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December 5, 2012

The scale factor

The disclosure that multinational companies have been paying a fraction of what tax they owe should surprise no one. Their corporate DNA drives them to deliver ever greater value for shareholders – and little else.  But it’s also why so many commentators believe we are in the end-game of capitalism in its purest form.  Jerry Mander argues that we need to recalibrate the way we think about capitalism and begin to make distinctions along the lines of scale.


Jerry Mander, Resurgence Magazine, 1.11.12

Then there is the crucial matter of scale.  Most economists these days, the media at large and the general public do not make clear distinctions between large-scale domestic or global capitalism versus local, small-market capitalism.  The former operates in diverse, far-flung markets and regions, with extensive infrastructures, gathering resources or engaging in production and distribution, wherever on Earth they can do so profitably, especially after the boost provided by corporate globalisation after World War II.  Or else they franchise their activities broadly beyond their initial community.
Large national and global corporations – especially those whose stock is publicly traded – are obliged to see constant growth, constant profit expansion and the absolute primacy of short-term self-interest, no matter the social, political or environmental context or effects.  Making profits for shareholders is the primary, if not the only, legal and practical obligation of corporate structure.  If they do not succeed in that, businesses fail.
On the other hand, small-market local businesses have the option to operate in far different ways.  Private, small-scale, locally owned and oriented businesses that operate in single markets – especially those that are not listed by stock markets – are usually more directly involved in community life; their customers may also be personal friends or neighbours.  Such businesses can set priorities and retain options that large-scale capitalist enterprises cannot.  For example, privately owned, small-market businesses can opt out of any legal imperatives to continuously expand; nor do they have to pay dividends to anonymous or dominant shareholders.  This is also true of family or community-based businesses, as well as worker-owned and operated businesses, co-ops, and ‘not-for-profit’ corporations of various kinds.
Small enterprises will usually continue to seek profits, i.e. the excess of income over expenses.  But their smaller-scale and community-embedded ownership allows them at least the possibility to operate from entirely different hierarchies of value thatn their megacousins operating nationally or globally.  They can more easily avoid the intrinsic pitfalls that derive from serving the hungers of large-scale, growth-oriented, stock-market-driven enterprises.
This is not to say that smaller-scale businesses always behave morally or that they necessarily place the interests of community or Nature ahead of personal gain, but the smaller and more local that scale of the operation, the greater the opportunity for more pro-social, pro-community and pro-environmental values and an acceptance of limits to growth.
A family-run store, or a restaurant, or a local service business – even when it seeks a profit – is a very different entity from a national or global resource company or bank or manufacturer or hedge fund.  They are structurally and functionally different from large-scale or global capitalism, with mostly different motivations and drives – not really even cousins.
They should not both be called ‘capitalist’.  I think the word ‘capitalism’ should not be used to cover nearly the territory it now does.  If local entrepreneurs were the only ‘capitalists’ in the world, I would never have thought about this book.  They are not the problem