Growth or Degrowth? Global or Local? Or Neither? Is this an impossible conundrum?

The Notion of Customer #6

Feb 11, 2024

What if some of the things we are often told are essentials for Business Success are wrong? Not just a bit wrong, but completely, 100 per cent wrong? Yet that is surely an inevitability if this assertion by Peter Drucker is true:

Every few hundred years in Western history there occurs a sharp transformation. ... Within a few short decades, society rearranges itself – its world view; its basic values; its social and political structure; its arts; its key institutions. Fifty years later there is a new world. And the people born then cannot even imagine the world in which their grandparents lived and into which their own parents were born. We are currently living in such a transformation.1

When it comes to getting things right, Drucker had a hell of a track record, so let’s check this claim out. Drucker wrote it in the 1990s and said that a transformation was underway. In fact, we can now see that the transformation started around 1970.

Fifty years on from 1970 takes us to 2020 so, if Drucker was right, the “new world” should be with us right now. And surely it is? Comparing the World of 1970 with the World of 2020 we unquestionably have “a rearranged society” with a different world view, basic values, social and political structure, arts and key institutions. Or, at least, a battle between those who favour such things and those of us who are perhaps a little more cautious and conservative.

We know this to be true. We experience it every day. And central to the reality is the fact that the 20th century’s Society+Polity+Business triple-lock that enabled hugely successful entrepreneurship, production, employment and welfare has been hacked to pieces. At least, it has in the West.

Now, you may say, change is always with us. And so it is. But if you take any other 50-year period since the Industrial Revolution (the previous 50-year transformation window was circa 1775 to 1825), the structure and ordering of most aspects of Society, Polity and Business stayed recognizably the same. But not this time. Nor has a stable ‘new normal’ yet emerged.

A major outcome of the 1970-2020 transformation has been the shift, first, from the Production era (G1 as we label it), when success was all about Products and volume sales, to a Product Augmentation era (G2, all about Added Value and sales relevance) and, now, to something completely new! These changes have both benefited from and further enabled the new, digital-technology-supported business techniques outlined previously in The Notion of Customer series …

So, now, we’re in G3, the third generation of modern business. What’s that all about?

Where are we now?

The business corporation as it evolved through the nineteenth and twentieth centuries was a product of the nation state2, but nation states (or, at least, the nation states of the West) have been undermined by the redistribution of corporate functions using the power of digital technologies, and their potential to create a global order with top-down-controlled and globally integrated functions.

As a result of all this, in the second decade of the 21st century, a number of businesses have lifted themselves into a Global Corporate Super League (GCSL). The revenues of any one of this group may well be greater than the GDP of quite substantial nation states. To make the point, consider, for example: Apple’s 2023 gross revenues were US$ 383 billion; the official estimate for Portugal’s GDP at the end of 2023 was US$ 376 billion.

Although members of the GCSL obviously still have to work at their performance, they are so large, so powerful, so clear of the rest of the pack, that they avoid some of the pressures that their smaller counterparts have to endure. ‘Lower league’ businesses, however, are under pressure from all directions. From a world devoid of monetary borders and thronged by predators with coequal right to target once inviolable territorial franchises. From a global map on which the striations of time zones and coloured inks defining nations and continents have been made meaningless by realtime technology and multi-terabit communications. And from the cadre of uber-powerful GCSL entities that are, for the first time in human history, more financially powerful than many nation states, supported by short-termist-minded, value and growth hungry stock markets and cost conscious, footloose, ever more demanding customers.

“Money has a power above the stars”3, wrote Samuel Butler three and half centuries ago. Now it bounces around the earth, ricocheting off man-made stars, indifferent to language, nationality and former loyalty.

So, a situation that was not clear-cut to start with has become even less so. There are various push-ons and push-backs, and will continue so to be, but the world in 2024 is radically different from that of 1974.

Where do we go from here?

In the past five years, we have experienced, inter alia: the COVID-19 pandemic; Russia’s attack on Ukraine, and subsequent energy and food supply problems; and, most recently, the terror attack by Hamas on Israeli citizens and its aftermath.

These events have all contributed to an awakening to the reality that globalization, at least in the form used thus far, has contributed to a weakening of the security of individual nations: a security that includes, for example, the ability to make high-grade steel, which in turn relies upon the availability of high energy fuels and power sources.

So, where do we go from here?

To cut right to the chase, it seems to me to come down to a debate about two factors - scale and scope:

Consider the two extremes. Do, please, note, I’m just introducing the issue here - not, at this stage, trying to solve it!

One: reinstate the old system. Local + Growth.

The West’s manufacturing has been outsourced to other countries. But if the old manufacturing model gave us not just power but also individual and community benefits, should we reinstate it? What if we were to reinvent Sheffield, England and Detroit, Michigan and the like? To an extent, this has been attempted in places. Here, for example, are some notes from 2019 related to activity in France:

Entire areas of production in the West have still collapsed, though, especially in textiles, footwear, household appliances, chemicals, timber, plastics and rubber. Thirty years of political passivity have produced a less rosy outcome than that promised by champions of pain-free deindustrialisation. France has had a trade deficit since 2004; the surplus in services does not compensate for the deficit in manufactured goods. Factory closures have turned whole regions into jobless deserts where technical skills have been lost. Service sector salaries, which were supposed to make up for job losses in industry, are on average 20% lower than those in manufacturing. ... Some French manufacturers have been bringing production back home — ski manufacturer Rossignol, Kusmi Tea, clothing companies Paraboot and Le Coq Sportif — which shows delocalisation can be reversed.4

And, here are some notes, again from 2019, related to the United States:

Dependence on imports has virtually eliminated the nation’s ability to manufacture large flat-screen displays, smartphones, many advanced materials and packaged semiconductors. The U.S. now lacks the capacity to manufacture many next-generation and emerging technologies. This is to say nothing of the human suffering and sociopolitical upheaval that have resulted from the hollowing out of entire regional economies. Once vibrant communities in the so-called Rust Belt have lost population and income as large factories and their many supporting suppliers have closed. The shuttering last March of the GM plant in Lordstown, Ohio—resulting in the loss of some 1,400 high-paying manufacturing jobs—is just the latest example. ... In terms of long-term competitiveness, the biggest strategic consequence of this profound decline in American manufacturing might be the loss of our ability to innovate—that is, to translate inventions into production. We have lost much of our capacity to physically build what results from our world-leading investments in research and development. A study of 150 production-related hardware startups that emerged from research at MIT found that most of them scaled up production offshore to get access to production capabilities, suppliers and lead customers.5

There are reasons to query this course of action. First, the never-ending Grow, Grow, Grow imperative of the modern capitalist model puts continuous pressure on people and resources. Second, it ignores the fact that, for decades, the West suffered from productivity challenges. Third, there’s the argument that many manufacturing jobs will, in any event, be taken over by machines.

Mind you, there are also arguments that industrial renewal should not be the same as the old, pre-outsourcing system. Here’s author Phil Mullan on the topic:

The alternative to economic malaise is industrial renewal. This does not mean trying to reverse the decline of coal mining and steel production, shipbuilding plants or car factories. It is not a quest to revive heavy industry and manufacturing of old. It is about the creation of new sectors for generating wealth across multiple services and goods. Economic renewal must embrace transport and energy, construction and communications, agriculture and healthcare, clothing and household goods, leisure and food.6

Mullan goes on specifically to mention autonomous transport, quantum technology and virtual reality as examples of the areas of development. An issue, here, that I have referenced in earlier posts, is that innovation tends to go to where the manufacturing takes place - a fact that increasingly favours China, India and so on over the Western geographies.

Two: do something different. Global + Degrowth.

The opposite of Growth has been labelled Degrowth, which only really makes sense when implemented in a global context. I mean, there would arguably be little point if Country A pursues radical degrowth while Country B retains carte blanche to Grow, Grow, Grow.

Jason Hickel is a champion of the Degrowth movement. He is eloquent and trenchant when it comes to putting his case. In Less is More he opens his argument like this:

This is not a book about doom. It is a book about hope. It’s about how we can shift from an economy that’s organised around domination and extraction to one that’s rooted in reciprocity with the living world. But before we begin that journey, it’s important that we grasp what’s at stake. The ecological crisis happening around us is much more serious than we generally assume. It’s not just one or two discrete issues, something that could be solved with a targeted intervention here and there while everything else carries on as normal. What’s happening is the breakdown of multiple, interconnected systems - systems on which human beings are fundamentally dependent.7

This breakdown, Hickel argues, is caused by capitalism’s obsession with continuous growth. You achieve x this year? You must achieve 2x next year … 3x the year after … and so on.

Which, perhaps, brings us back to the point about the emergence of the GCSL - the Global Corporate Super League. What does the Grow, Grow, Grow multiplication factor look like when a few corporations gain ever more scale and move up the list to become financially comparable with ever larger nation states? Who guards the guardians when the inevitable top-down bureaucracy, run by an inevitable new elite, gains ever more power? Who is John Galt?

Anyway, indications are that any suggestions to, say, India, that they might, for example, scale back their use of fossil fuels, would likely be met, in the short term at least, with angry rejoinders to the West: “You did it all so don’t tell us that we can’t do the same.”

Or is there a mixed model?

So, what’s it to be, Growth or Degrowth? Global or Local? Or, the other possibility, Neither?

I’ll leave this hanging and pick up the threads in the next in this series. And, yes, next time we’ll come back to - where else? - the Customer-Supplier Interface.

Aargh! by David Pinder

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