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Friday, 13 April 2012

Ok Dr Forskitt, now I get what you were saying!

Many thanks to Tom Joad for his comments, I have decided to respond by way of a full post to explain why Corporations are not necessary and perhaps are not even useful in the new world that many social entrepreneurs are trying to build from the ashes of the old which has died, but just has not accepted it yet.

Designed by many, available to all
At a competitive price of $25,00 or less if
you can find someone else to make it from
a freely available blueprint
There is absolutely no need for limited liability to exist, if you aren't prepared to take the risk, don't take it. Many of our problems now are specifically caused by people who could take risks with no consequences, that includes bankers, but also includes government employees (or did until the commercial lien came into play). In fact it includes anyone who hides behind Limited (or Vicarious) Liability, either as a director (or an employee).

Libertarianism simply removes all that rubbish and leaves you personally answerable for your actions, it therefore is I hope the way of the future as there is nothing like negative possible consequences to focus a mind.

It has taken me a while and a great deal of research, to catch on to the fundamentals of 'green' economics.

The current system of Corporatism has proven to be a failure, it has corrupted the free market through political means thanks to a largely complicit group of people we collectively term 'politicians' who accept donations and directorships in return for advancing the aims of the Corporation they accept the donation from.

The fundamental flaws in the underlying philosophy of the current economic system -

As a system which depends on infinite growth it must assume that there is an infinite abundance of natural resources, this we know is not the case, not only are there limits to the amount of certain resources available such as Oil, Gold, Food, Water but there is also a scaling cost of extraction which means that a fair proportion of the natural resources available, are too costly to extract to be 'economically' useful. This is the difference between 'peak oil' and 'total oil' reserves.

Under the free market system the price of a good is derived from the level of demand and the level of supply, if there is an infinite supply of these goods then the price can remain low.

However for certain goods there is an infinite supply - this includes legal and medical advice and all intellectual property. However the supply of these goods is artificially constrained by legislation. The stringent qualifications required in order to practise Law for example is not as much to 'ensure quality', as it is to 'ensure demand' and therefore allow supra-normal profits to accrue in legal practises. The market itself would ensure quality as the consumers would soon learn who was a capable lawyer and who was an incapable lawyer and it does not always follow the qualifications.

The vast majority of cases before the Court as resolved between the parties in out of Court settlements, admittedly the high price of Legal representation does usually help to focus the minds of the parties on resolution, but often the lawyers themselves will act in such a way as to prolong an argument unnecessarily and thereby maximise fees.

This also extends to the high cost of child and old age care, the cost is driven not so much by the actual work but by the high level of regulation and qualification required in this particular area.

On a simpler level still the reason the same pair of trainers which costs £3 to make can be sold direct from the factory for £5 or if you add a label to it saying Nike they sell for £100. They are the exact same trainers made by the exact same machines and people. The intellectual property of the brand adds a perceived value to a product only because £millions have been spent telling you that it does, and you believe it.

Now I can go to the same factories in Thailand and China as H Samuel and buy the same products (although I generally do not buy such poor quality goods) albeit at a slightly higher price, but still sell it at a lower price and still achieve a higher Return on Capital Employed. Small businesses are always more efficient than large corporations, of course I have less capital employed. Thankfully the jewellery trade is so old that there is nothing new any more, other than meaningless brand names, and unlike the fashion industry which simply recycles styles every thirty years or so, it takes up to a century for ideas to be recycled in the jewellery business.

Gold which costs around $1,000 per ounce to extract, has always been recycled and that includes burning floorboards to get the gold dust out, we are perhaps the greenest trade around. The important thing to note is that the value of the product is to a significant extent in the materials and not in the design or other intellectual property rights.

Now imagine if the same were true of car production, that you could simply pick your design then pay the materials and then someone to put it all together. The decision you would make would not be whether to buy Ferrari or Mercedes but which person you wanted the car design of your choice to be constructed by. Would your choice of car be based on brand or on look or on efficiency... the cost  would be significantly reduced as you would not be paying the premium for the brand name.

This is a change which is slowly coming into play, this is the new business model which has been chosen by Wikispeed in the development of their community based car design project. This is the business model which is supported by new methods of value exchange such as BitCoin. This is the business model which many software projects, such as Firefox, are developed through.

The model for the future may involve less personal greed and more co-operation, less protection of ideas and greater development through pooled knowledge which anyone can draw on and improve.