Monday, November 3, 2008

Insightful economics

Interesting story on the Daily Kos about the mergers being fueled by the government's quest to prop up every failing bank and investment company in the current economic downfall. I have always been rather suspicious of large corporations myself, growing up with the software industry and Microsoft's borg-like domination of the industry (and subsequent failure to provide much more innovation as of late).

The article brings up a book, Small is Beautiful: Economics as if People Mattered, a book I read many years ago for an Economics class at college, that looks at economics in a more holistic light than a purely statistical one. It makes me think of different strategies being pursued to improve standards of living in third world countries: wait for a large Western corporation to operate a strip-mining operation in the rainforest, or should you instead help local farmers by improving their access to global markets and improve the quality and yield of their coffee crops?

Which one is the better route? Which one has less adverse impacts on the environment, health and welfare of the people in the poor nation?

It seems to me that being small and nimble in today's globalizing world is not a liability, but an asset - particularly when it comes to transparency in the accounting department, flexibility in responding to a market (and not getting stuck trying to push a product line that is dying out - ala the Sport Utility Vehicle), and simply being a more humanizing place to work. This is anecdotal, but from all the people I have met, by far the ones that enjoy their careers more are the ones who work for the smaller, more innovative firms. I personally would hate to be one of the many hundreds of peons cut when one of the large "fortune 500" companies starts its regular payroll trimmings.

So why do we keep providing the incentive that generates big companies?

We seem to like bigger. There's something that's extremely satisfying about seeing companies expand, the number of employees increase, the bottom line fill up with larger and larger numbers. It not only scratches some deep psychological itch, it's practically the only way we measure success. Our measure for the standard of living is based on the amount of consumption, not knowledge or fulfillment or leisure. Our measure for efficiency is simply numbers over time, with little regard to quality, or pride, or environmental impact. Our measure for a company's success is simply size. After all, the Fortune 500 doesn't let you in because you're company is nice.

Whatever happened to compeitition?

Interestingly, 25% of all jobs in America are provided by companies with over 500 employees. (census)

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