The tertiary economy: A threat to the global economy

Abstract

Following Schumacher’s (1973) concept of the primary economy (nature) feeding the secondary economy (agricultural and industrial production), we suggest that there now exists a tertiary economy (the financial system of trade, banking, insurance, and stocks). We demonstrate using the economies of the USA and India that the increase in wealth suggested by a growing gross domestic product (constant GDP) is actually only an illusion of more wealth if the biophysical basis for the economy does not increase in like manner. Overall, the economies of the USA and India (measured in constant GDP dollars) grew by nearly 6000 and 2500% between 1950 and 2010, while their tertiary economies grew by over 11,000 and 4300%, respectively. During the same period, the secondary economy of each country grew by about 2800% (USA) and 35,000% (India). The tertiary economy’s share of US GDP increased by 85%, and that of India’s by 72% between 1950 and 2010, while the secondary economy’s share in both countries decreased (USA = 52% and India = 77%). The emergy throughput (a measure of wealth strictly linked to biophysical resources) of the economies of India and the USA between 1950 and 2010 rose to about 370 and 290%, respectively; on average about one-tenth the growth rate of the monetary economy. Trade between nations is evaluated to emphasize the impact developed economies have on the developing nations of the world. The buying power of developed economies as measured by their emergy money ratio (Emergy/GDP) is used to show the extent to which they enjoy a trade advantage with developing economies even when monetary flows are balanced. Trade between developed and developing nations, especially if developing nations are exporting natural resources, is highly advantageous to the developed world.