Long before the current global banking crisis I was concerned about the sustainability of the global economy.
Take the music industry for example.
The “Big 4″ record labels are behind about 80% of music sold globally. When the hundreds of small labels they bought up to become these huge conglomerates were independent, they managed to make a profit, yet these huge corporations are always pleading poverty, and trying to merge with each other even further.
Of course they blame illegal downloads for their plight, sure enough it must be eating into their sales, but consider the fact that a small place like Liscard even has a Woolworths, WH Smith and Asda with fair sized CD racks. These stores wouldn’t have these racks if they weren’t shifting a reasonable amount of product, and people in Liscard also have the choice of buying on the internet or going over to Liverpool or Birkenhead. If so many CDs are sold in such a small place, consider how many are sold across the entire planet.
Considering that each of these companies is behind about 1 in every 5 CDs sold, and they cost literally pennies to produce, most artists other than the huge ones don’t get particularly good royalties, even when you strip out the costs of distribution, warehousing and retailing, why can’t these companies with such a huge market make money?
Mind you when the likes of EMI hand out silly money to Robbie Williams, when his novelty value was clearly at an end, and he was never going to crack America, so maybe no wonder they have so many problems.
It’s a similar story in the car industry. There are about 7 or 8 major global players, just look at the number of cars on the road in Liscard (most of them less than 10 years old) that originated from one of these manufacturers, and project that across the planet. How on earth can they have so many financial problems?
If such giant corporations with such a stranglehold on global markets cannot make a profit, who can?
It seems to me that this constant pressure on companies for growth, is ultimately destructive.
I was blogging yesterday about the sheer madness of how British dairy farmers are being forced out of the industry at a rate of 2 a day, and we are having to pay a premium to bring in fresh milk from overseas at the rate of a million pints a day, because the handful of all powerful supermarkets have abused their position of power to bully the price down to an unsustainable level.
My friend Steve was blogging recently about obsolescence being built-in to products. The fact that successive models of mobile phone from the same manufacturer have different plugs to make them incompatible.
Indeed the mobile phone networks positively encourage us to upgrade our phones every 12-18 months, when in my opinion phones haven’t improved in a worthwhile manner for the past 4 or 5 years. All I want to do with mine is make and receive calls and texts!
I’ve blogged estensively about offshore outsourcing. It’s not that I’m against improving the lot of developing nations, quite the opposite. But the reason that these jobs are moving is purely down to greed, the fact that desperate people will work all hours for a pittance, and lax 3rd world governments will turn a blind eye to human rights abuses.
I saw the effect of outsourcing first hand when I was working in London. We used to get around a dozen CVs when we advertised a job. We were a small firm with not a lot to offer really. But after outsourcing started to take hold, we were getting over 200 CVs for each vacancy, a large number of whom put the reason for leaving as their job being sent offshore. Indeed, many of them were sent to India to train up their replacement before being made redundant.
The problem with all this came to me in a throwaway comment in an interview with a girl who works in the Chinese factory where Hornby trainsets are now manufactured.
She works a 12 hour day, 6 days a week, as a Quality Assurance person. Indeed she spends so long looking at model trains that she has problems with her eyes. She lives in a dorm with 60 strangers, with a simple bed and bedside cabinet for her belongings. Half of her meagre wages goes to pay for her dorm.
The comment in question was that she dreams of being able to buy one of the train-sets she helps manufacture when she has her own children, but it’s an impossible dream as she would have to save up for 3 or 4 years to buy one.
Some say that wages will climb in China when the economy gets going, like they did when Britain was a low wage economy.
The fundamental flaw in this argument is that manufacturing is much less labour intensive than in Victorian times, the population of China is so huge it’s hard to see demand getting to a point where there will be a shortage of labour and wages will rise, particularly when the people who manufacture the goods cannot afford to buy them themselves in order to increase demand.
The media are alarmist about everything to the point where we now take it with a pinch of salt. But in this case they were being alarmist with good reason.
Whereas a few years ago it was mainly entry level jobs being outsourced, now that a whole wave of offshore wokrers have a few years experience under their belts, even people with 20 or more years experience are now starting to find their job is under threat.
Whilst there has been no mass unemployment yet (at least according to government statistics) a downturn will accelerate the movement of jobs away, and we could get into a vicious circle where with slowing demand, more jobs are outsourced, the people doing these jobs have less spending power so demand is yet further reduced.
I don’t believe the current crisis is simply a crisis of confidence, I think there are a lot of underlying faults in the global system that need to be addressed, and we need to return to basic principals such as a fair days work for a fair days pay, and move the focus away from profits and towards quality of life.
And by that I mean REAL quality of life, not the ability to buy the latest new and improved mobile phone, or the new album by some X-Factor act.
