The Tertiary Sector: Evolution, Public vs Private, Financialization

The tertiary sector and its activities

Evolution of the service economy

This sector plays an increasingly important role in the global economy. However, its relative weight depends on a country’s level of economic development. There are significant differences between developed and developing countries in terms of the quantity and quality of the services provided.

In developed countries, which rank high on the HDI, services tend to be located in large urban areas and tourist areas. They employ more than 60% of the working population. In major cities, like Madrid and Paris, the percentage employed by this sector is over 80%. The quality of the different services available gives the population a significant level of well-being.

In developing countries, the number of people who work in the tertiary sector is less than 30%. The majority of people working in this sector are employed by the government or are engaged in low productivity activities, such as street vending. Social services are of a poor quality and most people do not have access to healthcare or education.

GDP AND HDI

Gross domestic product (GDP) is the total value of all the goods and services a country produces during a given period. The Human Development Index (HDI) is an indicator that measures life expectancy, health, education and standard of living.

Public and private activities

Public services: these are created and managed by the government in order to guarantee certain basic services to the general population, including the civil services, defence, justice, the fire services, education and healthcare. On the whole, these are the services which are part of what is known as the welfare state or social welfare.

Private services: these are created and managed by private companies with the aim of obtaining financial benefits, such as a newspaper.

Financialisation of the economy

Banking and finance are very important services. Some of the services they provide include a secure system for storing money, as well as providing loans so people can do business and generate more money. These activities do not employ many people, but the rest of the economy depends on them.

The growth of financial activities is the result of their internationalisation and the disappearance of regulations governing operations in financial markets that accompanied globalisation. This has led to significant economic instability and a succession of economic crises since 1990. 2007 was the beginning of the greatest financial crisis since 1929, which caused a global economic depression.