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Unlike his predecessors who worked in order to satisfy the known needs of known people, the new man produced for strangers. He also bought from strangers. His transactions were impersonal; he detached wants and motivations from identity – and standardized them.
Quantification invaded social intercourse. For the now-specialist producer volume of sales replaced social recognition as the source of personal security and well-being. For the new consumer price rather than custom became the paramount consideration in choice.
Price assumed magical qualities. Lowered sufficiently, it could transform one into many, and many into mass. A wave of the price wand could make almost everything produced – a luxury, a dedicated machine or substance, even the idea of exclusivity – end up a popular, mass market product.
The drop in prices could be astonishing: between 1779 and 1812, the price of cotton yarn in England fell 85 percent, and the price of the capital and labour that went into it by 93 percent (compared with a fall of 25 percent in the raw cotton price). Nearer our day, the cost of computer processing fell by no less than 98 percent between 1979 and 1998 (and vastly improved in quality, speed and reliability). If the price of cars had followed suit, a top-of-the range Rolls Royce would be selling for £840 instead of its 1998 list price of £155,000.
Not all prices fall. Gem diamonds have defied gravity for generations. Nor do the prices that fall come down consistently. Every business dreams of being or becoming the sole seller of its product and sole buyer of its inputs. For many the dream comes true to some extent, at least for some of the time. They launch new products which enjoy special status until challenged by something similar; they introduce new processes which reduce costs below the ruling average; they enter new geographical areas, find new or cheaper source of supply, provide customized products to individuals – all of which lend a quasi-monopoly position to the firm making the initial move, at least for a time.
Although the drive for monopoly status is all-consuming, its possession is precarious and usually short-lived. Even cartels collapse. Their members find it difficult to agree on what had been agreed; agreement itself creates new opportunities and inducements to break it. Outsiders, not party to the system of mutual threat which constitutes the cartel behave with little regard for consequences. If it is true, as Adam Smith famously averred, that ‘people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices’, the greater truth is that in the market system, to quote Scott McNealy, irreverent once-young chairman of Sun Microsystems, ‘it’s either have lunch or be lunch’. For the most part, competition rules.
The increase in efficiency implied by this downward slide in prices has been little short of miraculous. At the dawn of the market system, an average farming household in relatively favoured Britain kept two non-food-producing families at a modest consumption level. Today, a farmer in the US provides for 440 or more.
To increase productivity in this way requires unceasing innovation, both technical and organizational. Where increases in efficiency (or productivity) in previous modes of production were serendipitous on the whole, frequently unwelcome, and, especially, sporadic, raising productivity in the market system has been a constant, conscious and compelling endeavour for producers from the very beginning. Methods of production have been designed to absorb ever-larger doses of energy; materials and shapes have been designed for ever-increasing speeds and intensities. Processes have been reduced to ever-more-refined procedures.
Individual workers competent over a broad range of activities have been replaced with teams of narrow specialists whose individual competences exist only in their mutual support; human labour and control have been replaced with ever-more dedicated specialist machines.
These developments evoke a veritable sorcerer’s apprentice of large size and organizational complexity. The bigger the operation, the easier is it to cut costs; mix and match skills to changes in technical and market conditions; to refine the special purpose machinery and processes in which the ever-more intricate division of labour is embodied; to elaborate the internal communications networks which make these constant changes manageable, and the easier is it to sustain the special expenditure and organization associated with advertising and marketing.
While important, size as such is less important than relative size. A huge producer in one market would seem a tiddler in another: ASM Lithography, the world’s largest producer of wafer-steppers (or silicon lithography machines), with 40 percent of the market, employs only 4,300 people worldwide, while the gargantuan Toyota Motors company, employing 159,000, and worth nearly $100 billion on the stock market, produces less than a tenth of world motor vehicle output.
The drive for greater relative size feeds the imperative to grow that affects every economic unit. Private companies set themselves ‘growth objectives’ which determine their strategic choices, between diversification and specialization for example. Governments do the same for their slice of the market system. It feeds an advertising industry that turns wants into must-haves.
The growth that results from each producer’s attempt to achieve security through greater relative size is unlike any in history. In all other modes of living, economic growth, if it occurred at all, was through budding – replicating a largely unchanging basic unit. These modes of living certainly competed among themselves, and one often displaced another, or squeezed it into smaller spaces as, over the long arc of history, agrarian society forced back hunter-gatherers or nomads from its centres in the Middle East and Middle America.
Competition had a place within these systems too. Their members competed amongst themselves for resources – for land or for animal habitats. But it did not drive growth. If the systems grew, it was to relieve demographic pressure, or to take advantage of new resources.
In the market system growth is different. It arises from competition, not the reverse At the deepest level it stems from the mutual dependence of dispersed, autonomous economic entities whose only security lies in their ability to predict and guide, within limits, each other’s behaviour. Growth of the market system is the growth of a single organism, irreducible to its elements, not the addition of just another few cells to a homogeneous social honeycomb.
In a system driven by competition the space between optimum and maximum evaporates; sufficiency becomes a vapid concept. The growth of such a system is, in principle, unlimited.
This is not to say that it is planned or smooth. On the contrary, herd behaviour with its rushes and arrests is the norm.
This edited extract is from the section titled Consequences of Chapter 1 Market Society.
Last updated on 13 November 2019