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openspace4lifeAll quotes are from Natural Capitalism: Creating the Next Industrial Revolution by Paul Hawken, Amory Lovins, and L. Hunter Lovins, from the end of Chapter 7 and the beginning of Chapter 8.
Revolution is indeed what the authors are talking about, but theirs doesn't really change the fundamental nature of the economic system...or does it? You decide. Among many elements of the changes they describe as already in progress is the idea of a new service economy, in which corporations don't sell you a product, they lease you the service the product provides. The company can even upgrade the product in mid-lease, or replace it with a different means of providing the same service. The goal is then to increase resource efficiency, perhaps even to the point of making some parts of a system obsolete, so that providing the same value of service costs the company less. For example, an air-conditioning company could reconfigure itself to provide insulation and building upgrades for passive ventilation, providing the same cooling effect at a fraction of the cost. Selling more stuff becomes the antithesis of profitability.
Part of the concept is that because the company decides how to provide the service and develops long-term, predictable relationships with its customers, it no longer has to keep huge stockpiles of products as a hedge against shifts in customer demand. The authors explain this stockpiling as a major cause of the periodic boom-and-bust cycle of capitalism, which was the clearest, least controversial piece of evidence Karl Marx used to predict capitalism's fall. "Statistically, capital goods wear out evenly year after year, but . . . Small changes in economic growth or recession cause larger shifts in [purchasing] behavior, because the surplus funds available for investing in capital goods represent the small difference between two large numbers -- total revenue and total cost. . . . In economic downturns, the small difference is squeezed, so more products are repaired and fewer bought. If the economy is strong, older goods are scrapped and replacements purchased. When revenues fluctuate moderately, purchasing gyrates vigorously along with such economy-moving figures as manufacturing, auto production, employment, money supply, and GDP growth."
But the authors are convinced that the service-leasing economy they propose can reduce these factors, as well as "the need for extra capacity to meet boom-year demands," both by "dematerialization," i.e. reducing the quantity of materials necessary to provide a service, and by establishing a "continuous-flow 'solutions economy'" where production is driven directly by customer needs known in advance, a variant on the Just-in-time production methodology. It's doubtful that this would lead to a perfectly steady, "post-cyclical economy," but it could go a long way toward proving Marx wrong.
But who needs dematerialization, anyway? say the cornucopians, who believe that any global resource shortages we may encounter will always be overcome by human ingenuity without major upheaval, wars, collapsing civilizations, etc. They often point to the 1972 report by the Club of Rome, The Limits to Growth, as the telling example of how us "doomsters" got it all wrong. In fact, the book's specific "projections" were not intended to predict catastrophe within a few decades; for instance, it projected that if demand for oil continued to rise at the then-current annual rate, the reserves of oil known at the time would be exhausted in 1992. And "although the book described 'present known reserves,' and how they increase over time through fuller exploration and better technology . . . some readers . . . got the incorrect impression that the authors thought the reserves known in 1972 equaled the entire geological resource base." The other simplifying assumptions could also prove false without invalidating the general point: "the annual compound growth in world demand for oil, which in 1972 was projected to stay around 4 percent a year indefinitely, turned negative in 1974 and then averaged only 0.9 percent for the next 20 years." Yet few people now deny that peak oil is in the not-distant future or even the immediate past.
The point is that while "the idea of resource limits is scoffed at today in many business and political circles and has fallen into disrepute," that's hardly a sensible reaction to the supposedly incorrect "predictions" from a book that happened to be called The Limits to Growth. A better reaction would be to move toward refocusing our economy on true resources: "The word comes from the Latin resurgere, to rise again. A true resource, in other words, is . . . part of a cyclical process," or in short, renewable. And if a company adopts the service-leasing model and maintains ownership of everything it makes, it only makes sense to recycle and "renew" the resources in that product when it wears out. Industrial ecology wins again!
Revolution is indeed what the authors are talking about, but theirs doesn't really change the fundamental nature of the economic system...or does it? You decide. Among many elements of the changes they describe as already in progress is the idea of a new service economy, in which corporations don't sell you a product, they lease you the service the product provides. The company can even upgrade the product in mid-lease, or replace it with a different means of providing the same service. The goal is then to increase resource efficiency, perhaps even to the point of making some parts of a system obsolete, so that providing the same value of service costs the company less. For example, an air-conditioning company could reconfigure itself to provide insulation and building upgrades for passive ventilation, providing the same cooling effect at a fraction of the cost. Selling more stuff becomes the antithesis of profitability.
Part of the concept is that because the company decides how to provide the service and develops long-term, predictable relationships with its customers, it no longer has to keep huge stockpiles of products as a hedge against shifts in customer demand. The authors explain this stockpiling as a major cause of the periodic boom-and-bust cycle of capitalism, which was the clearest, least controversial piece of evidence Karl Marx used to predict capitalism's fall. "Statistically, capital goods wear out evenly year after year, but . . . Small changes in economic growth or recession cause larger shifts in [purchasing] behavior, because the surplus funds available for investing in capital goods represent the small difference between two large numbers -- total revenue and total cost. . . . In economic downturns, the small difference is squeezed, so more products are repaired and fewer bought. If the economy is strong, older goods are scrapped and replacements purchased. When revenues fluctuate moderately, purchasing gyrates vigorously along with such economy-moving figures as manufacturing, auto production, employment, money supply, and GDP growth."
But the authors are convinced that the service-leasing economy they propose can reduce these factors, as well as "the need for extra capacity to meet boom-year demands," both by "dematerialization," i.e. reducing the quantity of materials necessary to provide a service, and by establishing a "continuous-flow 'solutions economy'" where production is driven directly by customer needs known in advance, a variant on the Just-in-time production methodology. It's doubtful that this would lead to a perfectly steady, "post-cyclical economy," but it could go a long way toward proving Marx wrong.
But who needs dematerialization, anyway? say the cornucopians, who believe that any global resource shortages we may encounter will always be overcome by human ingenuity without major upheaval, wars, collapsing civilizations, etc. They often point to the 1972 report by the Club of Rome, The Limits to Growth, as the telling example of how us "doomsters" got it all wrong. In fact, the book's specific "projections" were not intended to predict catastrophe within a few decades; for instance, it projected that if demand for oil continued to rise at the then-current annual rate, the reserves of oil known at the time would be exhausted in 1992. And "although the book described 'present known reserves,' and how they increase over time through fuller exploration and better technology . . . some readers . . . got the incorrect impression that the authors thought the reserves known in 1972 equaled the entire geological resource base." The other simplifying assumptions could also prove false without invalidating the general point: "the annual compound growth in world demand for oil, which in 1972 was projected to stay around 4 percent a year indefinitely, turned negative in 1974 and then averaged only 0.9 percent for the next 20 years." Yet few people now deny that peak oil is in the not-distant future or even the immediate past.
The point is that while "the idea of resource limits is scoffed at today in many business and political circles and has fallen into disrepute," that's hardly a sensible reaction to the supposedly incorrect "predictions" from a book that happened to be called The Limits to Growth. A better reaction would be to move toward refocusing our economy on true resources: "The word comes from the Latin resurgere, to rise again. A true resource, in other words, is . . . part of a cyclical process," or in short, renewable. And if a company adopts the service-leasing model and maintains ownership of everything it makes, it only makes sense to recycle and "renew" the resources in that product when it wears out. Industrial ecology wins again!
