Equitable Distribution

CHAPTER VI

EQUITABLE DISTRIBUTION

Specialization and loss of employment - Limits of an expanding markets - Consumer power

Consumerism forces the adoption of successful business practices. Societies, nations, and corporations, experience and compare their organizational structure and attitudes in the global marketplace. The adoption of economically successful practices, and the standardization of production methods, presages a global culture. The continual adjustments of corporations and nations moves all societies towards a business structure with common strengths and weaknesses.

Specialization and loss of employment

A major element in the creation of the global market was the use of economies of scale. Initially, companies found that they could produce articles at a cheaper per unit cost when they were mass produced. Mass production led to the search for larger mass markets and then to the multi-national corporation with a market in many nations. We are now witnessing the growth of nation states that specialize in economies of scale; Hong Kong's production of toys is an example. We are also witnessing the growth of truly global companies.

In THE BORDERLESS WORLD, Kenichi Ohmae has describes these global organizations as Stage Five companies. Their mission is to provide exceptional value to customers throughout the world. Employees of these global organizations live in different nations and share in the unified mission, and in a common outlook. For these employees, mother country identity has given way to corporate identity.
Global economies of scale and increased automation creates a huge imbalance in the value, to the economy, of workers. Japan's computer chip industry has adopted global economies of scale and the development costs, research and automation, of producing increased memory capacity chips are now so high that the Japanese are in an impregnable market position. Only they can afford the investment costs. Even the American government has declined to subsidise the development costs for the sole remaining American firm in the computer chip industry. Specialization results in automation and the use of robots. Two or three factories in Japan, employing very few people, will produce all the advanced computer chips in the world.

This specialization and the accompanying automation is not restricted to a few articles. It is global in scope with less and less people producing all the lightbulbs, pencils, or other essential articles, for the entire global population. In Canada, as in most highly industrialized nations, 6% of the working population produce all the capital goods - and that small percentage is decreasing.

The continuing high investment in technology has meant that the amount spent on each industrial worker is increasing. In economic terms, capital is increasing while the percentage of labour costs are decreasing. This is especially true in the high technology field. In 1985, according to World Bank sources, for each new worker that France added to its work force, French industry invested $775,159 in new machinery. Japan invested $334,521 for each new worker added to its labour force; the United States invested $135,478 for each new worker and Canada invested $75,286. The obvious conclusion to be drawn is that more Canadians are performing menial jobs that require little investment while the French are increasing the number of people involved in high technology. Economic differences are now dependent on technological investment. At the same time, the number of people who can benefit from high capital investment, is decreasing.
This continuing technological change contributes to the reduction of occupations due to technological obsolescence. Learning a technical trade that will last a lifetime has become an illusory goal. There is no assurance that any technical skill will not be overtaken by changes in the market or by superior technology. All workers must now think of the skills that they can transfer to other jobs.

Flexibility of skills and attitudes has become a necessity in a world of global specialization.

The province of Saskatchewan in Canada presents an interesting study on the effects of automation. Saskatchewan has a large geographic area, a small population, and is remote from the consumers of its products. About a million people lived there in the mid-1970's, and since that time the population has declined and continues to decline. The wheat farms of Saskatchewan are huge and very efficient. The largest farm machinery that is available is used with a corresponding decline in the number of farm workers employed. There is also a major potash industry which is extremely capital intensive and despite its huge production employs very few workers. As a result Saskatchewan, with 4% of Canada's population, grows 60% of Canada's wheat, 40% of its rye, 30% of its oats and barley, and its potash mines represent 40% of the world's known reserves.

Saskatchewan's extreme efficiency has meant a reduction in the number of people employed; workers have moved elsewhere.

Globally, industrial specialization is restricted to industries with monopolistic-type powers, such as computer chip workers in Japan, toy production workers in Hong Kong, shoe production workers in Korea, and wheat production in Saskatchewan.

This increased efficiency, coupled with automation, has meant that, in 1988, six hundred international companies (3% of the world's work force) with sales of more than $1 billion produced 25% of everything made in the world's market economies. The continuing decrease in trade barriers will contribute to even greater efficiency in world production. With the increased use of robots and expensive electronic equipment a small factory will produce all the lightbulbs, pencils, or plates, etc., for an entire continent.

Production, the supply of goods, is rushing towards ever-increasing efficiency. Within the foreseeable future, only one worker out of a hundred will be employed in industrial production. The demand for this production, or, even more importantly, the equitable distribution of the goods produced, looms as a major concern.

Limits of an expanding market

There is still an expanding market in East Asia with newly industrialized countries. However, the market is only slowly expanding in North America or Europe. Industrial nations reach a plateau with a resulting loss of dynamism. This development has been most pronounced in the United States where the loss was noted in the January 1988 Report on Business magazine by Peter Cook. He states;

In the past 40 years, there has been an almost continuous erosion in U.S prestige and power. As other nations have restored their economic fortunes, Americans have seen their share of world production shrink. They lost their control over global finance when former President Richard Nixon severed the link between the U.S. dollar and gold in the nineteen seventies. And costly military entanglements, the costliest being Vietnam, have sapped American power.
The decline has been apparent in industrial-technological advances, where the United States has lost the edge in many old and new industries. Areas where it lags behind Japan and Europe include industrial engineering, robotics and opto-electronics and much of its education system is fast becoming inferior to others. But the fastest decline of all has been in the U.S. financial position. In the space of a few short years, during the Reagan presidency, the United States has swung from being the largest creditor nation to being the world's largest debtor.

Every nation that nears the highest level of consumption has seen a drop in its rate of GNP. The nation with the highest living standard in the world, Switzerland, has had a growth rate of about 4% a year for more that twenty years. Japan, in the sixties and seventies often had a growth rate in excess of 10% a year. In the 1990s, however, Japan's growth rate has slowed. It has reached the plateau of mature industrialized nations.

The possibility of greater efficiencies in improved computers and reproductive machinery, more efficient housing construction, and video teaching, remains. Production is becoming more technological, and employment in what has been thought of as a useful occupation is declining.

Economic efficiency, mass markets, automation, and expensive capitalization have meant that the irresistible flow of economic power goes to the Triad, - Japan, North America, and the European Community.

The end of dynamic expanding markets pose a major challenge. It has been argued many times that a new industry will be created to absorb persons displaced from an obsolete industry. Such a viewpoint is based on the assumption of an ever expanding market. That viewpoint is now seriously questioned. The upper economic limits are now being reached, materially, psychologically, and environmentally. The question of the level at which an equitable human lifestyle can be sustained looms as the major challenge.

Another trend is the growing service industry. Aerobics and sports for health, travel agents and hotels for travel, education and training for professional advancement, along with lotteries, would according to the German poll be the main interest of two-thirds of the population. More people will be providing a service for others and the emphasis on primary production will be of less significance.

Global limitations indicate there will be only so many industrial jobs (chips) on the table. Globally, nations are now fighting about the chips and the most powerful economic bloc (Japan at present) gains the most.

Until there is an equitable distribution of the chips there is a continuing jockeying for high paid jobs. As the number of primary production jobs decrease a hard core of permanently underemployed or unemployed people become an accepted fact of industrialized nations.

For many, it is difficult to accept that they need not be productive in the sense of having a job. There has been a strong belief that productive work defined a person's role and status in society. Without that definition of productive work, feelings of individual uselessness, lower self esteem, and personal impotence arise. Governments and individuals have therefor created positions that are woefully inefficient or even counter-productive. The Japanese rice farmer, the American welfare recipient, the minor European bureaucrat, are all examples of positions created to provide a sense of self esteem.

Governments also try to create jobs and compete with each other, usually with detrimental effects. The government of the province of British Columbia in Canada spent one and a half billion Canadian dollars on the Quintette coal project in the belief that it would create "more jobs for British Columbians". Japan's need for cokeing coal declined, the price fell, and as of 1989 the project was seven hundred million dollars in debt and selling its coal for less than its production cost. The project put independent coal producers in another part of British Columbia, who could have supplied the Japanese coal without government largess, out of business.

Industrial sophistication, and the higher capital intensity required, contributes to the growing separation of production (a very small percentage of the population) from consumption (the entire population). Industrial production is the concern of 5% of the population, consumption is the concern of 100% of the population.

Consumer power

The beginning of the twentieth century was a period of intense competition between industrialized nations for dominance. Germany challenged Britain; the United States flexed its muscles; and Japan showed its power by defeating the Russian fleet in 1905. It has been a century wherein industrial production became the hallowed ideal for nations. A century of human beings as cogs in the machinery of mass production.

As the century ends, the dominant motif of industrialised production also ends. People are no longer cogs in industry. They are increasingly aware that in industrialised nations the fear of starvation or deprivation causing death is a thing of the past. There may be a forced or imagined fear of work motivation faltering, or social fabric will tear, but industrialised nations can adequately feed, clothe, and shelter, all their citizens. To be desperately poor in an industrialised nation requires a mindset focused on failing and being emotionally prone to making bad choices. Citizens in industrial nations may pridefully call themselves survivors but that is mental state, not a reality.

Equitable distribution can only be considered from a global perspective. The challenge at present is the jockeying by nations to be paramount by having the lowest unemployment rate, or the highest per capita income, or the greatest industrial power, or whatever is likely to persuade national voters that their elected officials have got the best deal for them. Equitable distribution means a comfortable, adequate and sustainable standard of living for all citizens of the globe, not for a lucky few in industrialised nations.

In moving towards equitable distribution the preferences of consumers dictate where industry will coalesce. For nations and organisations it is important to select a number of industries in which to invest rather than trying to keep everyone employed in high paying jobs. Global consumers don’t care where the product was produced – they care about price, reliability, quality and accessibility. Organisations should seek to consolidate an established market rather than expand into a new one – it becomes more important to establish market share as the Japanese have done in the auto industry.

A comfortable life style for all citizens of the globe is not to be denied. Movies, travel, telecommunications have unveiled to all the lifestyles of every nation. The poorest farmer in Bangladesh knows the life style of a farmer in Germany and he will live his life struggling towards that level of comfort. This is a global desire or force that is to be accepted and dealt with as a fact. As Harold Dorn, Professor Emeritus at Stevens Institute of Technology stated -

No species has ever been able to multiply without limit. There are two biological checks upon a rapid increase in numbers – a high mortality and low fertility. Unlike other biological organisms, man can choose which of these checks can be applied, but one of them must be.

A low fertility is our likely answer and that is only feasible with equitable distribution. If a sense of equality is not achieved the jockeying for power and position will continue. Mindless consumerism is no different from mindless fertility and until these powers are reined in we are heading for the other alternative – high mortality.