Will the 21st century revive family businesses?

Will the 21st century revive family businesses?

Yeomanry making a comeback

Phillip Longman | Friday, 8 January 2010 Mercatornet

For reasons of technology, demography, culture, and efficiency, big is no longer necessarily better. Will the 21st century revive family businesses?

Two years ago in Warsaw, I had the great honor of speaking to this Congress about a global phenomenon that has come to be known as “The Demographic Winter.”  A documentary by that title, much of which was filmed at the last World Congress, has done much to further spread knowledge of the reality I was addressing.  But for those who are still unfamiliar with the Demographic Winter,  I will briefly describe it here before adding some new thoughts on how it will affect, and be affected by, the great global economic downturn that began last year.

Many of us grew up amidst warnings of “the population boom.” And indeed, world population has doubled in my lifetime. Yet today, in nations as diverse as Italy and Iran, Lebanon and China, Canada, and Cuba, the number children born each year is no longer sufficient to replace the population.

The trend at first glance contradicts the notion taught by Darwin and modern biology that all organisms breed up to the limits of their available resources. Indeed, it was precisely among the world’s most peaceful, prosperous and well-fed nations where the phenomenon of sub-replacement fertility began, specifically here in Western Europe.

Yet Darwin could preserve his theory by countering that these slow-breeding segments of human population have simply become maladapted to their changing environment, including a manmade environment that often makes the cost of parenthood seem prohibitive to rational individuals.  If we accept this hypothesis, does that imply that humans are on the road to extinction?

It would if fertility rates were falling below replacement rates consistently among all people, but that is not the case.  Rather than facing extinction, we are facing a dramatic slowdown, and eventual decline in human population, accompanied by dramatic changes in its composition.

Why is this?  Especially where childlessness and one-child families have become the norm, a larger and larger share of future population is produced by an initially narrow, but comparatively fast-growing segment of society. Specifically, in today’s low-birthrate countries, the next generation is overwhelmingly being formed by people who either reject or ignore the economic and social incentives that in modern nations have made large families not only unfashionable, but often prohibitively expensive.

Disproportionately, these people include those who are motivated by religious conviction to “go forth and multiply.” In modern societies, with their pension systems and other means of replacing the functions of the family, there has been little economic incentive to have children, and strong reasons not to. Thus, almost by default, what people have children, and especially those who have more than one or two, tend to be people who have non-economic motives to procreate.

Today, there is a strong correlation around the world between adherence to traditional Christian, Islamic or Judaic religious values and high fertility. The result is an emerging world in which in which the ancient, patriarchal values of these religions are becoming stronger, while secularism suffers demographic decline.

 The current world economic crisis will most likely compound the trend, for a variety of reasons. The widespread loss of jobs and retirement savings gives a survival advantage to those who still have abundant human capital upon which to rely, specifically, strong, largely self-sufficient families in tight-knit, high-trust, self-financing communities. Under currently unfolding conditions, the “fittest” are those who invest heavily and successfully in building up strong families and local community support networks.

Many people may try to contend with their financial and economic losses by forming secular communes. History suggests, however, that families and communities bound by common blood and religious faith are more likely to succeed in fostering the necessary sacrifice of individualism and consumerism.

These changes we are living through are very scary, but they also, I think, have the long-term promise of restoring the economic basis of the natural family and renewing society generally. Seeing more specifically how this future might unfold requires dwelling briefly on a few poorly remembered traditions from the past. 

In a recent issue of Foreign Policy Magazine, I have published a brief article entitled The Return of Yeomanry.  This word “yeomanry” is now obscure in English, and may be impossible to translate into many other languages.  But particularly in America during the 18th and 19th century, it stood for a clear ideal of human organization, which was small-scale production centered on a self-sufficient family unit.

One of America’s most prominent founding fathers, Thomas Jefferson, for example, wrote frequently the superior virtue of the country’s then substantial yeomanry, which mostly comprised family farmers who owned their own land and small family business owners.

Jefferson’s vision of America’s future was that widespread family ownership of small scale productive would remain the dominant form of social and economic organization, and that the influence of both Big Business and Big Government would be held in check.  

Since then all manner of social philosophers in many different traditions and different generations, have articulated and defended this vision. It was the dream for example, of Pope Leo XIII. It was also the dream Bulgaria’s Alexander Stamboliski and the other leaders of Eastern Europe’s mostly forgotten democratic “Green” movement, who in the aftermath of World War I reconfigured the former Austro-Hungarian Empire by redistributing royal lands and converting tenant farmers into self-sufficient freeholders. (1)

But until recently, real-life yeomen could be and were dismissed–often violently. Joseph Stalin, for example, made short work of Eastern Europe’s land-holding peasant class.  During the 20th century, both capitalists and communists, for different reasons, were hostile to the idea of a property owning, prosperous peasantry. Capitalists wanted agriculture to be industrialized, while Communists wanted it collectivized, with both opposed to any possible third way.  For both Capitalists and Communists, the future would be one of ever greater division of labor and increasing economies of scale, with the family stripped of nearly all productive function.

Yet today there are signs that the yeoman ideal of small-scale ownership and production, having already out-survived communism, maybe be poised for a big comeback around the world. This is not to predict the end of globalism, if by that we mean simply high levels of interconnectivity. But it is to suggest that for reasons of technology, demography, culture, and efficiency, big is no longer necessarily better and the yeoman has a chance.

We see this most vividly the realm of finance. For decades now, experts have argued that bigger is better in banking. With their economies of scale, larger institutions are more efficient, has gone the reasoning. They can match up lenders and borrowers on a global scale. In places where money was piling up (like China or the United Arab Emirates), banks with worldwide reach could tap into these savings and direct them to borrowers in places where money was scarce (like Stockton, California, or East Cleveland, Ohio). And so large-scale “transactional” banking largely displaced small-scale “relationship” banking, following the “logic of the market.” Looking back, however, we can see that global-scale finance wasn’t really so efficient after all, except in the sense of being very efficient at wasting the world’s capital on over-priced tract houses and worthless insurance. By contrast, small-scale community banks have held up quite well during the crisis, with micro-lenders in the developing world doing the best of all.

We see this also in the realm of agriculture. In the United States, for the first time in generations, the number of farmers is again on the rise.  Mostly they are small-scale family farmers producing food for local consumption, using organic, or regenerative techniques.

The trend is driven by two factors.  One is rising consumer resistance to, and fear of, the products of industrial agriculture, including genetically modified food, highly processed food, and food laced with pesticides and growth hormones. 

The other factor is that industrial agriculture is reaching a tipping point in its productivity. Oil and water, its essential inputs, are becoming increasingly scarce.  Meanwhile, the natural fertility of the soil in places that practice industrial agriculture is becoming exhausted.  Already, the rate of productivity growth on American and European agriculture has dropped substantially in this decade compared to the 1990s, and still more compared to the 1980s and ‘70s. World food production no longer produces a surplus, and in recent years has fallen below the rate of population growth, even as population growth itself has been slowing dramatically.

 I predict that small scale farming in the United States, anyway, will continue to boom, due it comparative advantage in oil and water use and in consumer preference.  This will be particularly true once policy makers realize that organic farming can both substantially reduce carbon emissions and go a long way toward solving the nation’s worsening health care crisis.  By one credible estimate, if every farm in the United States converted to organic production techniques, the nation’s carbon emissions would fall by 40 percent. (2) Meanwhile, processed foods produced by industrial means using high concentrations of fat and sugar are deeply implicated in the epidemic of obesity that is a major threat to public health and the nation’s solvency.

At the same time, many of the world’s citizens are being thrown back toward some form yeomanry for lack of any attractive alternative. The train stations of coastal China are packed with unemployed young people returning the countryside.  To alleviate Africa’s suffering, both the World Bank and the G-8 are prescribing a revival of small-scale farming using organic techniques.  With the decline of communism and union power, employers, whether in Tokyo or Detroit, no longer feel compelled to offer lifetime employment with generous benefits to forestall a revolution. So now mass production shrinks along with mass consumption,

Even home production of manufactured items seems around the corner. A technological development to watch is the emergence of so-called “personal fabricators.” These are digitally-driven machines, already used by companies like Nike to produce rapid prototypes. The machines effectively allow you to “print” a three dimensional object, such as, say, a sneaker. As with personal computers, the size and cost of these machines (currently starting at around $18,000) will drop quickly even as their power and potential expands.

Today, it is already possible to use a 3-D scanner, such as the Z Scanner 700, to create a digital blueprint of, say, a BMW tail light, and then simply print a replica for a cost of a few cents in materials. Maybe few consumers will wind up printing new cars in their garages, but they may well buy cars from small dealers who have printed them locally, with huge savings in the cost of logistics and inventory.

In concept, you can even print a house as demonstrated Behrokh Khoshnevis of the University of Southern California and the Center for Rapid Automated Fabrication Technologies.

A final reason to expect a return of yeomanry involves the global trend of falling birthrates. In the long run, perhaps the greatest shortcoming of both communism and corporate capitalism has been their failure to reconcile the tensions of work and family life. For the majority of the world’s population that no longer lives on farms or relies on home production, children are no longer an economic asset, but an avoidable liability. And so we get fewer and fewer of them, with resulting populating aging and for countries such as Japan and Russia now, absolute population decline.

By a Darwinian process, the future now appears to belong to whatever societies figure out or stumble upon forms of organization that reduce the direct and opportunity costs of parenthood, and widespread yeomanry and home production may be just the system to that winds up doing the trick.

Dr Phillip Longman is a Schwartz Senior Fellow at the New America Foundation. He formerly worked as a senior writer and deputy assistant managing editor at U.S. News & World Report. His best-known book is The Empty Cradle (2004). Republished from the World Congress of Families with permission. 

Endnotes

(1) For an excellent account of this movement, see Allan C. Carlson’s Third Ways: How Bulgarian Greens, Swedish Housewives, and Beer-Swilling Englishmen Created Family-Centered Economies — and Why They Disappeared. ISI Book, 2007.

(2) Tim J. LaSalle, et al, Regenerative Organic Farming: A Solution to Global Warming, Rodale Institute, 2008, http://www.rodaleinstitute.org/files/Rodale_Research_Paper-07_30_08.pdf

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