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Thursday, November 08, 2007

from Lawrence, Pub Philosophy Group, Sunday meeting: Is the march of technological and economic development a step in the wrong direction?

Dear friends,


This Sunday we are discussing a rather complex but rather important
topic for our times: Is the march of technological and economic
development a step in the wrong direction? I am sure that this is
something that affects us all.


In the meantime, I hope those of you in Madrid with a long weekend
holiday have a good time.


See you Sunday,

Take care

Lawrence

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Is the march of technological and economic development a step in the
wrong direction?


No, but. Technological and Economic development are not only necessary,
but maybe inevitable. In itself these should not create any serious
problems, however, what does create problems is how we manage these
developments.


Apart from the ethical implications of economic and technological
development there are issues relating to efficiency, scope, and purpose.
Of course, each of these aspects impinge on the other, and as a
consequences change the course each development follows and the
direction each takes. But first what do we mean by development and what
would be the right direction? Maybe the easier concept to explain and
understand is that of technological development.


In a way, we have an instinctive understanding of technological
development since technology is one of the very few characteristics we
generally have that other animals don't share with us. Sure, gorillas
and chimps use sticks to reach for fruit on trees or termites building
the equivalent of termite skyscrapers. But I don't think that we are
going to see, some time soon, gorillas building spaceships to reach for
the stars.


Why we need technology and why we need to develop technology is quite
clear cut: to exploit our environment more effectively and efficiently.
But as I hope to show, and as the title of the discussion suggests,
there seems to be a shift from genetic motivation or instinct to develop
technology. I will use genetic in a rather general meaning and not
necessarily in a strict scientific meaning.


We usually associate early technology with tool making, including
hunting and fighting instruments, building technology, agriculture and
even domestic use of technology. Consider this quotation from an article
in the Guardian (Falling price of gadgets fuels a worldwide buying
frenzy, Larry Elliott Friday October 26, 2007): "….. a piece of
audio-visual equipment bought for £100 in 1987 would cost the consumer
just £15 today. Over the same period, the cost of living has doubled."*


The article attributes this fall in prices mainly to technological
advances and globalisation, that also gave us different new products and
better quality products. Although, the Guardian suggests that this
anomaly between cheap consumer prices and the doubling of the cost of
living as a paradox, it explains this through globalisation and
technology. However, I would argue that there is indeed a paradox but a
different one from what the Guardian suggests. The paradox is that given
this technological advancement, why should the cost of living (in the
UK) double over a period of ten years? Whatever technology is doing it
is certainly not having an effect on how much it costs to conduct our
day to day lives.


One answer might be that although technology might be responsible for
better and different products, the price factor might be a result of
something other than technology: maybe profit or turnover targets rather
than say efficient management of raw materials. But another factor is
what the Guardian describes, but does not explain, as globalisation.
Officially ( whatever that may be) we are supposed to understand by this
as open and free access to all the markets of the world. The unofficial
meaning is of course, unhindered opportunity to move production to
centres with cheaper labour costs. Which might explain why the average
British person (or Chinese) is not necessarily better off with the new
advancements in technology. Technology might be the reason why some
consumer goods are cheaper than before, but it does not seem to
contribute to an overall cheaper cost of living. In which case, why not?
another thing that has not been said is that the retail price of a
consumer product does not include the environmental cost in producing or
disposing of that product. Of course, I am not criticising the Guardian,
they are just giving us the facts and their point of view, and for that
we should be grateful.


Hence, as far as technology is concerned, at the very least, we can say
that technological development is a natural ability we have inherited
and something humans are very good at. A question that is more
interesting is what technologies are being developed? And as a
consequence, we can then ask such questions as, why is it that people
have more access to a new t.v. set than medical attention; today
15.8percent of the US population do not have a health insurance cover.**


If technology is something that comes from a genetic impulse what
motivates and initiates economic development? I would argue that
"economic development" is a by product of evolutionary pressures,
precisely competition. Not only is competition the basic strategy for
survival, but competition is also an efficient way of managing markets.


What do we mean by economic development? Wikipedia distinguishes between
economic growth and economic development which briefly means the
well-being of the inhabitants of a region or county. However, it is the
creation of wealth that really matters and economic development can be
none other than the distribution of the wealth created in a given
society. Thus, if literacy is an indicator of economic development,
someone must have been spending money or resources to train children how
to read and write. And if no such resources are available then surely
the literacy rate wouldn't improve much. In other words, we cannot speak
of economic development without at the same time accounting for wealth
and wealth creation.


If technology is supposed to help us exploit our environment more
efficiently and competition is the most efficient and productive way to
create wealth, why is it that we see living standard discrepancies even
in developed countries? This is the point where philosophical analysis
changes into emotion politics. And usually demonstrated by the
invocation of the usual monsters of spending on weapons, capitalism
being exploitative and communism being oppressive and so on and so
forth. In other words not a very useful direction to investigate.


I take the view that economic development and wealth creation, in the
modern sense, is just an other aspect of evolutionary competition. And
despite the obvious advantages of competition, especially when compared
to bureaucratic creations, there are still a number of design problems
or flaws with evolutionary competition.


The first of these flaws is that the winner of a fair competition (not
illegal or fraudulent, but see further down) tends to take all the
spoils or at the very least the biggest share of the prize. If there are
six buffalos in a meadow and our tribe catches four of them for dinner
the tribe at the other end of the valley have only two buffalos left.
Other times the winner does take all, and this is well ingrained in our
mind set: from lottery tickets to Olympic Gold medals.


The second problem is that competition has an in-built tendency to want
more. We want more as individuals and collectively. We either want more
to be better off than our neighbours or more to improve our present
situation. I can either want a new two room forest hut either because my
neighbour has a two room hut, or because I can live more comfortably in
two rooms: more is the key here. As Oliver Twist understood very well.


Thirdly, having more can become in itself a commodity we crave for; in
other words we can become addicted to getting more in the same way we
can become addicted to other things such as television, medical
attention, drugs and tobacco. Why else would someone or some entity risk
their good standing in the business community for $20m illegal profits
when the entity is already worth $194billion? (see later for details)
Let us put aside for the time being that to maintain our status quo we
still need to spend energy and must have energy to spend; the physics of
thermodynamics has already explains this.


Although these flaws might not be causally linked they certainly display
a certain progression. Of course, in many cases the outcome of
competition is a clear cut result: win or lose. But in real life, there
seems to be an in-built safety mechanism for competition. In real life a
lot of people and countries cooperate and help each other; after all, it
makes sense as the evidence shows. Just because there is a clear cut
winner in a competitive race, the losers might still get to share in the
spoils, as market share, or to run again in an other race.


But the idea of wanting more is not as straight forward as the concept
of competition. We know that we cannot just want more ad infinitum: even
the universe is not that big. Thus the idea of wanting more is a priori
flawed and as a consequence something will have to give. Could it be
that in the march to want more we simply forget why we want more?


Furthermore, could it also be that "wanting more" is something (a
character trait) we inherited from our ancestors? Something they had to
develop in the early stages of evolutionary life in order to succeed.
The same could be said about enjoying the chase more than the prey. If
our ancestors didn't "enjoy" (maybe an adrenaline rush), or at least
like the hunt, they might not have been that persistent or that keen to
win against nature and the competition, and hence probable extinction.
Ask yourself this question: would you rather wake up in the morning and
go to work where your boss is nasty, the pay and conditions are bad and
the work is mind-numbing boring? Or a job were you are respected and
given every opportunity to succeed and your work helps you achieve
excellence and satisfaction? If you have a nasty job you can be sure
that someone is enjoying a good hunt at your expense.


Consider this second article which appeared in the same edition of the
Guardian as the previous article. (Don't invite traders to your
barbeque, Andrew Clark.***). I will summarise the facts: for the full
details follow the link. In 2004 a team of BP commodity traders in
Huston decided to gain price control of an otherwise esoteric commodity:
propane. This is the stuff that is used to fire barbeques and by seven
million poor and elderly Americans to heat their home.


By the end of February 2004 BP/the team (??) had a "dominant position"
of the market. This meant that they bought the gas for $0.8US cents per
gallon and sold it for an illegal price of over 0.9cents. An average
trade would be at least 10,000 barrels and each barrel has 42 gallons.
You do the maths. From this little scam, British Petroleum was fined
$303m, is to refund $53.5m to buyers and the team face and faced
criminal charges.


BP, as some other companies involved in similar ventures, was
financially strong enough to be in a position to buy itself a dominant
position in the market. Except that would have been an illegal position,
and they knew it. The company or the team only made $20m illegal profits
(thisismoney.co.uk, 29 June 2006) from this scam whilst BP reported in
their Financial Statement (As of 2004-12-31; Google Finance)
$194,630,000,000 worth of total assets. The traders themselves were not
exactly paupers, some of them held senior management position at BP USA.


What is important for us is that these although these errant companies
(BP, Enron and similar) eventually got caught the damage and the
hardship had already been done. Ask the pensioners from Enron. Thus the
strategy of making the competition pay dearly for their survival had
succeeded, even if at the end their scam backfired. Mind you by
competition I do not mean BP and other petroleum companies, but the
trader and the rest of humanity he or she were involved with. Moreover,
that some companies get discovered is evidence that wanting more cannot
go on ad infinitum; something has to give. The next question must surely
be, how many scams are not backfiring at the moment?


In a way, it is not the morality of these scams that ought to concern
us, but the effects such scams have on the effectiveness and efficiency
of businesses. No matter how wealthy BP might have been, a $303m fine
and $53.5m rebate is not exactly loose change; as any BP employee might
tell you. And this does not take into account the public relations
damage and market image of the company.


The take home message about competition and economic development is the
question: what plan B have businesses and governments have in place in
order to deal with the vagaries and flaws of evolutionary competition?


To conclude, there is nothing wrong with technological and economic
development. The balance between competition and cooperation is still a
reasonable one, and any efficient exploitation of the environment (not
distraction) is still a valid objective. What in my opinion seems to
have happened in recent years is that we have turned a disciplined march
into a sprint run and are discovering that our "genetic shoes" are not
exactly fit for this new endeavour. And as a result, some people are
finding themselves in some very sticky situations. Otherwise known as
global economic disparity, low incomes, child labour, criminal fines or
jail sentences.


Take care


Lawrence

* Falling price of gadgets fuels a worldwide buying frenzy, Larry
Elliott Friday October 26, 2007,

http://www.guardian.co.uk/business/2007/oct/26/10


** "-- According to the U.S. Census Bureau, the number of Americans who
are uninsured has increased from 13.4 percent in 1990 to 15.8 percent of
the population today." United Health Foundation November 05, 2007 05:00
AM Eastern Time (Press Release)

http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20071105005277&newsLang=en


*** Don't invite traders to your barbeque, Andrew Clark in New York.
Friday October 26 2007.

http://business.guardian.co.uk/onamerica/story/0,,2199784,00.html


from Lawrence, Pub Philosophy Group, Sunday meeting: Is the march of
technological and economic development a step in the wrong direction?

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