Scale economies influence what the supply of commodities will look like. In a textbook economic world, there are no scale economies. Among other things, it was hard to work out the math on them. Paul Krugman received his Nobel Prize in partly because he finally figured out the math and could incorporate scale economies into economic models.
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It does so in part because standard economics has a strong normative component: if the world worked this way it would be a better more efficient place. It is also the case that the assumption of constant returns to scale is ideologically convenient. It seems to preclude the possibility of anyone amassing economic power in the market sufficient to distort prices and the relationship between supply and demand.
What is bought and sold at what price is supposed to provide an accurate index of what consumers really want. Therefore, what consumers really and truly want determines what will be produced. This is known in the trade as consumer sovereignty. We are all little kings in the market. In a world of scale economies, this logic runs aground. Market outcomes reflect consumer choices, to be sure, but choices from what is available are not necessarily preferences about how one wants to live. Scale economies strongly influence what ends up being available. Unilever, in second place with a I want to leave aside consumer credit here, although it is tremendously important, and focus on the production side of things.
Corporations get money for operations and investment from three sources: their own earnings, issuing new stock, and borrowing. Debt financing of investment, somewhat like scale economies, both allows companies to grow and pushes them to grow. Missing the debt payment is severely frowned upon. At the least, the borrower has to strive for sufficient cash flow — the net of money coming in and going out from operations — to cover the debt payments.
Earnings growth and cash flow are not uniquely tied to increasing output. But in the industries most susceptible to economies of scale, they will tend to go together. At the same time, the finance sector itself is under considerable pressure to increase its output, which is composed of loans. They work very hard to find ways of lending money — entering new markets, devising new debt instruments that are so complex no one actually understands them, lending to marginal borrowers, and so on.
So the whole financial infrastructure of capitalism is pushing for continued growth. Competition Competition promotes some of the best and some of the worst things about capitalism. It drives the feverish, unrelenting quest for innovation which we see in products all around us. The pressures of competition may also be associated with appalling working conditions, poverty wages, child labor, pollution, destructive methods of resource extraction and the blighting of landscapes.
It is not necessarily the case that businesses that do these things are run by evil people. Competition is also centrally important in creating the permanent growth economy. It does so in two principal ways. One is by driving the kinds of innovation that have brought us all those new products and those tremendously significant economies of scale. What makes expansion necessary, however, is the result of something much deeper about how competition works. A company that competes successfully will earn profits. Some of these may be returned to stockholders as dividends but some will certainly be retained and reinvested in various ways — in new inputs of labor and raw materials, in research to develop new products, in more efficient machines, in buying up a competitor and so on.
True, some or even much of this reinvestment is to replace the old with the new, but some of it will be directly new investment — in expansion, in building new plant, in setting up in a new market. For the individual firm, to stand still is to die. The goal of any individual capitalist is to make money and then to use that money to make more money. In a capitalist world, money and power, money and life go together. Certainly it helps if the individual company is environmentally conscious. Ford Motor Company, for example, has invested a lot in making both greener cars and greener production facilities.
As big and powerful as it is, Ford also does not have unlimited choices. It cannot choose to opt for a smaller market share and so undermine its own profitability.
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If we scale up from a successful company to the global economy, a couple of things become apparent. One is that investment must keep up with the competition, not necessarily the market. This is so even if the market is not large enough or growing rapidly enough to absorb all this output. Further, companies cannot ordinarily just sit on idle capital. Idle capital is profitless capital. Companies either have to find a way to use it themselves or they have to throw it into the financial sector to earn some rate of return.
The financiers, in turn, have to find somewhere to invest it. This is a cycle that has no natural stopping point and no one involved in it can volunteer to call a halt or even to slow it down for fear of becoming uncompetitive. There are some countervailing tendencies. When the economy is hit by recession or depression, quite a lot of capacity may be written off as a dead loss.
That helps reset the system at a lower level, but at a very high cost in terms of unemployment, poverty, and waste of buildings and equipment. Some of the accumulated profit sloshing around in the system may be invested in physical infrastructure — roads, water systems, power systems, etc. This helps dampen some of the incessant churning of production and reinvestment in the system as a whole and slows the headlong rush to expand. Yet, one of the reasons for this sort of investment is to make the whole system more efficient so that it can produce more at a lower cost.
In that sense, soaking up capital in the ground does not solve the problem, but it does slow it down somewhat. But that individual has to be situated in his or her real world context. And this permanent pressure to grow translates into permanently expanding pressure on the environment. The question of when that might happen is an interesting and complicated one. The conventional assumption that resources are scarce and that the market will work to allocate them optimally needs to be examined, even in the case of non-renewable resources.
As Meadows points out, when fish stocks collapse and the price of cod skyrockets, this does not throw the brakes on overfishing.
It spurs increasingly frantic efforts to get the last of the dwindling stocks. After every scarcity scare, the usual outcome is glut. People buy more fuel-efficient cars and drive as much or more than before because they need to or want to. Airlines raise prices and marginal trips are foregone, but the volume of air traffic continues to increase. Meanwhile, the higher prices drive exploration and development of increasingly remote, inaccessible and expensive oil at ever greater environmental cost — deep offshore Brazil, Siberia, Alberta oil sands.
This is the market at work. When the price goes up, the supply increases. In the case of fish, there really is a threat of extinction. For oil, there is presumably a last drop, but we do not yet know when or where it is. Markets and States Markets are not natural entities. They are social institutions that rely on an array of conventions and guarantees to work well and to survive over the long run and these almost always involve the state. Capitalism requires generalized and consistent acknowledgment of what private property rights consist of and specific, legal recognition of who actually owns what.
These acknowledgments must be enforceable and therefore require a legal and juridical apparatus that is seen as largely independent of particular interests, and, crucially, secure over the relevant territory and over time. Warlords, pirate chieftains and Mafiosi may be able to enforce a particular version of property rights, but they cannot provide the territorial and temporal stability that a capitalist system depends on.
The developmental potential of capitalism — its ability to create wealth — hinges partly on the territorial consolidation offered by the state and international trade regimes also under the purview of the state. Dividing a production process into its component stages and assigning individual tasks to workers specialized in doing that task would, he thought, vastly boost productivity. In this context, the beauty of the market for Smith is not that it increases consumer choice but that it provides a good way of managing the increasing complexity of production.
However, as he immediately observes, the division of labor is limited by the extent of the market. There is no point in being able to make 50, pins a day if your market only needs twelve. Economies of scale again. Capitalism as a developmental system needs large and growing markets. This has partly to do with social structure. A large middle class that can buy many standardized things is better than a tiny aristocracy that buys exquisite one-of-a-kind objets coexisting with a mass of miserably poor peasants who can buy hardly anything at all.
But creating a large and stable middle class requires a lot of support from the state in the form, for example, of free public education or legislation establishing a minimum wage. The expanding market also has to do with removing barriers to trade. The state is critical in this realm. It integrates the internal market and stabilizes it. It supports the opening up of new markets abroad through conquest or trade treaties.
This is a necessary condition for the extension of the division of labor, the increase of productivity and the increase of wealth that Smith looked to. They defend the territory, creating a stable environment for investment, they administer justice, they defend private property, and they fund some kinds of infrastructure investment — the interstate highway system, for example — that provide immeasurable benefits to commerce and industry but are so massive and so long-lived that private capital would not be able to build and run them at a profit.
Apart from all this, states are themselves excellent markets for all sorts of goods with the special virtue that they can expand their purchases when the market most needs them — during recessions or depressions. Markets can exist in the absence of state power. But a capitalist system cannot. It proposes to enrich both the people and the sovereign. He is concerned with how wealth is created and distributed, not — as modern economists are — with how scarce resources are allocated.
His argument is that we can create more of them by allowing people to invest their own resources — capital, land, labor — as they see fit. But he also believes that the government has an important role to play in furthering the wealth-generating potential of the market. He was even in favor of progressive taxation to fund these operations.
As he wrote: The proposal of any new law or regulation of commerce which comes from [merchants and manufacturers] ought always to be listened to with great precaution…. It comes from an order of men whose interests are never exactly the same with that of the public, who have generally an interest to deceive and even oppress the public and who accordingly have, upon many occasions, both deceived and oppressed it.
As Smith has just suggested, this is also connnected to social position and the particular interests of business.
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What he wants is a state that serves the interests of the nation, not the particular interests of any group within it. What emerges more clearly in Marx is that all decisions about the economy are inherently and deeply political because they are precisely about who creates wealth, how it is created, and who benefits from it. And he thinks that the capitalist class has the most power to influence the state. Unlike Smith, who believed that markets left to themselves would produce balanced growth over the long run, Marx thought the unregulated growth imperative of the system would lead to imbalance and periodic crises.
What changes historically are the modes of acquisition, the form that wealth takes, and the incentives for how wealth and power will be used. Exploiting nature will always be involved. There are two things about capitalism that raise the stakes enormously. One is that it is so technologically advanced and productive. The second is that there is no limit to the growth imperative. None of the embodiments of wealth in the pre-capitalist world — land, slaves, jewels, castles — can be multiplied infinitely. Money is a different story.
It can keep on multiplying. And in a world where money and power go together, more is always better. These two things together mean that the capitalist world always needs more from nature. This deepens the challenge that we face in getting from where we are to a more environmentally sane path. If you think capitalism is going to be around for awhile, it means we need to deal with the whole social system, not just the parts of it that touch nature. From a political economy perspective, the problem is not to decide between states and markets but to decide how we think states and markets should work together to promote our general welfare.
We might also expand our notion of political economy to include non-market, non-state entities such as people. This way of thinking might allow us to include the environment more effectively in our notion of the general good. The path of the book I think it is important to delve deeply into how a way of life that puts unsustainable stresses on nature is produced. I think it is important to examine how stuff happens in some detail because it is the detail that shows how a path was constructed that has led us to this point.
The path that came into being was not the only path available. Neither was it an evil plot. It came into being through the intricate construction of social life, through the accumulation and exercise of various forms of social power, through the always interesting ways that people live within, create and are shaped by social structures. This means that the history matters. What people did, what they thought, who did what in pursuit of which goals — all of this matters. In principle, one would wish to write about all of world social and environmental history to make this case.
One is about the long history of mining which bears particularly on issues of land degradation and the contamination of surface water and ground water. The second is about the short history of the automobile, the internal combustion engine and suburban sprawl which bears particularly on issues of air pollution and climate change. Part I, then, is about the elements of earth and water. Part II is about air and fire.
This is an odd combination of topics.
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Mining dates back to prehistoric times. Many of them were made centuries ago. The nature of our responsibility for them is hard to pin down, yet, given the fact that mining is absolutely necessary for our way of life, we need to come to grips with it. By contrast, we are living the story of the automobile and suburban sprawl in a way that allows us to see directly how we are implicated in it. We continue to knowingly construct it even as we deplore its consequences. As more and more people around the world become rich enough to follow the American example, the problems will intensify.
The consequences are global and will affect all life on earth for centuries to come. Coming to grips with them will require different policies, temporalities and geographies from the story of mining and I think it is good to be able to explore a larger range of them.
Here is how the book goes. Part I explores the history of gold mining. Chapter Two examines the environmental impacts of gold mining through the ages and what people have been writing about those impacts since the 5th century BC. Mining is unavoidably environmentally disruptive, but the really toxic impacts kick in with the introduction of mercury amalgamation possibly around AD, possibly considerably earlier and, in the late 19th century, the new method of cyanide leaching to process ores.
What counts here is that these techniques were not merely conveniences — they were essential to keeping the whole business going. Without mercury, the incredible transfer of wealth from the Americas to early modern Europe would not have happened. The environmental harms of gold mining are inextricably linked to grievous social harms. Although rushes have attracted throngs of independent miners to the gold fields at particular times and places, the more usual problem has been how to generate a labor supply for the mines and the solution has more often than not been slavery or something close to it.
Chapter Three shows why outright slavery was necessary to gold mining in antiquity, not just a barbaric option, and how other coercive measures were critical to developing a labor supply in South Africa. What we see clearly here is how the domination of nature and the domination of people go hand in hand. And again, none of this was particularly hidden from view. Anguished commentary about enslaved gold miners in Egypt dates to the second century BC.
Major episodes of our history have hinged on particular ways of despoiling the environment and threatening human and ecosystem health and well-being. And we have known with considerable accuracy about those effects every inch of the way. Chapter Four poses a question that everyone knows the answer to: why is gold so valuable that we are willing to do all of this environmental and social damage to get it?
Answer that everyone knows: it is very rare, very beautiful, shiny, evokes the sun, is easily worked and it never corrodes. It is not, we can all agree, a particularly useful substance — it certainly meets no critical survival needs — and yet we have required and tolerated immense sacrifice in order to get it, from the dawn of history to the present day.
Further, its scarcity is not entirely natural. Quite a lot of effort over the ages has been devoted to making it scarce. We do all of this environmental and social damage getting the stuff out of the ground, and then we dig other large holes and put it back in. And even as we are burying a sizeable share of what we just unearthed, we are frantically mining more of it. Part II entails a dramatic shortening of time horizons from thousands of years to something over a hundred — that part of history that witnessed the automobilization of society and, in the US anyway, a steadily expanding ooze of suburban sprawl that made the car an existential necessity.
The problem is not so much the car as its engine, and not so much its engine per se as the fact that we ended up with only one kind of engine. Many readers will see this as a non-issue. The internal combustion engine is more efficient, more powerful, more useful for transportation — especially in the wide open spaces of America — etc.
This is not untrue, but it is not the whole truth. There are uses and users for whom a car powered by an electric motor was and is perfectly adequate if not flatly superior.
Nevertheless, the internal combustion engine unarguably triumphed in the market and the electric car went away. Why did it triumph? Chapter Five argues that its early and absolute domination of the global market for automobiles was not so much because all drivers positively preferred an internal combustion engine, but because they positively wanted a car and the only car they could afford for a crucial window of time was the one Henry Ford was making.
The reason their only choice was a Model T is because of the way Ford designed and built it. Ford preferred a gasoline engine for perfectly good reasons. Mass production, the moving assembly line, the five dollar day: this is a story that everyone knows. Stay with me. The argument, then, is that the market, ostensibly the guarantor of unlimited choice, can itself operate in a way that eliminates perfectly good choices. This is the power of the market. It is perhaps an exaggeration to claim that the entire history of the United States can be read as a history of property development, but it is not a huge exaggeration and it highlights the fact that settlement and development in the US has been a joint project of the market and the state from the beginning.
Critically, although sprawl is seen as a post-war phenomenon fueled by the baby boom, the GI Bill, the automobile and white flight, the foundations for sprawl were laid down decades earlier. Chapter Six shows how this worked and the kinds of market and political power that were involved. My goal is to show how a landscape that makes driving everywhere unavoidable and that obliterates nature is produced.
Chapter Seven examines that paragon of sprawl, Los Angeles. What I want to show here is how much work, how much investment and how much planning went into creating this configuration. As with suburbanization in general, sprawl here predates World War II. Plans were produced that would have protected open space and promoted rapid transit. Other plans were produced that promoted car traffic and endless commercial strips.
There was no lack of plans. The question really is why some plans were realized and others shelved. The answer has a lot to do with how the value of property is established and maintained and this has to do with money power and class power. Chapter Eight is not really a conclusion.
An awareness of how a social and environmental history was made and why it brought us to where we are today is a starting point. The next step is to think about how to make history going forward — a history that is in our own interests and that leads us in a direction we want to go. This chapter may be entirely unrealistic about what we can do, but I think it is unrealistic in a good way. See Young, I. Das Passwort muss mind. Darin sollte mind. Recht Steuern Wirtschaft.
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Erschienen: Auf die Merkliste Drucken Weiterempfehlung. Hardcover CRC Press. Produktbeschreibung We are at an environmental impasse. Many blame our personal choices about the things we consume and the way we live. This is only part of the problem. Different forms of social power - political, economic and ideological - structure the choices we have available.
This book analyses how we make social and environmental history and why we end up where we do.
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