Monday, October 28, 2013

Local People, Global Business

A Sunday drive on the side roads from the outer ring suburbs of Cleveland to the heart of the city goes through a variety of neighborhoods. The outer ring suburbs are prosperous--some are enclaves of great wealth. The "inner city" is often a post industrial landscape of declining or poor neighborhoods, vacant lots and buildings.

The Garfield Memorial
From the mid 19th through the early 20th century, Cleveland was a powerhouse of industry, and Ohio was pivotal in American politics. Eight men who were born or lived in the state were elected to the Presidency. Cleveland was a center of the production of steel and the home of Standard Oil during the massive growth of the American industrial economy. The Lake View Cemetery in Cleveland serves as a sort of monument to that era. The photo at the left is President Garfield's memorial. J.D. Rockefeller is interred there as well.

The burgeoning industrial economy of Ohio paralleled emergence of industry all around the world. "Industry" is people working together to transform raw materials to a finished product--an activity at least as old as civilization, now powered by oil and coal. Where there are people, there should be work, jobs, etc... It's the people who need the stuff, and people make the stuff.

For example, where there are people, there are babies, and where there are babies, there's a need for diapers, so there should be a diaper factory not too far away. That same chain of thought can be applied over and over again with different goods and services, and the supporting industries that supply tools, machines and the like.

That's sort of what I'd expect the "normal" condition would be, the businesses making stuff that people need would be near the people, and grow to meet regional needs. However, what's happened is global businesses have displaced local industries. Really, the history of diaper manufacture tells the story. A large scale need is now met by mega corporations manufacturing on a large scale.

The backdrop in the diaper story is two world wars helped spur the growth of large scale shipping and industrial production and the type of organizations that can make use of tens of thousands of employees. At the same time, free trade agreements made it possible for businesses to seek the lowest cost labor and raw material sources. Global shipping organizations can connect a factory in China to every WalMart in the United States.

Saturday, October 19, 2013

Networks and Centralization: Part Three

Commerce in our time is a global phenomenon. Goods and raw materials move by ship around the world. Similarly money flows around the world with very little friction. As a result, manufacturing has mostly moved to the lowest cost, least regulated countries, which turned manufacturing powerhouses like the United States into formerly industrialized countries.

Presumably, there's enough wealth, and work, and things to do in every locality, region, and country. For example near my home in Ohio, there are several Amish neighborhoods. They are generally located in rural areas. The roads in the areas are built so cars can easily drive through, but are more suited to low speed travel with buggies, wagons, and on foot. The types and number of business per capita in the areas probably resemble what the United States was like before the widespread use of cars.

One of the features of the Amish areas is that many goods are produced locally. For example, within 30 miles of my house, (which is only about 10 miles from Amish areas), there are many more sawmills per capita than in cities. The sawmills serve local craftsmen and home builders. Additionally, there are many, many small businesses. The businesses exist because the people are there, which seems like a no brainer. Where people are, there should be business, industry, and manufacturing. More people, should be more business.

Albert Duce / Creative Commons
However, in the global economy, the businesses are not attached to any locality or group of people. They are structured to extract wealth from a large region and transfer it to owners, creditors, and shareholders. Retail outlets, like WalMart, Home Depot, or even Amazon, are international in scope built on international transportation systems and financial systems. Goods are delivered from a central system, only a tiny fraction of the store's sales are paid out as wages, and the bulk of the sales are hoovered out of the locality and transferred to owners, shareholders, and creditors around the world.

Where I live, this system exists side by side with the Amish economy. The Amish live the way they do by choice. Furthermore, the Amish actually take advantage of the global system, but don't seem to let it take advantage of them. The global economic system has been thrust upon people through numerous well known laws.

This trend, then, which seems to take advantage of and possibly been propelled by "forces" like economies of scale, was created according to a plan. The wreckage that's in it's wake is really the wreckage left by monopolists and businesses moving on from areas to take advantage of a new system. The people left behind were disenfranchised even when the businesses used their labor. The tendency toward centralization and monopoly tends to create monoculture economies in cities and towns. The picture above of one of the ruins of Detroit is a prime example of the danger of relying on one industry and on national or global markets that feed it.

So, back to the question--is it laws and customs, or is there some underlying phenomenon that drives centralization? Dude, it's laws.

Networks and Centralization: Part Two

As discussed in the previous post, a fundamental aspect of life is that nature limits available energy and power production. Many patterns emerge from this limitation. For example, in human settlements, like cities, where energy can be expended by machines or lots of people, roads, property, and buildings tend to be built following geometric plans like a grid, rather than along the energy minimizing routes like deer or pedestrians make through fields.

The logical pattern of these natural energy minimizing routes is a star network. Nodes are linked by one or several connections. Between cities, roads, like the US interstates, follow these energy minimizing paths. Even airports and air routes follow the hub and spoke system. The star network introduces strategic value to locations in the map of nodes and routes.

To see the network in strategic terms is to adopt the view of a predator, like a wolf pack stakes out a watering hole or along the paths leading to it, or a mountain lion hides in a tree overlooking a path to wait for a deer. Or, in terms that aren't flattering, it's the tapeworm that takes up residence in the gut of a cow, or the leech that waits in the watering hole to attach to the leg of an unfortunate animal.

In human societies, laws and culture govern the equivalent of the producer-parasite relationships. However, the effectiveness of the laws is limited (or amplified) by nature. In commerce the hard work, creativity, time, and energy of the builders of a company become a mere cash flow that's acquired by a financier. The builders of the company do the hard work of transforming and working material to make useful things. The financier extracts all the value with a few signatures and shuffling of paper.

Generally, businesses are organized to expedite their acquisition--as if they come with handles attached. Their "value" is represented in symbolic or paper terms--this is often a side effect of the accounting that's necessary to pay taxes. In the US, the laws shape them from the very beginning creating a hierarchical organization from the start, so when an acquisition is triggered, a few years of cash flow are brought forward with a loan, the principle divided among the owners, and the debt and interest transferred to the company and its workers.

However, if you look at the flow of information and energy and work within a company, the vast flux of that flow is through the workers, while the management and ownership are off on an island. However, they accrue the tapeworms' share of benefits. In some cases, the management or owners are utterly ignorant of the essential elements of the business and see it only in financial terms. Hence, the tendency of companies to grow larger through acquisition and the tendency toward monopoly and combination, and typically, eliminate redundant systems and workers to accrue more benefits to owners, seems to be at odds with this.

Here again, the principle of "inside/outside" is at play. The strategic view of the owners is completely at odds with the workers. The workers are, perhaps by necessity of the numbers involved, unable to participate in strategic decision making, or they're just duped.

So the essential question is: do these tendencies arise from natural laws, and represent underlying natural processes, such as network effects, or are they actually contrary to these effects and merely imposed arbitrarily by the laws and customs of men?

Friday, October 18, 2013

Centralization and Network Effects: Energy and Power

The fundamental governing principle of life is that time and energy are limited. Life boils down to energy, and the expenditure of energy--the physical quantity of energy expenditure is power, or energy per unit time. For most animals--people included--the ability to generate mechanical power is limited by physiology, which in turn limits the amount of oxygen that can be delivered to muscles per unit time.

Game Trail in Northeast
Ohio Woods
Various patterns emerge from these limits, for example, if you walk through the woods in Ohio, you'll find numerous game trails, which are basically roads made by deer. The deer follow the tracks of their friends and wear a narrow path between sources of food, water, and shelter. If you follow these trails, you realize, quickly, that the physical capabilities of deer are a lot different than people. Rather than following the gentle slope of a hogback up from a stream, for example, a deer path will go directly up an earth wall.

Sometimes you'll find trails that are made by pedestrians which cut through fields, or small stands of trees, or cut across a lawn. These trails exist because it is easier--that is, less energy intensive--to get from point A to point B using them, rather than bushwhacking a new trail, or following the orthogonal roads or sidewalks, and making the walk 41% longer. In a pastoral world, these human trails crisscross the landscape, however, in an industrial society, only small segments of these trails connect roads.

In an industrial society, machines overcome the limitations of human power production. The energy that's stored in a cup of gasoline exceeds the amount of energy stored in a cup of food by orders of magnitude, for example 31,500 calories versus 320 calories for a cup of ice cream. The power that's produced by a machine is, again, orders of magnitude larger than the power that's produced by people. A typical healthy young man can produce less than 200 W for a long time. A 5 hp lawn mower engine produces 3,728 Watts as long as the tank has gas.

Within a city or town that grew in the industrial era, roads are shaped by geometry and plans, because machines make it possible to shape the landscape, and there's a reciprocal relationship between the machines: the trucks and cars and bulldozers, and the roads. That is the roads must be large enough to carry a truck, because the trucks must be large enough to carry the machines to build the roads.

However, the human imposed geometry generally disappears at the city limits, and the roads linking cities and towns are more like deer trails.

Wednesday, October 16, 2013

Inside and Outside

In almost every human society there is a ruling elite and a mass public. Indeed one needs to look far and wide and comb through historical and anthropological sources to find counter examples. In organizations like the military, or business there is usually a top down approach to ruling, and decision making is centralized. Freedom of thought and action declines toward the bottom of the hierarchy at the base of the pyramid. (This pseudo-geometric analogy is not a good one. decision making is centralized because of network effects... more on that in another post.)

By mere nature, just the numbers involved and the difficulty of sharing ideas described in prior posts, information, thus decision making, is shared unequally. However, countless examples in history and present day experience show that it is often necessary for the elites to, at minimum, cloak their activity in a guise of myth and morality or to hide them altogether.

The United States is a prime example of such a society, it's split between a domestic constitutional republic that's ruled by laws and a global empire which is outside the reach of the laws of the nation and runs through the executive branch. A sizable portion of the resources of the nation of hundreds of millions of people goes to further the interests of a small group of people.

General Smedley Butler (1881-1940)
Smedley Butler provided insight into this aspect of American society. In War is a Racket he wrote:
A racket is best described, I believe, as something that is not what it seems to the majority of the people. Only a small "inside" group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of war a few people make huge fortunes.
He fought as a marine in US imperial/commercial wars of the early 20th century and furthered corporate interests.

I helped make Mexico, especially Tampico, safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefits of Wall Street. The record of racketeering is long. I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-1912 (where have I heard that name before?). I brought light to the Dominican Republic for American sugar interests in 1916. In China I helped to see to it that Standard Oil went its way unmolested.

Always, American wars are presented with the rhetoric of morality, security and national interest, while the actual speculative strategic interests or venal economic interests are not discussed in public. The benefits of fighting are conferred on a few, while the cost is borne by the public, the soldiers, and the countless civilians who are killed. Any official who might argue that a war is being fought to just advance the fortunes of a friend would be met with furious indignation.

In a very real sense, though, that indignation is a sign of a problem. The public's goodness is used against them. Very simply, because they are essentially "good", the people assume everyone else is too. They can't imagine that a person or group would manipulate them each and every day to simply steal from them, or to trick them into sending a son or daughter off to die on behalf of a corporation.

Saturday, October 12, 2013

Mental Colonialism Part Three

To wrap this topic up for now (Part One, Two) , the systems that affect day-to-day life of people, even the mundane things like how the banking system works, have one part of their foundation in the "real" world and one in the world of ideas and beliefs.

In many cases, the ideas that support the systems of the day have a monopoly on the minds of the people, and have a physical manifestation in the mass of humans that believe them. The ideas serve as a channel that directs a river of meat toward various ends. Where ideas and their associated systems hold a monopoly, the lack of competing ideas means that a failure of the dominant system brings total collapse rather than a quick transition to a new way of life.

The title of these three posts includes the word "colonialism"--which implies these ideas are imposed. That is, a person or group develops the ideas and imposes them to achieve a goal. It's easy to confer an almost god-like status on those who succeed at creating these ideas and systems, or at least set them apart from all other men by assuming that what they imposed was born from perfect clarity of thought and purpose, and that the thing they created matched their concept.

In more mundane terms, having "left the city", and creating a new thought, they returned to conquer by teaching (or violently imposing) their new ideas. While the impulse of the creator is toward freedom--a need to leave the city to simply think, invariably the manifestation of their idea is the gray sleepiness of the systems of the city, and their own reanimation as an undead, which is at the very least, an ironic fate.

However, this description of the thinker and society might be more of a myth than a reality. The role of understanding or consciousness in shaping systems and society might be less important than nature and the nature of human beings. That is, the mass action of people, and the shape of societies and systems is maybe an emergent property, where simple rules combine to create complex systems.

One example of this is the tendency of capitalist corporations to grow bigger and bigger through acquisitions or monopoly practices that destroy competition. One can view this as the result of ideas. There are historical examples where collusion and scheming resulted in systems that are favorable for monopolies to flourish. However, there are analogies to this in nature, specifically, where larger animals require proportionally less energy per pound than smaller ones. That is the metabolic energy is proportional to the mass of the animal to the 3/4 power, so an elephant takes less energy per pound than a mouse, so there is an underlying mathematical principle that tends to drive this outcome.

Perhaps the mixture of these two concepts provides a more genuine description of the true relationship of thought and the systems that people inhabit than one or the other alone.

Monday, October 7, 2013

Mental Colonialism Part Two

My first job out of college was at a small high-tech company--call it Crystal--that was bought by a French multinational corporation. I was surprised at how the purchase was financed because it seemed improbable--a loan was used to buy the company and the debt was transferred to Crystal, which paid it off over a number of years. The company's intellectual property, developed by scientists and engineers over a couple decades, its land and equipment, and its profits became the French company's property essentially at no real cost to them, because the company paid for the purchase on behalf of the French company. Really, it was like a magic trick.

A similar procedure is performed on a daily basis with land and houses. A home buyer puts a deposit down and obtains a mortgage and a deed for some property. In the simplest analysis the bank uses the buyer's deposit, and through fractional reserve lending creates the rest of the purchase price with nothing but a flourish of paper and pens writing signatures.

The items of value in the transaction are: the buyer's deposit, the mortgage payments (which are really the time and effort of the buyer), and the property. What the bank provides is as substantial as smoke or symbols and numbers. However, in the bank receives payments of the principal and interest for years, or gets the property in the event of a default.

This truly remarkable arrangement between bank, buyer, and property is made possible by laws, customs, and most importantly by beliefs and ideas that are widely held. These ideas, in fact, have a near complete monopoly on people's minds.

Saturday, October 5, 2013

Mental Colonialism Part One

A prevalent theme in literature is that a person needs to wake up or escape from their received ideas to think freely and to understand. Another metaphor for this is to leave the "city"--civilization and other people--to obtain freedom of thought and understanding. Yet another metaphor is that obtaining this wisdom is akin to a trial of physical pain and sacrifice. One of the implications of these metaphors is that free thought is at odds with "city", civilization, and the family. In the city, people partake in a system and fulfill a role, and there's a reciprocal relationship between ideas and these systems; the systems exist because corresponding founding ideas are believed.

Through most of recorded history, it's been dangerous to even discuss new ideas, or to question the ones that are in place. Human creativity and new ideas intrinsically mean that the way things are is not the only way to live, and may not even be close to the best way. The body of ideas that circumscribe the political and economic systems of the times drives competing ideas and beliefs to the fringe of public consciousness through physical violence, such as against the Cathars, or just by exclusion from canonical education.

These beliefs and the systems are yet another case, like the vampire and the cross, where the public confuses the symbol or an idea with a thing. In the United States a large part of the population confuses the bible with history. That is, the collection of borrowed and rehashed myths that became the founding story of one tribe is regarded as the universal story of all people. The story that's been assembled through scientific inquiry into history is less well known and ancient myths and old religions are all but forgotten, or are just academic curiosities, or fodder for comic books, or artistic memes that are "understood" by only a tiny sliver of the population.

Egyptian Horned Goddess Hathor
Hathor in Cow Form
The concepts and symbols associated with those religions would have been the stuff of day-to-day life of people living in the pre-Christian west, and probably regarded with the same level of confusion that Christians have for the cross as a symbol as a thing with magic powers.

The two images above show the depiction of the Egyptian Horned Goddess Hathor, on the left in "human" form, and on the right as a cow. Bountiful nature is given a fitting symbolic form--as a cow, and a set of horns. Likewise, the parallel male horned god, like Pan of the Greeks, or Freyr of the Norse, is found in many religions.

While these broad religious beliefs are interesting to think about, the more commonplace pervasive beliefs of day-to-day life have a substantial impact on the way people live, and on the organization of society. I'll discuss the concept of a mortgage and real estate ownership in Part Two.

Wednesday, October 2, 2013

Information Theory, Speech and Writing

Claude Shannon
Information Theory provides broadly useful concepts; it describes the physical limits on recording or transmitting data. Broadly speaking, information is change. It's present on the microscopic scale in the spin of electrons, the orbital states of electrons, and chemical reactions. On the large scale, it's present in the tides, the rising and setting of the sun, gravitational fields, and the like.

The concepts can also be applied to the problem of transferring thoughts from one human mind to another. The rate of data transfer through speech or writing is small compared to the rate of data transfer through visual media, like a video. However, writing or speech does not rely solely on the information that's present in the words. From an information theory point of view, speech or writing is like a compressed form of data transmission. It relies on information that's already shared between the speaker and the listener, or the writer and the reader.

Part of that shared information is cultural, taught since childhood, or learned through study. Part of it is inborn, recorded at the level of organs, cells, and DNA of our ancestors, and even in the inert matter that led to our most ancient single cell ancestors. That information comes from the universe. The part of that shared information that's encoded from the universe doesn't necessarily translate easily to speech, because it predates words and speech by millions and billions of years.

One of the fundamental problems of communicating ideas, then, is the shared experience of the author and the audience might not overlap, so, in information theory terms, the message is transmitted with lossy compression, and only an imperfect version is received.