After even more thinking about how to address issues of social in-equality, I updated the original article.  So here is the updated version.

Trickle Down Economics isn’t working the way it was intended and never did.

What’s really happening is more like the separation of Oil and Vinegar. The more you let an economy stagnate, the more the wealth floats to the top like Oil and ends up in the hand of the rich with less in the hands of the poor. But having all the oil on top makes terrible salad dressing. Separation continues until someone creatively does something about it.

There are two scenarios that we are seeing playing out (and a third scenario that could make a difference):
1) The poor can shake up the economy or,
2) The rich can shake up the economy or,
3) (The government can shake the economy)

The Solution of the Oppressed

Occupy Wall Street, riots in the Eurozone, and North Africa’s Arab Spring are all examples of how the oppressed tend to shake things up. Since their resources are limited, they use whatever means they have available to them. Rioting and demonstration is one tool. Their other tool, if they are lucky enough to live in a democracy, and wise enough to recognize myths of the economy, is to vote for representatives that actually support their interests. Here is an article that accurately dispels one of those myths and which also supports the Salad Dressing Theory of economics.

A Rich American Destroys The Fiction That Rich People Create The Jobs

(A note to be added. After attending a conference on Social and Economic Development, I am learning about a few other concepts which have been working for impoverished people particularly in the global south where many groups of women have been encouraged to work together to save small amounts of money each week (0.15cents/each) and gradually they learn business skills to be able to take this small amount of collective money and begin their own businesses and their own community lending programs without the benefit of micro-finance organizations. Although such efforts should be unnecessary in the global north, whether such collective efforts might help the poor in our communities to advance and have a greater voice is an interesting question. During their collective community meetings, the women learn not only to address financial needs of the community but also designate a part of their meetings for addressing social needs. In some of these groups, men have been allowed to participate as long as they don’t attempt to subvert the power of the women. )

Solution by the Wealthy

If the wealthy recognize the fundamentals of this principle (i.e. that the wealth always rises through the instrument of profit), they should have no fear in shaking things up.

In order for the economy to be revitalized by the rich, it has to be shaken to mix the wealth into the poverty just as oil into vinegar in salad dressing. Since, wealth naturally floats back to the top, there has to be a way of continuously pumping the wealth to the bottom members of society. Only then will they have enough money to spend to keep the economy moving.  The article above rightly points out that Henry Ford realized this principle and ensured that he always paid his workers enough to become his customers.

Another way, however, is through investments in the poorest sectors of society that benefit the poor in tangible ways. The following article is another example of that kind of mixing. Adidas is planning to sell a kind of Reebok running shoes in India for $1.00 using local labor and materials. At first, they may loose money but it will come back to them in the form of social capital and eventually profitable business.

What, Why: How can Rebook sell trainers for $1

(Note: One of my classmates rightly pointed out an interesting environmental issue with this, namely that if the trainers are built too cheaply or with non-recyclable materials, billions of used trainers will clutter-up land fills. Good point Greg, lets hope that Adidas contemplates plans for recycling, provided incentives for returning them, and thus reduces their material costs.)

Similar to the Ford example, the Tata Nano, a $2000 car, built for the masses in India, helps get families off dangerous motorcycles and into cars and is another great example of making products that the masses can afford.

(Note: The concept of having individual transportation driven by gas is ultimately not sustainable, so while I cite this as an example of creative economic stimulation that helps the masses, I actually hope that India and all other counties for that matter very quickly recognize the need for better designed communities that limit transportation requirements, improve public sector transportation systems, engage renewable power and utilize electric vs. gas vehicles. Are there any creative electric bus builder out there that wants to step up to the challenge with a solar powered transportation solution?)

If we want to look at solutions to many of the economic problems, the wealthier countries, companies and individuals need to create vital and thriving partnerships with the poorer nations and people to provide opportunties, goods and services which genuinely benefit the poor. As the poor benefit from wealth, the rich will also benefit.

The Government Solution

Government can play a role by building sustainable infrastructures, developing renewable energy powered transportation systems, investing in education and research and through taxation of wealth, wherever it is hiding, to redistribute some of it to the majority of the people in the world who are becoming poorer.  Higher taxation is  necessary especially if the wealthy are unwilling or lack the creativity to shake things up.

Sharing Ideas

If you agree with the Salad Dressing theory of Economics, please feel free to Share this article in whatever way you would like. Post the link, share through facebook, linked in, or Twitter or add to your bookmarking site.

Wishing you all good health and happiness,

Garth

Several years back, Nick Negroponte (of One Laptop per Child), began his quest to develop a laptop that was affordable for distribution to children in developing nations and which could use local wireless networking. While the program had it’s ups and downs, it did produce a positive result and assisted in helping many school children to have access to computers that were interconnected. What’s more important is that, in targeting a $100 laptop, he and other like him, set a benchmark for all laptop makers, who at very least, had to sit up and take notice. Bill Gates and others in the hardware and software industry at the time understandably were critical of the idea. They may not have believed he would reach this target, but they could be certain that he would try and this meant that the approach to driving revenues from software and hardware would need to evolve from a high cost per user to high number of users at a very low cost. And by setting this goal, a new paradigm was established for all hardware and software companies, especially those who wanted the program to succeed.

While we could have predicted the reduction in price of laptops anyway, as a result of continued exponential advances in technology, targeting $100 was, at the time, aggressive to say the least. Having said that, the only real question was “how long will it take”? At long last, several computer makers are building $100 laptops (netbooks) including Cherrypal and others albeit generally on an Android platform rather than Windows. 

After, more or less achieving the initial goals of OLPC, Negroponte is targeting a new $75 price point for OLPC based on a tough, ultra low energy, solar powered tablet computer with an 8GHz processor by 2012. Immediately critics of his goal cry foul stating the obvious, that he isn’t a technology expert and that an ultra low power 8GHz processer will likely not be available at such a low price by 2012. But they are forgetting the fact that this is a paradigm setting goal and, for Negroponte, I suspect it is more about setting the target than it is about his personal success at reaching the goal.  If anyone reaches the goal, the children and youth of the world are still the beneficiaries and Negroponte wins.

And, not to worry, at the same time Negroponte is announcing his goal, the  Indian Institute of Technology has already announced its’ intention of developing a $35 (about 1500 rupees) solar powered tablet which will be available for Indian students along with wideband networking at it’s 22000 universities. This goal is from a country with a 63% literacy rate and success in developing a $2000 car for the masses. What is beginning to emerge is radical life changing technologies that will not only revolutionize the fortunes of India, but of the rest of the world. Computing power and access to information will soon be in the hands of every child and every person who wants it and, I for one, couldn’t be happier.

What are the impacts on the world? » Continue reading “The 99 Dollar Laptop and the Impact of Technology on Poverty Reduction and Global Markets”

As I’m reading and studying trends related to various world issues, I noticed a few trends that gave me cause to ponder. Beyond speculation, these trends may also give us clues as to how we might organize our businesses to contribute to the betterment of the world.

For example, on reading the World Values Survey, there appeared to be a trend toward individualism and secularism until 1980, after which the values seemed to take a little bit of a reversal at least in most cases. While there was no discussion on this point in the chart, I have to wonder if there was a pause to re-think the issue of continued movement towards secularism and individualism.  

What’s even more interesting is that the Happiness Index taken by the World Values Survey suggested decreasing happiness in the US until 1980 (this same period of trending toward secularism and individualism) after which there was a reversal. The US happiness index also increased from 1980 onward peaking at 2006 during the Bush administration, although perhaps by that point with the anticipation of change on the horizon.

 Still, I have to wonder whether the reversal in trend toward secularism and individualism suggests. » Continue reading “A Reflection on Trends towards Happiness and what it means to Business”

Over the weekend, I had the great privilege of attending a conference on “Rethinking Human Nature”, an incredible array of scholars and activists who, rather than protesting in the streets, demonstrated, by their examples of dedicated service, through their studies and their occupations, their deep and abiding concern for humanity. The conference theme was about evolving and developing the capacities of the higher human nature.

Among the many brilliant presenters was a young lady who is working on her PhD thesis whose presentation was entitled “What Can Justify Duties of Global Economic Justice? Individual Responsibility, Human Consciousness, and the Oneness of Humankind”. Her name is Shahrzad Sabet. In asking the question, she began by sharing with us the globally accepted UN Universal Declaration on Human Rights. She the began to dissect the responsibilities for the implementation of these rights. To be fair to Shahrzad, I will state that the remaining text is my perhaps feeble understanding of the arguments she so simply and brilliantly presented and perhaps, at some point, I will have a chance to speak with her further to clarify or to refer on-line to her thesis work, but I can only say that after hearing what she had to say, I was completely overwhelmed by her convincing arguments recognizing that there really isn’t a minute to lose in beginning to bring this argument forward on a wide basis, and I am also quite convinced that someday this young lady will be amongst the Nobel Peace Prize winners because these same arguments will force all nations and all people of conscience to take action. Such action will come in the form of adopting laws and practices which will require all citizens of the world (or at least those who have the freedom to vote or make buying decisions), all business leaders and all government leaders to act forcefully in upholding these Human Rights by taking practical, direct and personal responsibility for implementing Global Economic Justice through their votes for responsible government representatives, those who will make the necessary revisions in government institutions, and in turn, through laws which will require all people to make these Human Rights a reality.

In nations such as Pakistan, Haiti, India, Indonesia and many others, billions suffer under the oppression of poverty, the lack of a suitable infrastructure, and through catastophic environmental impacts, while much of the world continues to enjoy their freedoms without paying much attention and governments pay immense amounts of money towards military spending and the expansion of environmentally destructive practices which only serve to further human suffering.

Her arguement goes something like this: » Continue reading “Individual (Legal?) Responsibility and Liability for Global Economic Justice”

What impact do businesses and other organizations have on the Environment?

Paul Ehrlich and John Holdren developed a formula for examining environmental impact stating that I = f(PAT) where I is impact, P is Population, A is Affluence, T is Technology. In other words, if we increase global population, which is inevitable, in order to maintain environmental impact, we must reduce either the Affluence, or create Technologies that reduce individual and collective impact. Brown and Garver changed the formula to I = f(PATE) and added the influence of Ethics. They also conclude that each of these variables have an influence on the others. Without going into a deeper description of the variables, we can generally agree that from a world population view, this view of human impact of the planet seems fatalistic because we know that the planet is already stressed beyond limits and on average, Population and Affluence are both increasing.

This would seemingly leave the entire hope of humanity resting upon the ability of Technology or a sudden swell of Ethics to decrease our net impact on the planet. Recent flooding in Pakistan disrupting the lives of 12 million people and leaving 4 million with food shortages, the worst in 80 years, mudslides in China, and a massive block of ice (260 square km and half the height of the empire state building) which recently fell off the ice shelf in Iceland into the water suggest that our climate is still shifting in uncontrolable and potentially dire directions. Ice falling off a land based shelf, by the way, does contribute to elevated ocean levels, cooling of oceans in the immediate vacinity of the ice, and vast amounts of fresh water (i.e. desalination) being dumped into the ocean and affecting ocean flows.

So here’s the question: Can we solve the issues facing us with only Technology and Ethics before our planet is irrepairably damaged and forces our hand on the factors of Affluence and Population?

The short answer is “probably not”! But there are ways in which Technology and Ethics can have an a positive impact on affluence and ethics and here’s how one idea of how a solution could unfold from an individual, business and global perspective. » Continue reading “The impacts of Technology and Ethics on Sustainability and Business”

My extended visit to British Columbia has enabled me to enjoy many of the blessings of the Vancouver Island. It is a place of tourism, boating and every sort of adventure, caving, sailing, kayaking, swimming, crabbing, whale watching, you name it. An island paradise to be sure. That having been said, there is a tremendous amount of traffic and obvious contributions to the CO2 levels which impact climate. After having taken part in some of these adventures, I have to ask myself, besides paying for carbon offsets, what would actually get me, never mind anyone else, to stop traveling up and down island between my parents home, my sisters homes and the many other points of interest the island has to offer. No question that, at least in my family, we are driving smaller 4 cylinder cars thus reducing fuel consumption over larger vehicles and we drive slightly older cars (my parents car is a 1992). Maintaining vehicles extends their life and reduces manufacturing and resource requirements. But even with many smaller cars on the road, their is a pollution problem in certain congested spots especially along Highways 1 and 17 and, even with the tremendous number of trees, the island traffic still contributes to the global CO2 problems.

It’s fairly clear that people are just not ready to give up their holidays, their retirement freedoms or their independent modes of transportation. Even those of us who are aware of the severe issues have difficulty giving up our carbon habit. A book called “Right Relationship” by Peter G. Brown and Geoffrey Garver discusses how we have, for the most part, failed to maintain a right relationship with the planet and suggests how we might re-establish such relationships. But if we are going to maintain “Right Relationship” with our planet while maintaining “Right Relationship” with our friends and our families (who often live some distance from us) and our own sense of well-being which requires exercising some level of freedom, we will need to take a different “tack” than just sitting at home. For those not familiar with this use of the word “tack” it is a method used by sailors when sailing against the wind, whereby they zigzag diagonally across the line of the opposing wind in order to reach their up-wind destination. Ironically, the other way of going up-wind is to motor. Even though sailboats for the most part are powered by the wind, most have on-board diesel motors for travelling in harbors where using wind power is unreliable. Yet another source of CO2.

If we imagine Sustainability as our up-wind destination (i.e. the wind of our personal freedoms seems to blow in the opposite direction). What are the “tacks” we might take in order to reach our desired destination? We want to arrive at a place where we are in “Right Relationship” with our planet and where we have the freedoms we desire. We want to get their without having to motor all the way and creating a problem for the planet and for future generations. » Continue reading “Sailing! An interesting tack on achieving Sustainability”

I was recently invited to Vietnam to participate as an Investment Consultant on behalf of potential large scale North American investors to review a development project in Yen Tu, Vietnam, a place of pilgrimage for Vietnamese Buddhists. My consultancy work in the area of investment and development is based on a simple philosophy: If it isn’t good for the world, it isn’t good for the courtry either. Coupled with a recent course on sustainability the whole effort had me pondering the best ways to encourage and increase sustainable international development which aids a country in reducing poverty without taxing the planet’s resources.

Development has the potential to do harm but can also be used to do good if it addresses the local needs in a sustainable way. But even high standards such as LEEDs doesn’t guarantee that the results will be positive. On the other hand, using investment opportunities such as Yen Tu to encourage Sustainable Development and the use of LEEDs standards will certainly help to create skills for the future. It increases local expertise related to sustainable building practices, especially when the work is performed primarily by local developers. And it ensures that newly acquired expertise stays local and gets used on future building projects.

From an investment perspective, one way is to encourage sustainable development is to share methods and approaches through active program participation, collaboration and educational programs which allow for project participates to learn new sustainable techniques, always bearing in mind that we can also learn something from the local participants. Some investors are interested only in getting a good return on investment and less interested in how the development work actually gets done. Savvy investors recognize that sustainable building practices bring higher returns, especially when looking a long term value of the project. (If you happen to have access to a few hundred million you’d like to invest, feel free to call me and I’d be happy to direct you on how to invest in this or other projects in Vietnam. After all, there is a very satisfying feeling when you invest in a project that makes a difference in the world while earning you a reasonable rate of return.) Given a secure revenue stream, which the Yen Tu project certainly promises (see details below), long term profits will always be higher when operating expenses are reduced, a natural outcome of lower energy and resource costs. It’s simple math.

» Continue reading “Sustainable International Development”

When I first met Susan McLennan, she was one of three speakers at a Life Entrepreneurship forum. As soon as I heard Susan speak, I knew that she was someone I wanted to learn more about.

The speakers before and after Susan told of their life stories, how they came upon some incredible personal hardships, how they overcame their hardships, what they learned, how they had subsequently built successful businesses and how they could help us in doing the same. They were terrific speakers and I truly enjoyed them.

But Susan took a very different approach. She started her presentation with just a sentence or two about her own background, quickly brushed past that part of the presentation, and went on to the story of her work as a PR specialist with her company Babble On Communications. » Continue reading “Susan McLennan, Sustainability, Social Justice and a PR Specialist’s Perspective”

(Re-published from April 17, 2008)

My recent ventures took be the the annual meeting of the CBBF (Canadian Baha’i Business Forum) where I was previously honoured with the opportunity to serve as a member of the board. The CBBF is an organization which promotes the principles of:

• Corporate Social Responsibility
• Sustainable Development
• Gender Equality in the work place
• Value Based Leadership
• Ethical business practices
• Consultative Decision making
• A New paradigm of work

One of our invited speakers for the CBBF Annual conference was David Patterson, CEO of Northwater Capital Management, an asset management organization with $8.5 Billion under management which specializes in handling large investments such as pensions and utilizes it’s “market neutral fund of hedge funds”.

The conference theme was “Doing Well by Doing Good: an application of Values Based Leadership”.

David was understated and yet inspirational in his presentation and shared a number of concepts that were divergent from standard organizational theory.

He shared the notion that doing good for the whole system (world, community, organization and family) rather than self focus was strongly encouraged in his organization. The fundamentals of his approach – what’s good for the system is good for the individuals in the system and not necessarily the other way around. While it is difficult to accurately articulate his presentation, as much of it was supported by images of the Northwater working environment and it’s employees participating in world supporting and family events, he also based his assumption and methods on the success that his organization has acheived by using this approach.

In addition to the support of world and community, the company encourages open consultation through the elimantion of status based work spaces, even David has the same desk as other employees, and they frequently call random members into consultations to get alternate points of view.

David’s talk should be one of those talks presented at the TED conference where new and inspirational ideas are presented in many fields of endeavor. There are many companies that could benefit from his leadership model.

Garth Schmalenberg
Executive / Relationship Coach