This is the second part of an article looking at why do we put local government money in the big rather than the small? Especially when the big tend to extract, while the small are so integral to a creative and vibrant place? I’m trying to argue why. The first part is published here.
There are a number of stories in why we have conveniently forgotten the evidence in favour of small local enterprise over outside owned corporations. The early work was done by Goldschmidt (in rural communities), Mills and Ulmer (in manufacturing) just after World War II. They studied the benefits to communities and places dependent on small local in direct contrast with large outsiders. But the work was buried with a heavy critique. It had to be. It was a direct challenge to the rise of the corporation as the model for business following World War II. Cognitive dissonance took hold. The rise in the ideal of the corporation was the first explanation for our wilful amnesia.
Corporations were the showpiece of mass war production, even though it was fed by and dependent upon many layers of subcontractors and government (conveniently forgotten, all that wider context). Stacy Mitchell put it like this, “….postwar policy was built on the idea that big business was more efficient and therefore would provide higher incomes and this improved social welfare. In the following decades, a wide range of government policies would work to promote the concentration of capital and the rise of big industry.”
Well, the idea that the workers would all benefit from ‘trickle down’ assumes an equitable power between disconnected owner and worker, and surprise surprise, it didn’t happen. But I’m sure some doctrinaire Neoliberal economists are still looking at their models and believing that it will. This is the second reason for our amnesia – the rise of Neoliberalism. Strongly associated with it was the fall of empiricism within the economic discipline, having its nadir with the cult–like Neolibs, upon which all reference to the real empirical world was lost.
Read in a machine voice,
“We are an infinite number of equally powerless firms and individuals where there is no such thing as exploitation by the non-existent ‘powerful’, just willing buyers and willing sellers with perfect knowledge who rise and fall on their own merit by making rational choices to maximise their utility in an asocial context where location of ownership doesn’t matter and the world is a set of unlimited land, labour and capital resources whose transaction price – and only meaning – is determined by Our Lord Market. All hail.”
Well, that all makes perfect (non)sense. It doesn’t matter who owns, or where? Seriously? A place is not a functioning social or environmental system, it is infinite piles of ‘resources’ just waiting to be allocated at a completely fair price by the benevolent market? Do you have *any* knowledge of the environment and society at all? Apparently there is no need to look at history or the real world smacking you over the head with a large dead fish then.
Much of much of the economics discipline – the doctrinaire model-worshipping parts – would do well to seek an understanding of ‘organised complexity’ and systems. You cannot see the world as a machine, any more than the raising of your child, and be wise. You simply cannot. Jane Jacobs wrote very well about how to look to a local economy as complex and evolving socio-ecological system in her The Nature of Economies (reviewed and discussed here.)
The trouble with all this hero worship of both corporations and Neoliberalism is that it is all stark raving bonkers. Here’s why. Are corporations more ‘efficient’? No …. and yes. The idea of more ‘efficiency’ is only true relative to costs and production of masses of identical widgets, great for a war. But an economy does far more than that. It innovates, it builds community, it fosters thought, it differentiates, it works within a moral framework, it adapts, it protects local values, it is concerned with far more multiple values that a beast churning through ‘resources’ and making profit.
And how do large corporates stack up to those functions against local enterprise? Not well at all. Not very ‘efficient’ in that context then.
‘Efficiency’ of one is those meaningless words unless there is a context to go with it. I can ‘efficiently’ exploit if I can use my power to influence the laws.
I can far more ‘efficiently’ destroy a stream with a bulldozer than a shovel. A corporate can be very efficient in one thing. Small enterprises can be very efficient in many, many things – the supporting values of community and place mentioned above. Corporates can efficiently destroy those same values.
Neoliberalism is also bonkers. The love of large-scale and more wealth as merit is so linked with Neoliberalism ideals. If you fall under the heavy crush of a corporate foot, it’s merit. You deserved it. They won. You lost. Made bad choices. They’re better. You have less merit. Willing buyer-willing seller. Rational choice.
There is apparently no need to make a distinction based on power, scale and location of ownership because none are relevant to the model. So we treat all enterprise the same again, and give more public dosh to the big guys.
No power relations??? So perhaps colonisation and empires never happened. Did we Europeans just politely come to New Zealand, smile, and invest much needed capital for the good of all? Mr Key might think that – and he is quoted as effectively saying so – but it is a false and distorted view.
But our politicians from 1984 until the present day, love this new age neoliberal religious faith. It’s either love, or they are just completely devoid of an ability to either synthesise or dig deep into philosophical assumptions. Or they are, frankly, not very bright. I haven’t decided yet. Some time in the early 1990s, flush from the Mother of All Budgets, then Finance Minister Ruth Richardson made the comment, “What’s good for business is good for New Zealand.”
She was wrong. It very much depends – of course – on the type of business. Blood diamonds anyone? A slave economy of cotton? All business is good??? The mafia perhaps. Union Carbide and Bhopal? A grinding monster chomping through people and earth, stamping on the little man, spouting toxins and dumping slag to the detriment of we natives, and for the benefit of some colonial master far, far away is no one’s idea of ‘good’ …. unless you are that colonial master.
This was a part of the early history of our country; a feeding frenzy of power, destruction, extraction and taking from others who didn’t have the gunboats and the regiments in red. We should have learned from that, because it could, and is, happening again. Big and central is attempting to dominate over small and local. And we, the people, through subsidies to corporations (I need not mention tax havens, blind trusts and tax cuts for the very top), are helping them. How on earth did that state of affairs evolve?
No region benefits when the city dominates. No small country when a larger threatens. No small local business benefits when the large business dominates. No people benefit when some oligarchy with a sense of entitlement sets all the rules. The growth in power of a few is destructive to our own.
Adam Smith recognised and wrote about this – keep checks on the powerful, their political influence, and on immoral behaviour. Once that is done, regulate lightly, because the village looks after itself – but his words have been twisted. The Neoliberals who hold Smith up as some saint for the ‘free market’ don’t mention his warnings and lessons of immorality and power, his preconditions of fairness and equity to free commerce. They don’t mention that before we deregulate, we need to ensure we have both an ethos of care, and checks on those who would use and grow their own power to influence the field of play. Power and morals don’t come into it remember. Just utilitarian calculus – if the mob’s happiness is greater than the innocent’s they happen to be lynching, then that is the ‘rational choice’. All good. All calculus, with each dollar a unit of happiness.
How times have changed. We used to know about the influence of the big over the small as a given. Now if you mention it, you’ll probably be called a bolshie pinko lefty activist. We pinko negative lefty antis like to call it “a pretty damn basic knowledge of history.” After all, we’ve had feudalism, and empires, and robber barons, and J P Morgan et al., and the industrial revolution with children under the cotton looms of Manchester, and manufactured famines, and colonisation, and, and, and. I mean, for heaven’s sake, power relationships go back to the cave, and into almost every social setting you can imagine – the home, the classroom, the workforce.
And now we have the corporate kind of power. Who wouldn’t know about that? Who could teach any Economics 101 class and unthinkingly talk of meritocracy and equal powerlessness? But they did, and still do. And most quietly take down their notes.
And we know, but do not teach, that a community with many locally owned enterprises outperforms those communities dominated by outside-owned corporates in so many ways – socially and economically. Adam Smith’s village of smaller enterprises is superior to oligarchies and outside owners. Ownership matters. What size and dominance it has, and whether those owners are part of a community and place or distant geographically and without a sense of belonging. This is what we need to look after; our structures of ownership that drive creativity alongside a motivated people and a healthy landscape. Beware the Vesteys and the oligarchies. Build de Tocqueville’s democracy; Jefferson’s vision of agrarian democracy.
As a country, New Zealand once acted upon that awareness. Around the turn of the previous century, the Liberal Party under Richard Seddon imposed land reform, broke up the 50,000-acre estates and parcelled out the land to the many. Our policy people were not then so blind that they saw no difference between the local hardware store and our then equivalent of Walmart.
We understood that power needs tempering, it needs to be looked on with if not suspicion, at least an open awareness. We know that some will act on the basis that, if they made more profit by exploiting the less powerful, then they will do it. If they can privatise the gains and socialise the costs, then why not. If they can degrade the land and water, then leave, then they have no moral responsibility beyond the profit on the spreadsheet. They don’t belong to that place; their children will not be affected by the consequences; it is not their large company’s concern. And believe me, with slow cycling natural systems like forests, soils, water, fisheries and climate, as well as with the social ‘capital’ of a community – it is very profitable indeed to degrade and walk away. And they call that ‘efficiency’. It is ‘efficient’ to degrade if you don’t think as a connected local and long-term.
Integral to why big business are not great for local communities is because of how they frame the issues. What are people for? What is the river for? Or the land? What defines them? The post WW II glorification of the big business ideal has led to a loss of meaning of people and the planet, reduced to a short-term dollar. People and land became more like expendable, substitutable cogs. Grist. Things to mill. Inanimate, unthinking parts in the machine.
The mechanical, hierarchical, impersonal and autocratic approach is now the norm in many large organisations; where engagement, dialogue and creativity are crushed by rigid box-ticking and obedience. Cogs are not expected to think or have anything relevant to say. Who needs thought, foresight, adaptability, vision, dialogue, laughter, love, when the world is certain and controllable.
It is no wonder a town dominated by corporate thinking results in a less vibrant and diverse economy alongside the reduction in social and environmental foundations whose health and integrity is essential to all, including – and here the irony begins – the large impersonal corporations themselves ….. because the world is not certain and controllable, and they will *need* those who can foresee and adapt. Evolution and extinction are very relevant nature metaphors alongside the complexity of ecosystems; far more meaningful that the reduction of complexity to a machine of producers and consumers. Because without those who can foresee and adapt, and without the resilience that comes from diversity, they will fail …. eventually.
Unless the people bail them out again, of course. After all, what are the taxes we pay (but they don’t) for, anyway?
Adam Smith and all the other thinkers about community and place – the Jane Jacobs, Christopher Alexanders, Lewis Mumfords – are right. Think local. Don’t get seduced by some swank from the metropolis with the big cigar. Look to the artisans in the back alleys.
Preserve our neighbourhoods. Create a network of villages in our towns and cities; places to gather and sit; each with its own cultural expression. Make it fun. Remind people of who they are and where they came from. Build an ethos of moral and enlightened care. Build beauty and patterns that connect. Places to be and belong. Inspire and encourage the weirdness of continually differentiating expression.
Maintain the integrity of people and place. Call ugliness for what it is. Create checks on power and its influence on local economies and policy, especially on those who would
presume to be aristocrats and corporate thinkers (profit whatever happens to our legacies and beauty) who live outside any place and moral code.
Then we can live lightly. Look to the village and the town as more than just a market place of transaction; as a place and a community to be part of, living within a wider environment – the Shire, a green and pleasant land – unravaged by Sauron and the dark satanic mills.
This is not some naïve vision. It is the alternative to a potentially very bleak future dystopia. I think we need to stop thinking that bigger is better, and that autocratic hierarchies of command and control are more ‘efficient’. That’s straight out of Sauron’s business manual, and we are not yet Orcs.
 Stacy Mitchell (2006) Big Box Swindle: the true cost of mega-retailers and the fight for America’s Independent Businesses. p75
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Nicely crafted again Chris, hope it got printed for more to see.
You mention Economics 101. When lecturing at Massey University in the ’80s, Natural Resource Economics was also taught. This linked many of the factors you mention together but could not predict the damage to communities and wellbeing that has since occurred.
Economics 101 should include Diminishing Returns, the impact of marginal cost and return and of course Opportunity Costs yet none of the “suits” seem able to perceive the links between these and reality.
Why? Because they are almost impossible to include in “accountancy generated” spread-sheets.
It has been clear to me for many years that if we actually understood all of what Economics 101 and Natural Resource Economics used to teach and were provided the “systems” context to apply such concepts routinely, the environment would improve far faster than applying the misguided regulations that are now being mooted.
Why? Simply because in their drive for “more production” the “suits” have got the real economic outcomes wrong as they have not paused to consider just when the next input has actually LOST money and begun the process of environmental and community degradation.
It is simple to calculate the “What” and the “How” with spread-sheets and “adjusted” data.
But the real emphasis for communities should be to keep asking “Why??”
“The voice of reason is small, but very persistent’ (if allowed to be…..)
Exactly Barry. It is what is *not* in the financial analysis that is often the critical thing. And so we degrade the foundations of it all.
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