Business is about resources; their efficient use to produce the goods and services consumer want and/or need. Economics is essentially the study of different ways in which this is achieved and the impact on a populace. All very simple when you think about it. And yet, very complex to do.
The last few months, I have been working very diligently on a number of projects while thinking about business and economics. I’ve been trying to see the trees through the forest, as the saying goes. And now, I want to share these reflections with my readers. Please forgive me if what I write is a bit rough but this is the first time I actually put these thoughts down in writing. This is an exercise for me to clarify these ideas in the process.
When you look at business from an historical point of view, you have to start with agriculture then work your way up to artisanal production, all the way to the industrial revolution and then to the present, post-industrial era for Western countries. Over this period, literally thousands of years, the mindset has been production. How many wars have been waged over access to raw materials? Or, wars to control supply lines? Even revolutions focused on the redistribution of land, another means of production? Many! Centuries and centuries worth of wars and conflicts over resources so we could produce goods and services. Seems obvious when I state it like this but I think it is worthwhile repeating because sometimes we forget the obvious – like one of my college professors taught me.
As a consequence, we have philosophized, conceived, and implemented any number of economic systems over the course of history to best use those resources and – slowly – produce a wealth that benefits the greatest number of people. We have tried mercantilism, capitalism, socialism, communism, and certainly a number of isms I have even mentioned in this effort to manage a resources as best as possible. Sure, it hasn’t always worked well. There have been those who have tried to rig the system in their favor and those who still do; some “legally” others not so much. On the whole, we have done a fairly good job of it. So much so that capitalism seems to provide the greatest benefits and since the fall of the communism has entered a phase of globalization. I don’t plan on addressing the merits of capitalism at this point as this is not the subject on which I writing and will just take it as fact even though many flavors of capitalism exist.
So far so good. We can produce in a very efficient manner and business is very good at managing the resources we require for that production of goods and services. But…….and this is a big “but”….in western countries does this still make sense? Let’s face it, manufacturing is an ever smaller portion of GDP. Does it make sense to continue to seek control and influence over the resources needed to produce more goods and services? Is that what business should focus on? This is where my thinking has hit a wall and a new paradigm has started to emerge. The simple answer is “no”. I will explain.
Since the 1970s, 1973 to be exact, the year of the first petroleum shock, it is my view that Western powers have pursued a policy of de-industrialization in an effort to distribute the risks to their economies and most importantly their power structure. If I look at the US, very deliberate policies to move production outside the US into Latin America are clear, then into Southeast Asia and more recently China and India. Each move provoking their economic shocks to each region with minimal impact in the center. Obviously, Western societies have people that need to work so “higher” value added industries were created in the service sectors: Financial Services (S&L meltdown), Internet (the bubble goes pop), Real Estate/Financial Service/CDS (near global meltdown). These facts are incontestable so they are not the point.
This is where I am heading: over this period, business has relinquished control over productive resources in favor of consumptive resources. I know, this is an awful terminology but it gets the idea across. Consumers have become the resource business influences control over. Maybe the word relinquish is too harsh – I will grant you that – maybe it is better to say that consumptive industries grew faster over the same period, or that more value-added came from the service sector,…whatever you like. This can be another discussion topic if you want. It does not change the fact that Western business is now more focused on managing the consumer resource than the producer resource and this is a significant paradigm shift.
If we look at this period of time, 1970s to the present, we can clearly see a number of industries that matured and evolved to control the consumer. Back in the 80s, advertising became a major player. Remember the fall of Saatchi & Saatchi? Then the internet came along and every click was recorded, analyzed and used to “more efficiently” provide you with ads. Next, social networking came to the forefront with companies like Facebook getting incredible valuations. Why everyone asked would Facebook be worth so much? Because it is a gold mine of personal information that can be used to control that precious consumptive resource, that is you! Remember Facebook’s attempts to change its terms of service? Some individuals were aware enough about what was going on to oppose it. Since then, I’m sure something else has happened to assist Facebook to maintain – or increase – its valuation because new investors have entered its capital structure. At this point, Facebook has more potential power than Google does as the latter has been unable to mimic the former. But don’t count Google out just yet. The “next big thing” is where 2.0. Ads will be served up to you on the basis of your physical location and your personal data. Google’s Android platform is a gold mine for providing such a service. And, let’s not forget Apple’s iphone with its operating system and the recent discovery of a secret file with all your movements recorded in it.
If you are not already convinced that you are the consumptive resource being managed by business then consider what is reality TV – another recent phenomenon. People like you and me go from being no one to being stars in 24 hours so that you can have a sense of connection to them and then buy the same goods and services they consume and/or promote. Or, your favorite musician’s new perfume. What does a musician know about perfume?!! Or, a singer’s clothing line? A sports figure’s athletic wear? Take a few hours out of your busy schedule to really listen to all the messages you are hit with and then come and talk to me. Look around your home, look at your clothes, look at your friends and become aware of all the decisions you made that were influenced by the media. Then you will be conscious of the fact that you are now the coal in the coal mine, the wheat in the field, the pig in your bacon,….the resource that business is managing to make a profit.
This brings me to a last thought. Assuming I am correct, what does this mean for our society as a whole? Does it make sense for us to be a resource that is managed by business? Is this moral, ethical, economically viable? What is it mean when we see our elected officials are mostly coming from the ranks of the wealthy, are paid by special interest groups backed by business, and are dismantling the welfare state and breaking collective bargaining agreements with the backing of the courts? In my opinion, once you see yourself as a resource to be managed by business and supported by the government we elect (executive, legislature and judiciary, state and federal) the world is upside-down. What do you think?