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Economic sectors
Three-sector
hypothesis
Colin Clark
Jean Fourastié
Primary sector
(raw materials)
Secondary sector
(manufacturing)
Tertiary sector
(services)
Others suggested
Quaternary sector
Quinary sector
By ownership
Public sector
Private sector
Business sector
Voluntary sector
Industrial output in 2005
Service output in 2005

The three-sector hypothesis is an economic theory which divides economies into three sectors of activity: extraction of raw materials (primary), manufacturing (secondary), and services (tertiary). It was developed by Colin Clark and Jean Fourastié.

According to the theory the main focus of an economy's activity shifts from the primary, through the secondary and finally to the tertiary sector. Fourastié saw the process as essentially positive, and in The Great Hope of the Twentieth Century he writes of the increase in quality of life, social security, blossoming of education and culture, higher level of qualifications, humanisation of work, and avoidance of unemployment.

Countries with a low per capita income are in an early state of development; the main part of their national income is achieved through production in the primary sector. Countries in a more advanced state of development, with a medium national income, generate their income mostly in the secondary sector. In highly developed countries with a high income, the tertiary sector dominates the total output of the economy.

Contents

Structural transformation according to Fourastié

The distribution of the workforce among the three sectors progresses through different stages as follows, according to Fourastié:

First phase: Traditional civilizations

Workforce quotas:

  • Primary sector: 70%
  • Secondary sector: 20%
  • Tertiary sector: 10%

This phase represents a society which is scientifically not yet very developed, with a negligible use of machinery. The state of development corresponds to that of European countries in the early Middle Ages, or that of a modern-day developing country.

Second phase: Transitional period

Workforce quotas:

  • Primary sector: 20%
  • Secondary sector: 50%
  • Tertiary sector: 30%

More machinery is deployed in the primary sector, which reduces the number of workers needed. As a result the demand for machinery production in the second sector increases. The transitional phase begins with an event which can be identified with industrialisation: far-reaching mechanisation (and therefore automation) of manufacture, such as the use of conveyor belts.

The tertiary sector begins to develop, as do the financial sector and the power of the state.

Third phase: Tertiary civilization

Workforce quotas:

  • Primary sector: 10%
  • Secondary sector: 20%
  • Tertiary sector: 70%

The primary and secondary sectors are increasingly dominated by automation, and the demand for workforce numbers falls in these sectors. It is replaced by the growing demands of the tertiary sector. The situation now corresponds to modern-day industrial societies and the society of the future, the service or post-industrial society. Today the tertiary sector has grown to such an enormous size that it is sometimes further divided into an information-based quaternary sector (see above), and even a quinary sector based on non-profit services.

See also

References

Further reading

  • Bernhard Schäfers: Sozialstruktur und sozialer Wandel in Deutschland. (Social structure and social change in Germany) Lucius und Lucius, Stuttgart 7th edition 2002
  • Rainer Geißler: Entwicklung zur Dienstleistungsgesellschaft. In: Informationen zur politischen Bildung. (Information for political education) Nr. 269: Sozialer Wandel in Deutschland/2000 (social change in Germany), p. 19f.
  • Jean Fourastié: Die große Hoffnung des 20. Jahrhunderts. (great hope of the 20iest century) Köln-Deutz 1954
  • Hans Joachim Pohl: Kritik der Drei-Sektoren-Theorie. In: Mitteilungen aus der Arbeitsmarkt- und Berufsforschung. (notices from the work market and profession research) Heft 4/year 03/1970, p. 313-325
  • Stefan Nährlich: Dritter Sektor: "Organisationen zwischen Markt und Staat." (organizations between market and state). from the sequel: "Theorie der Bürgergesellschaft" des Rundbriefes Aktive Bürgerschaft ("Theory of the civil society" of the newsletter active civil society) current 4/2003
  • Uwe Staroske: Die Drei-Sektoren-Hypothese: Darstellung und kritische Würdigung aus heutiger Sicht (the Three-sector-hypothesis: presentation and critical honoration from a contemporary view). Roderer Verlag, Regensburg 1995

Simple English

The Three-sector hypothesis is a macroeconomic theory. It says that there are three kinds of economic activities, which are very different from each other:

  1. The extraction of raw materials
  2. Manufacturing goods
  3. Providing services

These kinds of activities are named sectors. The theory speaks about the primary, secondary, and tertiary sector. The theory was developed by Alan Fisher,[1] Colin Clark[2] and Jean Fourastié[3] in the 1930s. Clark used a speech given by Sir William Petty, in 1690.[4] For this reason the theory is also known as Petty's Law.[5]

The theory also says that the main focus of the economy of a country will change, from the primary to the secondary, and from the secondary to the tertiary sector, as the country's economy develops.

References

  1. Fisher A: The clash of progress and security. Macmillan, London 1935
  2. Clark C: The conditions of economic progress. Macmillan, London 1940
  3. Fourastié J: Le Grand Espoir du XXe siècle. Progrès technique, progrès économique, progrès social. Presses Universitaires de France, Paris 1949
  4. Petty W: Political Arithmetick or a Discourse Concerning, The Extent and Value of Lands, People, Buildings: Husbandry, Manufacture, Commerce, Fishery, Artizans, Seamen, Soldiers; Publick Revenues, Interest, Taxes, Superlucration, Registries, Banks, Valuation of Men, Increasing of Seamen, of Militia's, Harbours, Situation, Shipping, Power at Sea, &c. As the same relates to every Country in general, but more particularly to the Territories of His Majesty of Great Britain, and his Neighbours of Holland, Zealand, and France. London 1690
  5. Murata Y: Engel's law, Petty's law, and agglomeration. In: Journal of Development Economics 87 (2008): 161-177

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