Size Does Matter

Lots of touchy-feely schadenfreude to be found at Ben Jones’ excellent Housing Bubble Blog and in the nooz emanating from the erstwhile federal capitol of the country. Lawmakers are just beginning to perceive that maybe they ought to do something about the mounting inventories of empty homes, homes in foreclosure, and mortgages going kaput.

As usual, the real news has something to do with what’s /not/ being talked about. For all the billions being tossed willy-nilly at Wall Street fat cats, at automakers who persistently ignored decades of market signals, and at the very people who created the financial mess we’re now wallowing in, there’s almost no talk whatsoever of changing the business environment to make it more friendly to (and more survivable by) the many small businesses in our country.

Fully 80% of the workers here in the great United Parking Lot of America work in enterprises of 20 employees or smaller. Don’t know how long that ratio has been standing, but I’d guess it was more like 95% as of 130 years ago.

A lot of business activity is collapsing right now. Much of it is in the field of these smaller businesses which nonetheless make up the bulk of the nation’s wage-earning power, even if those bosses-of-20 aren’t rich enough to fly their own private jets to DC to beg for money, and even if they don’t make the listings in the Googlethorp-Smurfburg Stock Index. Many of these smaller companies had lesser roles in niches that the bigger businesses just couldn’t get into or (more likely) didn’t care to. The most direct version of this type of dependent small business is the mom-and-pop greasy spoon across the street from the GM factory.

Ironically, the whole excuse for the massive (and growing) current bailout program is that we had to rescue the finance industry because (they said) without finance there is no business activity. But instead it seems that the larger banks are just treating the money as BAU funding (business as usual) and are putting it into executive compensation, scheduled performance bonuses, and the like. See the following for a story of BoA cutting off a business:

http://www.nytimes.com/2008/12/07/us/07chicago.html?hp

Kunstler makes it very clear in The Long Emergency that without the bounty of vast streams of FF energy, and without safe convenient cheap trans- and inter-continental shipping, any business activity as we know it will necessarily be of a much smaller and more modest scale.

Without meaning to get into the sort of nyaa-nyaa prophesy so common on the internets, I’d like to propose that we’re going to see an interesting conjunction of circumstances, and rather soon, that has some of the necessary preconditions for the resurgence of small local businesses being the dominant part of any local economic activity. Millions will be unemployed by the time this thing bottoms out. Within the same time frame, scores of businesses, large and small alike, will have collapsed. We are already familiar with how the large corporate stores have squeezed out most every other specialty store larger than a common liquor- or convenience-store. When those larger businesses collapse, and with them all their many satellite stores (particularly the grocery stores) what other businesses will be around to provide for the most basic of necessities?

Will there be any enterprising folks ready to sell hoes, rakes, shovels, buckets, and heirloom seeds for common vegetables? Do you have a local blacksmith/fabricator capable of making something like a woodstove using available scrap metal? What will these people accept as money in lieu of the by-then defunct or devalued paper currency now in circulation?

What about paper, or some kind of printing place that can do a local newspaper? How about lumber? Does anyone run a tanning operation? How about weaving cloth and making the materials needed by weavers?

Oddly enough, if you take the “greed” part out of the equation, it’s not too hard to locally make most of the things that are needed locally. It might make some sense, economically, to send down to New York for pins & needles, pen nibs, specialized medicines, published books not available locally, etc, but a lot of the common goods can be made locally without too much of a setup needed.

Here’s the catch: no one’s going to enjoy materially extravagant lifestyles based on that kind of living. (Am not going to say this would be good medicine for most of us.) Folks would still have to haul their own water (or pump it from a well, if they’re lucky), chop their own wood (or buy it from someone local who did the chopping), and grow their own food (or buy it from someone who grew it locally, though this could turn into a big money sink after awhile).

It’s no exaggeration to say that despite our current set of appetites (ha, I’m totally guilty of being a net info junkie in that regard) our basic human psyche is well-equipped to our living locally our whole lives, never straying more than 20 miles from home, and never meeting more than a few hundred people at the most.

The small New England town where I live once had at least six different paper mills. We still have a family-owned small sawmill and a few of the original mill buildings from the heyday of the local mills. It would probably be correct to say that this town changed more in the past 50 year than it did during the prior 200+ years of European-originated settlement .. and the one big change has been the death of nearly all local enterprises.

Got future?

31 Replies to “Size Does Matter”

  1. Steel towns would be worse.
    I was always amazed at all the factories that used to be in Newcastle (Oz).

    Textile clothing and footwear area – now box malls.
    BHP steelworks – almost a golf course (apart from the coal loader that goes non-stop to fuel China)
    Honeysuckle goods yard near the wharf – the fucking ugliest block of units you’ve ever seen.
    All the light industry (motor rewinders, sheet metal fabrication) – you guessed it – units!
    The abbatoir – a charming McMansion suburb.
    Commonwealth Steel – empty warehouses.

    No wonder AC/DC don’t play there anymore.

  2. Yeah, as the cliché goes, the big dogs always eat first. I can’t disagree with you there.

    “our basic human psyche is well-equipped to our living locally our whole lives, never straying more than 20 miles from home, and never meeting more than a few hundred people at the most”

    I don’t know how well this squares with thousands of years of human migration and how this may have shaped the predilections of present day man. Maybe in a backhanded way you are positing that in just a few generations humans (for the most part) have cast aside their wanderlust, inclination to explore new frontiers, youthful desires to see the world, etc., and are now better suited for some form of neo-preindustrial low-energy travel-restricted existence. Personally, I can’t wrap my head around the never straying 20 miles from home aspect of what you seem to be asserting. Even if all I had was my feet to move me, I’d still want to see something of the world beyond the Kunstlerian fantasy village alluded to. It’s probably fair to say that, in the thousands of years prior to this century, migration — as an evolutionary influence — has put a lasting stamp on what we are (as inapposite as this condition may be to present conditions). To put it another way, I doubt that a generation or two of cheap energy, television and fast food has the power to reshape our species so rapidly or dramatically.

  3. Have to agree with Holmes on that one — I think there’s a certain wanderlust built into people, especially the young. It’s a good way to prevent inbreeding, if nothing else. I think it’s likely that many farm hands will take to the roads during the long warm spell between planting & harvesting. College kids used to hike Europe at least through the 70s, and even now there are companies that organize walking tours through American cities.

    You can cover a lot more ground on a bicycle, and I remember a co-worker taking a couple months bicycling out west.

  4. Hi FAR! Haven’t seen you in awhile. Let’s see, what have you missed… Johnny playing jazz, a rabbit running amok, and more people writing really great comments… I like it.

  5. Totally agree with Holmes and FAR (welcome back, BTW, FAR, you’ve been missed here).

    Our species is hard-wired to travel–it’s genetic! That’s why space exploration captures the imaginations of just about everyone. And, we might even get a Moon and Mars human occupation program going. If we can pull that off, it will probably keep us humans occupied for awhile, since space exploration is so challenging. There’s also inner space–the oceans.

    At some point, our machine proxies may even inhabit the outer solar system and the space in between. Getting out of this solar system will be a bitch, though, unless some smarties figure out worm-hole space transits to the other side of the Galaxy or into parallel universes. The sky’s not the limit!

  6. So .. what you guys are saying is that the successful entrepreneurs of the future economy will be the ones running roadside burger/taco stands for all the passing cavemen expressing their wanderlust?

    Hell, that’s what we have now.

  7. Nudge, the funny thing is that I’ve been writing about this kind of thing in some of the upcoming FAR Future episodes!

    Sorry about dropping off, everyone, I had a couple weeks of too much to do and ZK just kind of fell on the floor when I got back to a less frenetic pace. Not sure how the week’s shaping up just yet.

  8. Good morning FAR .. was just catching up on your latest installment. Great stuff. Maybe we should trade doom notes one of these days? JR is kind enough to let me fill up space here occasionally :)

  9. ya, there are a lot of real good reasons for groups to partition and move apart. everything from “idealogical differences”, to overcrowding, to being cast off due to overcrowding, resource depletion, genetic drives, greener pastures…. the list could go on.

    europe for example, agriculture tech lead to overcrowding wich lead to sedentary pasturalism wich lead to a 1000 or so years of famines war and butchering. when to new world opened up, wow, what a releif that was.

  10. it’s a mistake to think that the pasturalism of 19’th century america was some type of climax. it was no more so than the industrialism of the 20’th is, or was.

  11. in my mind, the cloest things to a climax in sedentary agriculture, as far as large examples might go, are europe and china. eurpoe relied on a combination of war and famine to achieve balance. luckily, they also had the plague to give them breathing room. china, from what i know, used famine, almost exclusively, to acheive population balance.

  12. ” when to new world opened up, wow, what a releif that was.”

    Yeah… a whole new world to rape, pillage and conquer in the name of God!

    “The most dramatic moment in subsequent European-Native American relations was the first encounter between the Inca emperor Atahuallpa and the Spanish conquistador Francisco Pizarro at the Peruvian highland town of Cajamarca on November 16, 1532. ….Atahuallpa was in the middle of his own empire of millions of subjects and immediately surrounded by his army of 80,000 soldiers, recently victorious in a war with other Indians. Nevertheless, Pizarro captured Atahuallpa within a few minutes…. and proceeded to hold his prisoner for eight months, while extracting history’s largest ransom in return for a promise to free him. After the ransom–enough gold to fill a room 22 feet long by 17 feet wide to a height of over 8 feet–was delivered, Pizarro reneged on his promise and executed Atahuallpa.” –Guns, Germs, and Steel

  13. “Pizarro and Cortez were such assholes.” –Doom

    Ya, Doom… unfortunately, pretty effective assholes! They were on a mission from God to convert or kill the heathens. Pizarro and his men (less than 200!) overtook/conquered Atahuallpa and his 80,000 soldiers on home turf.

    My random thoughts about this are that small groups of equally fanatic religious types on mission from God could certainly wreak havoc on life as we know it.

  14. “Pizarro and Cortez were such assholes.”

    I guess on such high-risk but potentially high-reward forays into the new world you would be best served by sending your most ruthless assholes. Ruthless assholes would cut through the bullshit, extract you a return on your investment in reasonably short order, and do so with minimal complications or baggage.

  15. “equally fanatic religious types on mission from God could certainly wreak havoc on life as we know it.”

    Behold the Shrub.

  16. Ya EE and SB, those two were especially effective for Spain, and made themselves and their country very wealthy. Cortez even had to fight his own countrymen to pull off the conquest of Mexico.

    To me, the most amazing thing was the complete capitulation of the Inca to Pizarro. The Inca had so many men, they could have just rushed the spaniards and knifed them at close quarters.

    Lucky for Pizarro I was not around as a paid military advisor for the Inca. We would have had them for lunch that day.

  17. I has always thought one of the things that held the Aztecs back from really fighting Cortez is the whole God thing.

    They had some myth about a god coming to take revenge for past sins and Cortez looked a lot like that guy.

    Hmm there is a similar story somewhere. Can’t put my fingers on it though.

  18. A little Grecian formula for the hair and mustachio, lose about 20 pounds, get some flashy spaniard 16th century armor, a nice tall horse, brush up on old Spanish lingo. I already know how to be a bloodthirsty, greedy, crafty bastard.

  19. Why yes, of course, Nudge. You can be sitting half naked on the ground by my side, grasping my leg and looking up at me wantingly, hopeful that I will show you the favor of granting your continued life, and maybe a nice seat at the evening festivities in the palace.

  20. Ralph, you appear to live a rich fantasy life and these days that’s probably just as good an option as any. But I could be wrong… maybe this sort of thing happens to you all the time. (In the spirit of assigning blame, Holmes clearly deserves to be chastised for failing to set sell stop orders. dave, sooner or later we’ll see how lucky he really is.)

  21. Hey this important. Someone tell EE. Down here on the Alabama-Florida border region this week and there are acorns. Zillions of acorns. They look like water oaks and diamond leaf oaks to me. But there are some red oaks and southern live oaks around too. Could be those also dropped acorns. Squirrels are busy and seem perfectly content and sane, unaware of the Great Acorn Famine of 2008 striking much of their breathren around the country. I’m taking it as some kind of metaphor for the future. But the squirrels don’t seem to give a shit.

    Side note. I also have a small pecan grove here and it however was barren this year. This is not entirely unusual though, especially as last year the crop was enormous, and it usually does vary quite a bit year to year. As it does with pecans. This has happened before.

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