Sunday, December 31, 2006

Thoughts on a mountain top

A hike to the top of Bald Mountain always produces a flurry of thoughts.

I think today's corporate grail, "the economy of scale" is largely a fallacy. Real economy comes from small scale. Localized, small-scale production, support and services.

Over-concentration of manufacturing, distribution and management leads to a host of social and environmental ills. It has led to a "corporate feudal system", in which workers are dependent upon the benevolence of corporations for food, water, fuel, housing, clothing, etc. Specialization has become the norm, and lost are the direct connections between people and the source of basic life-sustaining necessities. For most of us, the concept of "living off the land" is probably as abstract as living on Mars. (And that state of affairs is just fine in the eyes of the global business community.)

The internet has become one of the more profoundly democratic tools that could serve to educate people how to better provide for their own security. To increase self-sufficiency. To facilitate micro-economies. But for this, net neutrality is essential.

There is a real economy of scale, and this is created through the consolidation of human understanding, compassion and kindness.

***

Businesses compete by delivering their products at the best price. To survive, corporations must continue to improve their performance through a variety of means. Inevitably, increase of profits, and earnings per share, requires reducing operational costs. (This is where "economy of scale" enters their models.)

An important element of increasing profits is "externalizing costs". The more cost that can be stripped away from the resources a business needs, the higher the profitability (and hopefully, the lower the cost of the product to the consumer.)

But someone pays for costs that are externalized. Usually, it is the society at large. Externalized costs include resource depletion, pollution, waste management and recycling, infrastructure degradation and human health and welfare impacts.

The United States has in fact made considerable progress re-internalizing these costs, forcing manufacturers (and subsequently, consumers) to be responsible for the "total cost" of a product through its entire "life cycle", from resource extraction through reuse, recycling or disposal. This is accomplished through regulation, taxation, community pressure, etc. California has long been a leader in this effort.

Globalization, however, introduces a method for the evasion of such controls. As corporations move the resource extraction and manufacturing operations to countries with weak or non-existent social and environmental controls, they successfully externalize important elements of a product's total cost.

It is for this reason that Americans, despite stricter regulation of industry at home, can continue to enjoy the same low prices for products, even while corporate profits soar.

We have succeeded in transferring once-localized problems to a global scale. And in this way, we each share responsibility for solving these issues wherever they arise.

My travels in Latin America repeatedly allowed me to witness this phenomena in action.

***

Someday, we will be shocked that we buried anything but organic waste. As resources decline, we will no doubt mine landfills to reclaim valuable materials (just as we mine gold and diamonds now.)

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