Fractal Economics

After reading Parke Bostrom's excellent critique of my post on Entrepreneurial Humanism, I looked up "anarcho-capitalism" on Wikipedia, and I agree that there are some very close parallels between the two.

Most particularly, I agree with the statement attributed to Murray Rothbard, a leading philosopher of anarcho-capitalism: "…the capitalist system of today is, indeed, not properly anarchistic because it is so often in collusion with the state."

This cuts to the heart of my deep distrust of capitalism as it exists today.

The way I see it now, when corporations reach a certain level of assets and cash flow, their power over the government (through lobbying and campaign contributions,) and over the marketplace itself (by muscling through legislation that favors their interests,) creates Mussolini's definition of Fascism: "Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power."

But even if we could make laws that reduce this corporate influence (which I doubt, given just how much power the corporations really do wield,) it would at best only limit the corruption, not solve any basic problems.

I truly believe that we must come to grips with the basic human conflict of individual vs. collective good, and that this can only be done through self knowledge, self discipline and conscious cooperation, not legislation or other forms of coercion.

Reaching the point where enough people have resolved this conflict to create a culture of cooperation will, in my belief, be as great a leap in human evolution as the emergence and success of the Cro-Magnon brain that replaced the Neanderthal brain.

It will require re-defining what terms like peace, prosperity, well being and contentment mean to us as individuals, re-structuring how we connect and interact with people in our daily lives, and re-structuring the social and economic institutions that create the larger landscape in which we live.

In creating a socio-economic system that supports this evolutionary leap, I believe that the workable answer to the corporate capitalism/fascism we have today is "fractal economics": an economy based on small to mid-sized businesses applying a common set of ethics and principles, operated by employers and employees who are applying these same principles in their daily lives, and serving a customer base also applying these principles in the use of their purchasing power.

[I'm using the term "fractal" here as an interpretation of fractal geometry: " 'A fractal has been defined as "a rough or fragmented geometric shape that can be split into parts, each of which is (at least approximately) a reduced-size copy of the whole," a property called self-similarity.' " (Source: Wikipedia) In fractal economics, I'm reversing and expanding this definition: "An individual unit having a certain shape and properties, which combines and interacts with other units having similar shapes and properties, to form a larger unit with the shape and properties of its smaller units. This larger unit can combine and interact with other larger units, with each larger unit embodying the basic shape and properties of the smallest units."]

Obviously I've presented this in sweeping and idealistic terms. I think it's important to do that at this stage, to allow ourselves to be inspired by the possibilities of real change - fundamental change - rather than slapping more bandages on the systemic cancers of our culture.

Turning these ideals in something that actually works has to start somewhere, so I'm putting this model forward in expectation that others will help to identify its strengths and weaknesses, contribute new ideas, and pull it together into something that we can put into action.

The vision I'm seeing is composed of three interdependent components: pro-active consumerism, fractal business design, and fractal money. These three components also represent phases of the implementation of entrepreneurial humanism through fractal economics, each step creating the foundation for the next step.

Pro-active Consumerism

This is the absolutely essential core of fractal economics, without which no other component can function.

It is dependent upon the following hierarchy of assertions:

1. If we are to divest the power to control our lives from government and corporations, without creating other institutions that do the same things and then complaining about how they control us, we must take up that power ourselves.
2. In taking that power, we must also take personal responsibility for doing the beneficial things that government and corporations are doing for us now. This means that most of us are called to invest time, energy and money differently than we are currently investing them.
3. In order to create an economy that works for most of the people most of the time, we must invest our time, energy and money in re-creating the marketplace from the ground up. This means moving from a 'push-based' to a 'pull-based' market.

The push-based market is dominated by corporations dedicated to generating profit without regard to the impact on human beings and the world in which humans live.

Products are created on the basis of their ability to generate sales, and then a lot of creativity and money goes into convincing the public that we need this, we want this, we have to have this, it will make us feel cool, sexy, smart, powerful, beautiful, connected, loved, etc., while ignoring, denying or minimizing the consequences that using or consuming the product actually brings.

(The soft drink industry is perhaps the quintessential example of this. According to information found at http://www.everyday-wisdom.com/soft-drink-consumption.html the National Soft Drink Association reports that average per-capita consumption of soft drinks in America has reached 600 12-ounce servings (56 gallons) per year. In males between the ages of 12 and 29, the average is 160 gallons per year. [When I attempted to verify this information at the NSDA website, I found that it's a closed, members-only site, as is the American Beverage Association's site.] The official website of the US Dept. of Agriculture provides a report strongly linking soft drink consumption by middle school children to obesity and type 2 diabetes. According to the American Diabetes Association, 8.3% of Americans have diabetes, and almost 25% are pre-diabetic, with the numbers still rising.)

The ethos underlying this mode of operation is some variation on "Hey, we're here to make a profit, that's what business is about, it's not our job to decide what's good or not good for people, or the world. We sell, they buy. End of story."

And in my belief and judgment, most of that ethos is absolutely correct!

It's our job to decide what is and isn't good for us, our job to decide what we will and won't buy, and why we do or don't.

In the pull-based market, consumers do take responsibility for what we buy and from whom, for the impact of our spending/consuming habits on our own lives and those around us.

In fractal economics power must always be accompanied by responsibility (and vice versa,) because the properties of the larger structures always equals the sum of the properties of the individuals involved.

If we want an economy that works for most of the people most of the time, we must have a majority of individuals who work for most of the people most of the time - not to the exclusion of their own profit, but in ways that recognize a level of mutual inter-dependence.

I propose that we (consumers) establish a network of affiliated organizations specifically to bring together, educate and empower consumers in taking control of, and responsibility for, our economy.

I propose that we call the parent organization the American Consumers Union, the local affiliate the Humboldt Consumers Union, and that we create and copyright/trademark logos for them right away.

I propose that we link these names and logos to copyrighted documents titled "The Bill of Rights & Responsibilities of the American Consumers Union" and "The Bill of Rights & Responsibilities of the Humboldt Consumers Union".

I propose that these documents be similar to the following:


The members of the American Consumers Union are agreed that the corporate-dominated American economy of the 20th and early 21st centuries is unstable, unjust, and hugely benefits a small minority to the detriment of the vast majority.

We are also agreed that changes needed to bring about a more stable and just economy (one that meets the needs of most of the people, most of the time,) cannot be legislated or coerced. It can only come about through the cooperation of citizens who recognize that what we buy and from whom impacts everyone around us. We must be willing to purchase carefully to make that impact a positive one, and willing to pay a higher price (and where necessary, to make do with less,) in order to bring about a more stable and just economy.

We declare the following rights and responsibilities, and declare also our determination to put them into practice:

1. We have the right and responsibility to organize and consolidate our power as consumers, to set standards and specifications for the goods and services we desire, to cooperate with businesses to deliver these goods and services at a reasonable profit, and to reward businesses that do cooperate with our customer loyalty and support.
2. We have the right and responsibility to purchase products that are well made, designed to be durable and repaired rather than discarded, and to pay a reasonable premium for this quality and durability.
3. We have the right and responsibility to purchase products that, throughout the cycle of manufacture, use and release, are supportive of the planet on which we live and depend, and to pay a reasonable premium for these products.
4. We have the right and responsibility to exercise a hierarchical preference in purchasing locally, regionally and American made products, to support family, small and mid-sized businesses over large corporations, and to pay a reasonable premium in giving this support.
5. We have the right and responsibility to purchase from businesses that pay employees a living wage, provide health care and retirement benefits, and to pay a reasonable premium in supporting these businesses.
6. We have the right and responsibility to do business with local credit unions and banks, to keep our money within our communities rather than exporting it, and to accept that sometimes we will receive a lesser short term profit from investing in this way.


By recognizing that how and what we buy as consumers directly impacts how and what we earn as employees or entrepreneurs, by cooperating with other consumers and businesses to achieve a workable balance of personal and community prosperity, we create a very different marketplace from the existing, winner-take-all, corporate-dominated killing fields.

By doing all this under the banner of a clearly defined set of rights and responsibilities common to all, and linking these rights and responsibilities to clearly recognizable logos, we can tap into the deep and powerful desire for change that has been building up in the shadows of America until the Occupy Movement gave it voice.

I think it's vitally important to keep two things in mind at this point:

First and foremost is getting something in motion as soon as possible, rather than trying to hash out every possibility and detail before we start.

Secondly, the purpose of taking the first few steps isn't to make the changes we want happen right now. It's about creating the framework and momentum of cooperation, getting face to face with consumers and businesses, making incremental changes in our own spending/purchasing patterns within this framework, and documenting and publishing the results - however minor those results might seem.

The biggest hurdles in creating positive change are always inertia and skepticism.

Inertia is why it's so important to go from doing nothing to doing something, however flawed it may prove to be, as soon as possible. (Also because the widespread discontent expressing through the Occupy movement will turn toxic, ugly and violent very quickly if it isn't given a positive outlet.)

Skepticism is why it's so important to document and publish. Every small success builds the confidence to produce more small successes. A small group showing the world five small successes will almost certainly become a larger group, and will show the world five larger successes.

Where to start?

Something do-able, something non-threatening, something that lends itself to business/consumer cooperation.

Example:

I'm a big fan of Casa Lindra salsa, made in Arcata (Northern Humboldt County, CA, six miles north of where I live.) The cupboard under my kitchen counter is filled with stacks upon stacks of plastic Casa Lindra containers, which we use for food storage, but we still put stacks and stacks of them in the recycle bin each month.

I think it would be relatively easy to organize a group of Casa Lindra customers who would like to buy their salsa in bulk, and to approach Casa Lindra with a proposal to make this possible.

I also think that Casa Lindra would be receptive to approach by a group of customers who are already buying their product regularly, who have come up with a plan, and are pledged to do their part in making the plan work.

This, to me, embodies the very heart and soul of pro-active consumerism: Consumers deciding what they want and how they want it, coming up with a plan, approaching business(es) with the plan, and committing to doing their share to make it work.

With this humble beginning, I can imagine a functioning network of local chapters affiliated through the logo and the The Bill of Rights & Responsibilities of the American Consumers Union in two to five years, and a functioning national organization in 10 to 20 years.

As the numbers and clout of the organization grows, I see the ability to support small and mid-sized businesses in providing good pay and benefits for employees becoming a reality, and this mutual support and cooperation leading to…

Fractal Business Design

This phase of fractal economics is less thought-through in my own mind, but it starts with a trademarked/copyrighted logo and mission statement similar to the bill of rights and responsibilities above, to be adopted and used by each participating business.

The most crucial aspect of this concept is to have statements equivalent to the following included in the core mission of the business itself:

1. The commitment of this business is not solely to provide profits for its owners, nor solely to provide living wages and benefits for its employees, but to provide both in mutual cooperation and support.
2. The commitment of this business is to provide products and services that meet authentic needs, do what they're supposed to do, and to work closely with customers to ensure that this is so.
3. The commitment of this business is to provide our products and services in ways that support the planet on which we live and depend.


The general idea is that businesses with very closely aligned mission statements will be better able to cooperate, with each other and with consumers. (Especially consumers with a closely aligned mission statement of their own!)

As the movement grows one benefit will be that affiliated businesses can employee/recruit people who belong to the American Consumers Union, which will not only provide an unusually cooperative and aware work force, but also an unusually cooperative customer base for affiliated businesses.

As growth continues, and the cooperation between consumers and business increases, it will be possible to create businesses with a list of products and services desired, and a list of customers waiting to buy them. This will reduce or eliminate the need to allocate a significant part of cash flow to advertising, and reduce losses from unsuccessful products.

This level of business and consumer cooperation will also make it possible create consortiums of small to mid-sized businesses, which will reap the benefits of economy of scale and the bargaining clout of large corporations, without their inflexibility.

For example, with a loyal customer and disciplined customer base, ultra-efficient cars could be produced using parts from relatively small contractors, assembled in relatively small local/regional plants, and pre-sold to customers who know exactly what they want. The price to the customer might be somewhat higher than the same car produced in one gigantic plant in Michigan, but the customers aren't just looking at the bottom line. And if customer demand drops off, the participating businesses can cooperate with each other and with customers in scaling back production, and/or creating and providing different products. This is all supported by customers whose loyalty is to the companies and their core values, not just the products.

Obviously there's a lot yet to be worked out, and I'm going to take my own medicine and post this for feedback rather than trying to hash it all out first.

Blessings to all,

Bob