Market crisis and industrial policy

One of my sparring partners is Kevin Carson of Mutualist.org. We do not agree on everything, I guess I’m still a social-democrat at heart, but I always find his thinking to be open and clear, and we find ourselves in our mutual preference for peer to peer dynamics, including on the level of economic transactions.

I guess the commonality is: if we control our own means of production, we are more able to voluntarily aggregate them in common production projects (or do it individually and exchange those goods).

Kevin’s particular perspective, as I understand it, is this: there is a strong connection between the current form of state-maintained, subsidized and protected ‘capitalism’ (which Kevin holds is the opposite of a true free market), and the size of the state. If it because the current system is so fundamentally flawed and crisis-ridden, that we need such a big state in the first place.

In this vision, stopping subsidies to unsustainable ‘bigness’, would be the best strategy not just for a more sustainable society and economy, but for achieving a more moderate state size.

Kevin Carson has explained this argument in detail, in a latest essay, available here.

It is entitled: Industrial Policy: New Wine in Old Bottles

Excerpt:

Their vision of how to restore “the economy,” naturally, amounts to a return to an economic “normalcy” defined by giant corporations and mass consumer society. The problem is, the present model of industrial production is about as sustainable as the Titanic. It came into existence only through government policies to subsidize the operating costs and inefficiencies of big business, and a regulatory framework (including “intellectual property”) to protect it from competition. And that industrial model is hitting a wall, a systemic crisis, in which government will no longer have the resources to subsidize inputs at the level at which they are demanded. The present industrial model, identified with GM’s Alfred Sloan and celebrated by Alfred Chandler, is based on enormous market areas and costly, product-specific machinery. The only way to keep the unit costs of such machinery down is large-batch production to utilize full capacity, and then worrying about making people buy it only afterward (commonly known as “supply-push distribution.”2 So Sloanist industry, under “Generally Accepted Accounting Principles,” produces goods to sell to inventory, regardless of whether there are orders for it or even of whether the product works, and has an astronomical recall rate.3 It follows a business model based on consumer credit and planned obsolescence to keep the wheels running. As Ralph Borsodi described it, the push distribution system required by Sloan-style mass production amounted to making water run uphill.”

1 Comment Market crisis and industrial policy

  1. Kevin CarsonKevin Carson

    Thanks a lot, Michel. As always, after I published the paper I thought of material I wished I’d included in it. Particularly the recent CPSIA legislation, which will effectively destroy small apparel manufacturers by mandating a $4000 safety test for each separate product line marketed. As Eric Husman described it at GrimReader, the small apparel business model involves designing a whole lot of different product lines, seeing which ones sell, and switching production to those lines on a demand-pull basis. The testing requirements essentially criminalize this model, so that the only companies that can absorb the cost are those that intend to switch to large-batch mass production in the lines that sell.

    In almost every case, the state intervenes to impose minimum overhead costs and prevent small-scale production using spare cycles of capital equipment people own anyway. Since high overhead is mandated, you can only enter the field on an all-or-nothing basis.

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