finance varies geographically and is highly uneven, for now we leave real estate in the urbanization sector for conceptual clarity. As discussed in the conclusions, separating real estate from finance is also useful conceptually in the study of financialization. However, we welcome both theoretical and empirical challenges to this decision, and remain open to recategorization.

10. We recognize that naming the sector in this way exposes one to the various debates within the global cities literature – see Parnreiter (2017) on whether Sassen uses command and control together, or Kleibert (2016) on whether these controlling sectors give cities command. Thanks to the editor for this point.

11. Even if one takes a very conservative definition and only considered the urban as construction plus real estate, those two sectors combined surpassed manufacturing in the mid-1990s in France.

12. See note 10.

13. Even critical heterodox and neo-Marxist approaches such as those of David Harvey (Harvey 1974, 1985) can be hamstrung by the relegation of urbanization to a ‘spatial fix’ for capital or as a ‘secondary’ circuit of capital which only becomes important economically by virtue of a crisis of accumulation in the ‘primary’ (i.e., manufacturing) sector. Related work on collective consumption (Castells & Sheridan, 1977; Pahl, 1978) see cities as sites of state-supported social reproduction as opposed to seeing social reproduction and city-making as a large economic sector.

14. Blumenfeld was actually rephrasing a claim made in a 1944 British planning study. His famous paper is actually quite critical of economic base theory. See also Rutland and O’Hagan’s (2007) questioning of economic base theory for a convincing argument about how these relationships are changing empirically.

15. See note 10.