A recent copy of New Scientist had a number of interesting articles on the current economic growth paradigm and how it is damaging to the earth which sustains us. A common theme is the issue of consumer demand and particularly, consumption of short-lived disposable goods. Disregarding the arguments for a service based economy, changing this paradigm would appear to present cash flow problems to businesses.
In essence, the perfect product for the consumer and/or for the environment is not necessarily the perfect product for the producer. Apple would be far less profitable if it didn’t have a new model iPod, iMac, iThing out every year to make the previous model a tech toy cum fashion accessory faux pax. This is the other side of the coin that needs to be addressed if talking about the dangers of the economic growth model driven by consumption.
For a real example, we need only look to forestry, where it is the lower revenue, high volume uses such as mulch, firewood or pulp for paper that drive significant native forest logging. These activities provide the cash flow that support any higher value added uses such as structural timbers and furniture. In the case of forestry, the negative environmental impacts can be addressed by sustainable, best-practice, plantations. But the aforemented forestry products are non-durable by nature, genuine consumables. Whereas, for white goods, electronics, apparel etc., they are – or are supposed to be – more long lived, durable products that have been manufactured for obsolescence. The solutions here then must be based around extended producer responsibility and ‘cradle to cradle’ principles. For an alternate revenue model, leasing is likely to fit the above scenarios more aptly than ‘buy-to-own’. So, we will lease cars, tvs, white goods and other semi-permanent durable goods which would provide cash flow to businesses. There are still issues though since innovation will be required and innovation usually requires significant investment in R&D, which often requires prompt repayment upon product launch from high purchase prices of goods (e.g. Sony Playstation 3). Under a leasing/cash flow model, this quick payback would be more difficult, but if the money for R&D was lent on a longer term basis, then the cash flow from operations would aim to cover the debt repayments.
Sorry, went off on a bit of a tangent near the end there and lost some focus… No time to tidy things up, paid work to do!
More info:
New Scientist, 2008, “The Folly of Growth: How to Stop The Economy Killing the Planet”, 18th October.
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