 Wednesday, May 29, 2002
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Comment on John Robb's New Economy
Eric Norlin
I read with great interest John Robb's
recent piece called the "New Economy II." Therein he argues that a shift in the power relationship between individuals and corporations has created a situation wherein pricing power doesn't exist, while labor mobility drives up wages:
I emphatically agree with Business Week in thinking that this pricing environment will hurt corporate profits and the stock market. In fact, I would go even further and say that the New Economy's pricing pressure and labor mobility will result in little market growth over the next 15 to 20 years. We are extremely likely to see a Dow of ~11,000 in 2015! During a similar period 1964 and 1981, we had GDP growth of 370% but we entered and left the period with a Dow of ~875. It is possible to have growing economy without rapid increases in corporate profits and a healthy stock market.
I don't, off hand, disagree with John.....but then again, I'd like to address a few points:
1. I agree that inflation is a non-issue for the consumer (on a worldwide scale) because of global transparency of markets (brought about via networked applications and modern financial tools).
2. I agree that labor mobility (once it truly picks up again, and it is -- slowly) is leading to increasing wages.
3. I don't think John fully accounts for the ways in which Corporate America (especially) can spur on increasing profits....
That is, he assumes that the prime driver of profit margin growth is pricing power. But that has not historically been the case -- especially for high tech. The prime drivers can break down as follows:
1. Cut expenses. THIS is currently the prime driver -- and I'm betting it will continue to be so, well into 2003. Business will spend on that which they believe can either save them money on captial expenditures or help them to cut employees (thus, keeping labor mobility in check).
2. Get existing customers to spend more. Ah yes -- the glory of CRM....of course, its largely been a failure. But this holy grail ain't goin' nowhere. Businesses will be loading up on plans to get the existing customer base to spend more (witness AOL's push for broadband).
3. Expand by getting new customers. Really there are only 2 ways to grow a business -- cut expenses and grow revenue -- and the first one isn't
real growth.
Where is all of this leading?
Business is in a horrible mess in their IT departments. They've been spending and spending and spending on the alphabet soup of IT systems (CRM, PRM, ERP, etc) -- with none of it being able to address the 3 stumbling blocks: interoperability, flexibility, extensibility (or as I'm calling it IFE -- get it? "iffy"). Sound familiar? You're damn right it is -- its called "web services" [eric hears the groan from the crowd].
The only way out of this mess -- and ultimately the "next great innovation" that spurs on a renewal of corporate spending -- will be for the Corporation to realize that if it is to A) cut expenses B) generate more revenue (either route) and C) still have shit work, it must D) re-think the architecture of its entire IT system. Distributed IT is coming -- in a big way......and everyone from the BigCos to the Indies are on to the scent.
In my mind, it all hits a grand stumbling block, unless it solves a
crucial problem along the way...
The following is a summary of a much longer report.
Ecological Footprints of Nations
Mathis Wackernagel, Larry Onisto,
Alejandro Callejas Linares, Ina Susana Lopez Falfan,
Jesus Mendex Garcia, Ana Isabel Suarez Guerrero,
Maria Guadalupe Suarez Guerrero
Center for Sustainability Studies
Ecological footprint: the biologically-productive area required to continuously provide resource supplies and absorb wastes of a particular population given prevailing technology.
Though nations use discontinuous and scattered areas due to international trade, calculations can be made by computing ecological-services consumption and then calculating the necessary area (at world average productivity) to provide these services.
A series of compatible approaches to calculating carrying capacity, from energy-flow to ecological space to footprint, have been developed, but are largely "compatible" and therefore synergistically strengthen each other in formulating appropriate sustainability tools.
Planetary Biological Productivity: Land
- Fossil energy land: valuable CO2-absorption capacity being foregone in favor of unreplenished fossil-fuel use and generation of unsustainable waste products/pollutants.
- Arable: 1.35 billion ha under cultivation, but 10 million/year abandoned due to degradation.
- Pasture: less productive, and plant-animal conversion efficiencies reduce biomass energy potential by a factor of ten; also encroaches on valuable forest land.
- Forest: secure a huge range of ecological services, but productivity is decreasing.
- Built-up areas: because they occupy the most fertile areas, these lead to a loss of arable land.
- Oceans: though large areas, these have generated limited food gains despite high harvesting.
Considering available resources according to this division, we arrive at an ecological benchmark figure of 1.7 ha. of land per capita for comparing ecological footprints; it is to this figure that human use of biologically-productive space must be reduced.
It is worth noting that the report does not cover the use of fresh water (often diverted from ecosystem to artificial uses at high energy and environmental costs), or contamination (capable of significantly reducing productivity); thus, the present study is an underestimate of human uses.
Results
In only 10 out of 52 surveyed countries is the ecological footprint less than 1.7 ha/person.
Many countries have a higher productive capacity than 1.7; the report takes this into account in formulating its "ecological deficit": degree to which footprints exceed capacity.
While several nations are running surpluses, the predominance of export trade means that this extra capacity is in many cases used up.
A comparison of deficits and surpluses shows an average ecological footprint of 2.3, more than 35% larger than current available space.
Footprint numbers, while clearly illustrating problems facing sustainability, also indicate an equity problem in that industrialized countries' current resource use requires drastic under use by Southern populations. Moreover, it is clear that over consumption, not poverty, is the threat to sustainable development.
An additional issue is the quality of life obtainable by living on 1.7 hectares of capacity; case studies, experiments, and even international competitions should be developed to highlight this issue.
Implications for Measuring Sustainable Development
- Time-series. As with economic indicators, time-series footprint studies can provide progress reports, can show the benefits and pitfalls of previous practices, and, via historical analysis, can illuminate the effects of economic/demographic growth on ecological footprints.
- National accounts. The ecological footprint systems approach allows quantification for national accounts purposes, which can allow inter-sectoral planning and identification of the risks and opportunities to conserve natural capital in favor of potential future interests.
Implications for Political Mobilization
- Deflects confusion as to the meaning of "sustainable development" by helping to refocus public attention through presentation of clear and measurable objectives;
- Acts as a measurement tool to inform government, business, and NGO environmental assessments and policy impact studies;
- Yields positive and accessible information by clarifying impacts of a proposed action in terms of "perceivable ecological units," thereby allowing the public to generate more informed opinions on actions with a positive or negative environmental impact; and
- Sharpens our understanding of biodiversity's significance to human survival, yields an overall picture of man's impact on the planet, and thereby allows exploration of the denial mechanisms which currently hinder public action on environmental issues.
Implications for the Business & Economics Status Quo
- Enhances economic analyses by injecting issues of resource throughput and scale into monetary assessments, internalizing environmental costs into economic analyses of resource distribution and supposed "efficiency," and by re-adjusting GDP to incorporate environmental degradation and thereby redefine the issue of "world competitiveness";
- Informs trade policy, which is currently lagging far behind Agenda 21 mandates;
- And redefines wealth and scarcity by incorporating the ecological footprint studies' measurements of natural capital and its potential interests into standard economic welfare gains measurements, thereby encouraging
- Development of alternative solutions to reduce ecological footprints, which creates the potential for competitive advantage determination vis-a-vis sustainability, encourages ethical investment in sustainability, and drives business to create efficient solutions for the achievement of sustainability.
[ Full Report ]
