Alexander Dukes is a regular Strong Towns contributor who has been developing a series of deep-dive, philosophical essays about the “Democratized Economy,” a transition he argues is occurring in our social and economic life as a result of technological advances and an increased abundance of the basic necessities of life. Read the previous installments here: Part I, Part II, and Part III.
In this installment, Dukes discusses some of the implications for our cities and towns of a shift from mass production, characterized by the big-box store and the assembly line, to an economy characterized by more direct relationships between the consumers and producers of goods and services.
The purpose of applied economic study is (or at least, should be): To discover and implement better means of allocating scarce resources so they can be employed to improve human lives. I believe the most effective way to do this is to grant individuals and the public greater control over their economic lives. Just as governmental improvements give people greater political autonomy, economic improvements provide people with greater economic autonomy. Throughout history, societies have evolved their economies to distribute resources to steadily grant individuals more economic autonomy.
In The Emerging Democratized Economy, I outlined the difference between the Modernist Economy, characterized by the systems of mass production that arose with the industrial revolution, and the emerging Democratized Economy. I described the Democratized Economy as “an economy that looks to the talent and wisdom of the population at large to drive the economy.” The Democratized Economy maintains and builds on the abundance provided by the Modernist Economy’s mass-production processes.
I believe the United States is currently in transition from a Modernist Economy to a Democratized Economy. The Modernist Economy characterized by large national and multinational corporations that use mechanization and standardization to achieve the mass production of goods and services. The goal of mass production is to provide an “abundance” of products to the public. In economics, a good or service becomes abundant when it can be produced at a relatively trivial cost to end consumers.
Through mass production, the Modernist Economy has provided individuals with more economic autonomy than ever before. Prior to the Modernist Economy’s industrial revolution, most people were responsible for sourcing the materials and labor that provided their basic human needs. Generally, people fetched their own water, built their own house, farmed their own food, and made their own clothes. This is why most people lived on farms before the industrial revolution. After the industrial revolution, most people bought all these basic needs with money they earned working in factories and offices.
Over the years, a process of continuous efficiency gains by businesses has brought us to the point where the basic needs cost little relative to their historic costs. Most people can easily buy water, food, and clothing today. And were it not for our mismanaged housing market, most people would easily be able to acquire shelter. Today, the economic questions most Americans tend to trouble themselves over are not related to the basic human needs. Most people in the United States have enough economic autonomy to concern themselves with the “higher needs” of belonging, esteem, and self-actualization, as shown on Maslow’s Hierarchy of Needs.
Through greater economic autonomy granted via mass production and abundance, the Modernist Economy has provided Americans with a vastly better life than existed prior to the industrial revolution. However, in the present day I believe America is beginning to experience diminishing returns from its Modernist Economic ethos. New perspectives on how best to allocate scarce resources to help secure our “higher needs” are needed for the 21st century and beyond.
Introducing Holistic Production
The process by which the Democratized Economy produces goods and services is what I call holistic production. Holistic production inverts the mass production process. Holistic production is driven by people from the bottom up, rather than from the top down by corporations. In holistic production, consumers and the community have more direct relationships with the designers and producers of goods and services. As a result, the end user is more readily able to influence the characteristics of those goods and services, by providing direct feedback to the producer.
Under holistic production, the things we consume increasingly reflect the unique idiosyncrasies of an individual or community, helping to realize the goal of economic harmony. An economic system achieves harmony when the production of goods and services is aligned with the economic requirements for self-actualization in individuals and communities.
(Philosophical side note: There are additional societal and personal psychological requirements for achieving self-actualization beyond the economic requirements discussed here. These societal and psychological requirements are beyond the scope of this article. Relatedly, the holistic production process bypasses the Maslow needs of belonging and esteem because satisfying these needs are not economic questions.)
Self-actualization means that a person or community acts virtuously in accordance with their individual nature. For example: If a person naturally takes to playing piano, then a requirement for their self-actualization is being a pianist. The pianist could play for the London Symphony Orchestra, a common jazz bar, or a church. The venue and prestige don’t matter for self-actualization, what’s most important is the fact that the pianist is able to play piano.
How Holistic Production Functions
In the holistic production process, unlike in traditional mass production, producers and consumers at the bottom of an industry are empowered to set the terms for larger corporations (if the producer or consumer utilizes a large corporation at all). An early manifestation of this bottom-up production process is commerce conducted through the internet. The internet represents the mass production of telecommunication services. Holistic production uses the internet’s mass telecommunication system to transform the traditional top-down, mass producer-to-consumer relationship into a relationship that is more harmonious and intimate between smaller-scale producers and smaller sets of consumers.
To illustrate, let’s return to our pianist example. Thirty years ago, a person who dreamed of playing piano for a living had to go through one of a small number of middlemen, such as a major record label, to publish their art. Today, thanks to the holistic production process, musicians of all stripes leverage one-on-one connections over the internet to sell directly to customers, collaborate with fellow artists, and find gigs to play. Even if our pianist only serves a small niche of consumers, he or she can still make a decent living through the internet. The pianist might even gain such a large following through their online presence that large studios offer a record deal so the pianist’s music can be published for a mass audience.
When artists use the internet to facilitate direct engagement with consumers, the consumer decides organically what is popular. Effectively, the market selection process is inverted. Major record labels can only react to the organic appeal of popular artists after the signal from the public is clear. This holistic production process stands in contrast to the mass production process of music publishing where the studio heads decide what they think will be popular, and the public is only able to decide whether they like what the studio heads have served.
In general, the holistic production process is better for artists and consumers. Artists benefit because the artist knows their worth to the studio due to consumer feedback. This forces studios to bid on artist contracts, and the artist gets to select the contract best for them. In the past, only the most popular musicians received this treatment. Consumers benefit because they get to vote with their wallets in a more bottom-up, democratic way than under the Modernist, studio-nominated music publishing system. In the holistic production process the authentic desires of consumers, artists, and publishers are all better aligned. This alignment is what I describe as economic harmony.
Taking a wider view, the abundance of inexpensive basic needs has freed so much wealth in the economy that Americans are spending less money on mass-produced goods. Even advanced consumer goods like computers, dishwashers, televisions, etc. have all decreased in price due to efficiency gains made by mass production. Therefore, the public has more money to spend on “experiences” and “artisanal” products that are highly targeted to the unique tastes of small consumer groups. It is easier for smaller businesses to produce these unique products because small businesses are closer to individual consumers and know what their clientele wants. This democratization and decentralization are being felt across the economy. One only need to look on Bandcamp, Soundcloud, YouTube, DeviantArt, Etsy, the new large public murals that are in vogue now, or downtown shops to notice how ubiquitous niche and customized goods have become in our society compared to even ten years ago.
Because the public has been given the economic authority to diversify its buying habits, more consumer spending than ever is aligned with what self-actualizes more people than ever. These small businesses are on the forefront of the holistic production process and the Democratized Economy. Now let’s talk about cities.
Holistic Production and Cities
Cities benefit from the Democratized Economy and holistic production by spreading their commercial and industrial revenues across a wider band of their population. When a town or city’s economy is composed of many small businesses, redundancies among those small good and service providers tend to form a more resilient foundation for the local economy. Frequent readers of Strong Towns know that a collection of small downtown stores tend to generate more dollars per acre than centralized “big box” supermarkets, collectively employ more people than big boxes, keep more dollars within the local economy, and are within walking distance of more people than a big box.
On the other hand, we have also read stories of small-town economies being devastated by the closure of a single big box store that served as both the primary employer and the provider for most goods and services in the locality. Had these towns retained their diverse mix of small stores, the closure of one store would have caused less harm to the economy. A city’s local system is more resilient and healthier when it features many small stores instead of one large big box.
The mass production ethos puts huge pressure on our towns and cities to facilitate big box development. It is more efficient for large corporations to stock and manage one centralized big box supermarket because fewer people must be hired to serve an entire town or large area. Unfortunately, what’s good for the goose is not always good for the gander. Fewer people hired to serve the same size city might be good for corporate profits, but fewer people being hired in a town means a higher unemployment rate and fewer dollars circulating in the local economy.
This illustrates the difference between Modernist economic thinking and Democratized economic thinking. Faced with choosing between zoning for the big box or encouraging more small downtown stores, a city following a Modernist ethos will zone for the big box because its leaders view appeasing large corporations as “necessary to attract business.” A city following a democratic ethos will put its own local well-being before the needs of big box corporations and encourage the development of small stores in its downtown. Remember, in holistic production the self-actualization requirements of the local individual or community have priority over the preferences of the mass producer. The city following Democratized economic thinking will opt for a development pattern that encourages diverse, small stores that are aligned with the self-actualization needs of its residents.
(Philosophical side note: The ability to self-actualize also requires that the individual or community understand their own nature such that they can know how to self-actualize. This is a big part of what Strong Towns is trying to help cities achieve in my opinion. A city that can express its own nature in a positive, sustainable way is a Strong Town.)
Distributing consumer spending across many different smaller establishments also helps individuals access the Democratized Economy and the benefits of holistic production. When a town or city encourages its citizens to shop at only one centralized store, it is akin to a farmer dumping a bag of fertilizer on one tomato plant and growing one huge tomato. Encouraging shopping at many different stores is like fertilizing a field of tomato plants and growing a basket of smaller tomatoes. A basket of tomatoes is more useful to the economy than one giant tomato.
Our “basket of tomatoes” are the people working in small shops and proprietorships to produce unique products according to their self-actualized nature. As a final example, let’s say a local artist decides to pick up a coffee at an independent coffee shop. The artist’s patronage helps pay the barista, who likes to spend part of his salary on beer at the craft brewery after work. The barista’s money spent at the brewery helps pay for an art piece the brewery bought from the same local artist that shops at the original coffee shop. The harmonious cycle among the trio repeats indefinitely and provides each participant with their own slice of economic autonomy. Multiply this process hundreds or thousands or millions of times, and it provides a harmonious economic foundation for a city, region, and nation. When each person in a community enjoys economic autonomy—the ability to independently decide how they want to contribute value—the economy becomes truly Democratized.
(Cover photo: Alícia Roselló Gené via Flickr)