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GROW YOUR PROFIT$
By CHRIS PROVOST
iUniverse, Inc.Copyright © 2010 Christopher Provost
All right reserved.
Chapter OneConsumerism in Crisis
Over the next twenty years, we will experience dramatic changes in life style, consumption patterns and product design driven by the great recession, resource scarcity, climate change, the end of easy oil and water, food, and political crises. These issues seem far away until you realize that in cities and counties across North America, Europe, and Asia, the results of consumerism and unsustainable resource consumption are forcing leaders in governments and in Fortune companies to address the environmental consequences in ways that will affect us all. The oil spill in the Gulf of Mexico with the explosion and loss of the Deepwater Horizon is an example of the consequences of the choices we make to address fuel needs. Drill deep and risk disaster or allow prices to rise. There is no excuse for the environmental impact of the spill. However, BP and the other oil companies would not be drilling deep wells, spending billions to do so, if not for the demand consumers have placed on fuel sources. The most powerful, environmentally harmful addictions we face are our consumer energy and resource addictions. The cure for these addictions as a civilization if not managed properly will have an equally tremendous impact on employment and our living standards as the addictions themselves.
Last week as an example I was driving by a plastics bag plant, which opened six years ago to great fanfare with investments in machines and a new site. The owners had extensive plans for growth. The plans for a rail spur and silo development evaporated as companies shifted to a smaller bag size and bag imports from China increased. The next kicker they experienced was the focus on the impact of plastic bags on the environment. US plastic bag, sack, and wrap consumption ranges is over five hundred billion plastic bags annually, their impact on birds and pollution mobilized the environmental movement against bags. Although compared to paper, "plastic grocery bags consume 40 percent less energy, generate 80 percent less solid waste, produce 70 percent fewer atmospheric emissions, and release up to 94 percent fewer waterborne wastes." However, reusable bags are a better environmental alternative, so a small tax on bags ensued in the city of the plastic bag plant. Net result-the once-new factory is closed and the building is for sale. This closure is an example of blowback from the feedback loop trying to correct environmental consequences of consumerism.
These corrections, while devastating for us in the short term will be, if not managed properly, even more devastating to our children.
Environmental agencies and corporations such as the Carbon War Room, Factor 4, Factor 10, Ceres, and USCAP are all working on plans to address carbon and water shortage. These plans will affect industries from fishing and food to paper box manufacturers, from electronics manufacturers to trucking companies to major global and small retailers. However, few companies have environmentally proofed their business to deal with the coming changes. An example is the shredder and offsite storage industries. Shredders and shredding services have traditionally been sold based on the fear of privacy violation. However, if I don't print it, I don't have to dispose of it. Our accountant recently wrote an article on an ingenious way to efficiently scan paper and reduce waste. The day after the article came out, he had 119 requests for information. Many companies are going paperless, including Walmart. So, what does this mean for the shredding companies, offsite storage industry, and post offices in your country? It means a dramatic reduction in the need for shredders, shredding services, paper storage, and postal workers. Governments that are propping up such services need to develop legislative processes to address antiquated industries as the penetration of computers in North America and Europe means there are better cost-effective environmental alternatives. The question is what to do with workers whose jobs are eliminated.
Employment is one of the key questions we need to address when looking at the future. Changing to what Van Jones calls a Green Collar Economy may be beneficial for companies, managers, and workers, but if governments and businesses transform themselves, without collaborating on employment policy, the economic impact will be disastrous. We need to face the trends now and withdraw investment from non-sustainable areas while reinvesting in the critical areas of innovative infrastructure and training. An example is computers and the automotive industry. Computers allow us flexibility to eliminate unnecessary resource consumption due to travel and can alter business models in many more ways than they have done. Automotive companies build and operate increasingly financially unsustainable companies, as shown by the billions required to keep them afloat. Governments continue to pour billions into industries that are not viable instead of cooperating to build a manufacturing base for integrated chips and monitors even though such high-tech manufacturing facilities will be critical in the future. If the world were an ice cream cone, humanity has eaten all the ice cream and only has the cone left to feed an increasing number of people. Therefore, we need to be selective on what pieces we give to whom. From a business perspective, this means we need to have a clear strategic vision for investment instead of investing in yesterday's technology. So, how did we get were we are?
Civilizations and Skewed Development?
Since 1492, when Christopher Columbus arrived in the Caribbean, the world has been experiencing skewed growth. Growth was skewed because the resources available to Western empires increased dramatically as Europeans exploited the massive resources of North and South America. In addition, the Greco-Roman scientific and technical thought structure of Western Europe accelerated the population's advantage in warfare and physical goods production. Greek thinking concentrated on inquiries and debates into the nature of the world. Greeks strove to understand how and why the world operated with a concentration on the individual, which led the West to follow and appreciate science and technology. Plato, Aristotle, Pythagoras, Plotinus, and many more created thought paradigms that challenged and developed Western civilization's understanding of the physical world and options for governing. Jewish thinking reinforced these philosophical paradigms as Christianity spread throughout the West. The Christian empires of the West led the world in scientific exploration, building on the Greek model as they stove to understand more about who God is and how He revealed Himself in His creation.
Scientific investigation and prosperity exploded in Europe with the Renaissance and the Protestant Reformation. Scientists such as Isaac Newton, a staunch Christian, focused on scientific research to understand the truths about how God created the universe. Science was a political and military power multiplier for Western European empires as they leveraged the resources in the western hemisphere and their expanding scientific knowledge for expansion.
Islam also had exposure to Greco-Roman thinking and Jewish thought and from 1400 to 1500 experienced an explosion of science. Islamic military power at one point surpassed that of Western European empires, however, this flowering of knowledge faded quickly amid internal strife. In 1492, the same year that Christopher Columbus came to the western hemisphere, the Moors were defeated in Spain. Islam was defeated from within as the Persians and the Ottoman Empire fought each other while eliminating their focus on scientific expansion.
Asian countries started from a different philosophical starting point to model the world. Asians in the Chinese sphere of influence concentrated on harmony and the family. "Every Chinese was first and foremost a member of a collective or rather of several collectives-the clan, the village and especially the family." Scientific knowledge was viewed as having limited utility, although the Chinese were incredible inventors, inventing gunpowder, clockwork, cast iron, the wheelbarrow, paper, pasta, ketchup, the printing press, and more. However, these ideas were never incorporated into a systematic, scientific method of study. Eastern philosophical models of Confucianism and Daoism and religions such as Buddhism did not have the same philosophical emphasis on exploring the universe. India also did not develop a scientific method, although they developed significant mathematical prowess with the invention of what we term today "Arabic" numbers.
Today, Western Europeans often think of their civilization as historically more creative and wealthier than Asian ones. However, this is a major historical error, as is the assumption that these countries were always poor and Western empires saved them from a horrible fate. In fact, for over three thousand years, China was the richest empire on the planet! This wealth facilitated a belief that the emperor was the Son of Heaven, sovereign over heaven, and that all foreign countries were vassals. However, the invasions of the Mongols, along with China's internal struggles and lack of a scientific method, was to have an impact on their development. In 1570, Spain set out to colonize the Philippines, where the Chinese had long lived, resulting in approximately twenty thousand deaths. Next, China had to deal with internal strife and a war with the Japanese over Korea in 1592. However, the seminal issue that still defines relations between China and Western countries today is the Opium Wars. European countries, America, and the British sold opium to Chinese in violation of morality and government policy. British forces, to support this trade and address what they saw as unjust Chinese practices, forced their way into China using the very weapons invented by the Chinese (gunpowder and cannons), but which had now been innovated with stronger metals. Gladstone, a British politician, declared, "A war more unjust in its origins, a war more calculated to cover this country with permanent disgrace, I do not know and have not read of." Western nations exploited China to such an extent that the Chinese government's moral ability to govern failed. This has affected China's view of the West to this day.
While differences in philosophy, knowledge, and science had an impact, access to easily accessible coal and oil compounded Western growth. The application of low-cost energy has been a key mechanism since the industrial revolution for the expansion of empires and financial business models utilized by countries such as Holland, England, Germany, Britain, and the United States. Key Western civilization inventions such as the train, steel ships, electrical generation, and gas-powered cars and tanks and aircraft have all been based on using energy servants to project military force faster and more powerfully against opponents. The hydrogen bomb itself is an energy weapon, facilitated by our ability to project energy using jet engines.
In food production, the use of fuel to generate ammonia and nitrogen has also allowed energy to aide Western food development and export to other areas. This use of energy servants has dramatically increased the wealth and accompanying carbon footprint of European countries and members of the Organization for Economic Co-operation and Development, including Japan and Korea, over the last two hundred years.
In the late twentieth century, the global imbalance in knowledge, resources, and energy created from the fifteenth till the early twentieth century has been altered by US government polices that have shifted part of the core manufacturing base of US, Canada, and Europe to Japan, Korea, and then to China. An even more important transition has been the shift in the engineering and intellectual development of software products to India, China, Ireland, and the Philippines as those nations have increased their engineering ability based on Western exportation of technical information. The shift in manufacturing to Asia from the United States was initially the result of US government policies to develop Germany and Japan subsequent to World War II. In its fight with the Soviet Union, the United States also utilized the growth of economic relationships with politicians in countries susceptible to Communism to slow the spread of Communism and reduce exposure to the Marxist Communist model. Consumerism and major retail discount-chain growth, which required cheap products to flourish, also affected policy decisions to move production overseas.
In the last thirty years, manufacturers increasingly shifted production overseas to low-cost areas such Mexico, Honduras, Vietnam, Cambodia, and India to achieve even lower prices. However, the largest manufacturing plant in the world that generates TVs, plastic toys, braises, and cars is in China. Initially starting with Singapore, South Korea, and the other Asian Tigers, China in the late twentieth century became a powerhouse of manufacturing. Deng Xiaoping's Southern China tour prior to the Communist Party meeting in Beijing in 1992 had a dramatic impact on China accelerating economic changes that had started previously but which had slowed down with the impact of the Tiananmen Square massacre. The 1980s and 1990s were the start of Guangdong Province's prosperity. From 1985 to 1994, the province's exports increased from $2.9 billion to $50 billion.
Domestically, the Chinese people between 1980 and 1985 "bought more than 150 million bicycles, 250 million wristwatches, and 100 million (mostly black-and-white) television sets. From 1985 to 1990, China consumed another 120 million bicycles, 130 million electric fans, 50 million washing machines, 40 million refrigerators, and 120 million (increasingly color) television sets." In one example, Frank Lo Kit-Lu, a Hong Kong businessman in the first year of production in China, noted, "2,000 workers made 14 million brassieres, more than 12 million of which were shipped to the United States. Under the so-called Multi-Fiber Agreement which governs the international trade in garments, Mr. Lo triggered the imposition of a United States quota for the importation of Chinese brassieres." This explosion of exports from China was financed by billions of dollars from foreign, but mostly overseas Chinese and Japanese investors and by the use of a lot of inexpensive oil to allow for shipments across the Atlantic and Pacific oceans.
The people of China are the working resource that allows the country to manufacture items at a very low-rate wage, and the ocean container is the mechanism that allows the product to be moved at low cost. Chinese workers are usually very young migrant workers from the farming areas of China. China's population census figures show the number of migrant workers grew from 20 million in 1990 to 132 million in 2006. A manager in China explained to me the internal travel restrictions and the challenges of getting a residency card in a different city. Often, she told me, people would marry someone from another city so they could get a residency card. Although a national ID card facilitates temporary residence in the cities, it is very difficult to get permanent residency, and if both parents are migrants, this affects their ability to get education for their child. However, the World Bank's brief on "Rural to Urban Migration in China," by Alan de Brauw and John Giles, shows that the average income of poor households rose as a result of migration. Although there was an accompanying negative effect on high school enrollment as migrants are usually employed in "occupations requiring no more than a junior high school education." The average hourly compensation wage rate in China, based on an IMF report, was fifty-seven cents in 2002-forty-one cents in the country, and ninety-five cents in cities. Although compensation has increased since 2002, it remains low due to the large unemployment rates in China, which are a danger to any Chinese government, as civil unrest is a major reason for Chinese governments' failures.
Excerpted from GROW YOUR PROFIT$ by CHRIS PROVOST Copyright © 2010 by Christopher Provost. Excerpted by permission.
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Table of Contents
Chapter 1: Consumerism in Crisis....................1
Chapter 2: Our Value....................16
Chapter 3: Broad-Based Disruptions....................26
Chapter 4: Trends and Alternatives....................37
Chapter 5: Acknowledging the Challenges....................66
Chapter 6: Leading from the Front....................91
Chapter 7: Organizational Transformation for Profit....................99
Chapter 8: A VBridge to Sustainable Profitability....................132
Chapter 9: Detailed Broad Trends and Resources....................151
Chapter 10: Closing Summary....................198