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Thursday, October 2, 2014
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- For decades the world economy has been on a path towards globalisation. The drive to achieve ever larger economies of scale at ever lower marginal costs pushed manufacturing to standardise, slashing expenses by outsourcing and supply chain management, consolidating suppliers, eliminating unnecessary in-house middle management, pushing for mergers and acquisitions, purging excess to deliver better returns to investors and ever lower prices to customers, thus strengthening their purchasing power and bringing more citizens into the sought-after middle class.
This process of globalisation-driven growth is supposed to have a trickle-down effect, bringing wealth to many while more middle class members rise from rags into riches. But the reality of a globalised economy seems to be that poverty is its only sustainable phenomenon. While one can claim there has been growth and market expansion, the number of people living on less than one dollar a day has never been so high.
Controlling the population explosion has been considered one of the key factors in bringing equitable and social development to everyone on the globe. But population control is simply not enough.
The most critical though least debated action required is changing the business model. Our economic system has long been driven by efficiency without ever considering sufficiency. Greed, not need, has been the muse of the ranks of business. And the gap between the world’s richest and the poorest has never been so large.
The Blue Economy proposes that we respond to basic needs with what we have. The time has come to stop consuming more than the carrying capacity of our earth. We have to introduce innovations and technologies that cascade nutrients, energy, and matter the way ecosystems do, so that we can exit the trap of scarcity and enter the world of sufficiency for all living sentient beings, not only the human species.
Amory Lovins and his energy experts at the Rocky Mountain Institute have proven that modern society reached Peak Oil in 2007, meaning that annual extraction of fossil fuels reached its highest point, subsequently beginning a long decline in reserves. With Peak Oil, reducing consumption and searching for renewables became an absolute necessity.
But the end of the age of unlimited access to fossil fuel brings another “peak” with it: Peak Globalisation. Companies that have undergone a brutal transformation to become the global players will now face a downturn in their underlying growth dynamics. The winners will be the small and medium-sized companies, inspired by millions of entrepreneurs who will respond to basic needs for all with what is locally available. This shift permits the design of a competitive business world where free trade and free direct foreign investment are not the key to economic success. The new business model will provide opportunities for the local risk taker who is capable of creating a broader coalition of economic and social activities with multiple revenues and multiple benefits, going beyond the straightjacket of the core business and core competence mantra of the highly standardised globalised world and its fetish of discounted cash flow analysis.
The shift away from the Harvard Business School model, which forces management to focus on one product and one process at a time, will insure that David will win against Goliath. He will win not because of privileged access to global capital, labour, energy, and mineral markets, but because the drive towards globalisation has left the giants of industry extremely vulnerable. And unlike companies listed in the Fortune 500, few entrepreneurs aspire to replace the giants; rather they are happy with the 2-3 percent market share each can nibble off their formidable opponents. This new paradigm will facilitate the arrival of decentralised production and consumption systems that are now technically and competitively viable in all sectors of the economy. including mining, forestry, agriculture, metals, chemistry, energy, paper and pulp and so many more.
The portfolio of 100 innovations described in The Blue Economy, and their growing successes on the market in all four corners of the world demonstrate that these individual breakthroughs are not isolated cases but are part of a new trend which I call “The End of Globalisation”. While its complete penetration of our social and economic tissue may take another few decades, it is already shaping competitive forces, driven by local needs and local resources. This will shape a new society in which jobs are generated, the best products for health and environment are cheaper, and social capital is created by simply being more productive and competitive. After all, that is what is expected of the homo economic: achieving much more with much less. (END/COPYRIGHT IPS)
(*) Gunter Pauli, author of the Blue Economy and entrepreneur.