III -NEW SHAPE OF CORNUCOPIA
4.THE GREAT BUYER'S MARKET
The creative society will be a buyer's market. This will make marketing
more critical than production and it explains why the zaibatsus will deal
with marketing themselves and subcontract production, rather than the other
way around. Once Clause #1 has cured the production system of its produce-to-work
chronic disease - leading to new ways of working that will result in the
re-structuring of Cornucopia into new manageable, family-size, production
units - we will witness a complete re-definition of our production objectives
and a drastic transformation of the relationship between corporations and
their customers. The marketing-oriented zaibatsu will really dedicate itself
to the satisfaction of its clients and then... Surprise! The system will
begin to produce what the people want.
Escape from hysteresis
Don't we produce what we want? The prevailing theory is that there is almost perfect congruency in our society between what the people want and what the system produces, since almost everything that is produced is eventually consumed. "If goods were to be produced that were not wanted"- argue our far-seeing economists - "the producers would go bankrupt and production would readjust to effective demand".
Let's not even argue the loaded question as to whether or not effective demand is a proper estimator of the needs of a population, since it is not even effective demand at all, but the momentum of production itself that presently sets the goals of production and determines the consumption patterns.
For quite a while now, it has been the momentum of production itself, not our wants, that has defined the production objectives of our society. No flaw in the democratic process, no tenebrous conspiracy; prior to Helots, no consistent political option could have modified this situation substantially. Our production patterns were not a matter of policy that a new Administration could change, but a matter of necessity, of bowing to the technological imperative of "hysteresis". Inextricably meshed in the very fabric of a machine-based industrial production system, is the obnoxious tendency to try to get the most out of the fixed capital, producing more of what it already produces.
It began naturally with the imperfect slave, then went on with the the "job game", as we strove for employment and every manufacturer was strongly encouraged to keep on its payroll all the manpower it could. The rules were to produce in order to work, to produce more of the same... and to produce first and see later if it would sell... More often than not it did, for there is such a thing as the absence of alternatives.
I remember a cruise along the Niger River, some years ago, during which the whole supply of peanuts and Vichy Water was completely exhausted on the third day of the trip, although none of the passengers had impressed me at first as great potential consumers of these commodities. Faced with a dry bar and a diet that consisted mainly of potatoes and rice, everyone climbed on the bandwagon and went for the available substitutes, although I am positive that what we all really craved for were pretzels and beer...
It is true that most of what is produced is sold, but our consumption patterns, both public and private, have been nevertheless biased by a need to keep wealth productive and manpower at work. For a large share of our production, we do not even have a decision to make: the State does the buying for us. Whether or not I feel insecure has no bearing on the decision to develop new warheads, because nobody will ever ask you or me what the Nation's priorities should be, and neither you nor I will ever have a say about it. No discrepancies can arise in this sector between supply and demand, between our "wants" and production, since military hardware is built on request, all purchases are tailored to manpower requirements, and orders are issued before the goods are even designed. It is great for equilibrium, but since it is demand here that is made to equal supply, it is a little far-fetched to assume that it is our "wants" that are thus satisfied.
Now, of course, new rules for a new game: Helots - the basic fixed capital investment of the future - are highly adaptable, while subcontracting production managers will make it a rule to amortize "dumb" equipment on a project basis. It is possible, now, to break loose from hysteresis; therefore, it becomes necessary for every producer who wants to compete and survive to take his cue from the clients' demand. To produce what the people always wanted to get but were never allowed to ask for.
Modern forecasting techniques make it possible to know demand in great
detail. When we shall make up our collective mind to give the people what
they really want, we will, for a while, look for new ways to assess and
forecast that demand. It is unlikely though that the great American zaibatsus
will play hide-and-seek for long with the clients, thus suffering a great
loss of time, energy and money. We will soon end up with a simpler approach...
Betting the sure thing
Cornucopia will give up guessing and will ask the client what he wants. Why should producers make fools of themselves trying to outguess each other on the matter of the customers' fancies? Does City Hall, if a bridge has to be built, get five contractors to erect each their best model and then pick the one it likes best? Of course not! Tenders are issued, bids are submitted and the choices are made between proposals; competition takes place on paper, without wasting all that steel and ruining any of the contractors. The State, sometimes, will ask potential suppliers for "prototypes" before it decides on a new bomber or the like; but then, it will usually make it worthwhile to the bidder, and we know that the real purpose is to sponsor research and to create high-tech jobs. A contract is signed before we get down to mass production.
Why shouldn't what is good for the State and Boeing be good for G.M. and its clients? Why shouldn't the client say what he wants, place the order and THEN, mass-production begin? We can ask the client now, so we will. It will take no coercion, no special legislation, no intervention from the State. Surviving in business, more than ever, will mean knowing what the client wants and zaibatsus, operating in a subcontracting framework, concentrating on marketing, will simply realize that they can gain a tremendous edge on their competitors by passing the buck of advance planning to the consumer, along with a sizable share of the savings that come with reduced guesswork.
A society that values leisure, and wishes to work only to produce what it wants, will require the customer to give sufficient notice of the durable goods he wants. We will ask him and, to make sure that the mischievous buyer is not joking or misled by unscrupulous competitors after he has made his choice, we will not take his word for it; we will extract from him a firm purchasing order.
"Tell us today what car you want two years hence " - will come the zaibatsu's sales pitch, - "and we will sell it to you now, at to-day's price minus 15%, not only in the color you want, but with your initials in the upholstery's design if you so wish. Indicate the frills you want, our helots are flexible! Pay later of course! Just sign here, now, so we may go on and build it according to specs..."
It will happen as soon as a subcontracting system becomes the rule. It might even come before... As one zaibatsu does it, every one else will, because it is more efficient and gives a better deal to all parties involved. People will be asked in advance what car they want and when they want it; competition will take place before production plans are finalized.
Whether GM will take 40, 50 or 60% of the market for cars will still be the consumer's decision; they will simply say so in time for GM not to do anything foolish ... and for GM's competitors to try harder if they want to increase their share of the orders' market the following years. The system will keep all the advantages of a market economy but will drastically reduce the wastage.
Everyone wins in this deal. Even the usual Joe-comes-lately, who neglects to pass the order in advance, will not be hard put, two years later, to find on the market the Joe-changed-his-mind willing to sell him the brand new car he had reserved but does not want anymore... and who will sell it to him cheaper than could a manufacturer who, not working on a purchasing order, would have to fit in his price a provision for unsold production.
Ford, GM, Chrysler... will probably do it, because they have the credibility to sell a car on the flimsy basis of a four-color catalogue and engineering specs. Should they waffle a bit too long though, let's not forget that, in the wide open labour market which comes with universal entrepreneurship and G.I.A , any zaibatsu with money can move in and do it, since the expertise, in the shape of technical teams of all kinds, will be there for the asking. So repent, Detroit, for your marketing sins!
What can be done with cars can be done for all durable goods. It can be done to buy a house - and that's the way it used to be - or anything from furniture to home computers. Design it, sell it... then make it. When we do it that way, it brings about fundamental changes in relations with clients and a transformation of our production objectives, because it is not the State nor the momentum of production that will henceforth set the targets, but the consumer himself... and this is the final buyers' market.
Since profit is the price for "iffiness", and the major risk
in production is "will it sell?", this approach is a tremendous
plus for producers. They get rid of the uncertainty in consumers' demand,
not only statistically at the level of global demand, not with the margin
of error of market surveys, but knowing for sure that the client will buy.
The buyers' market thus becomes a laughing-all-the-way-to-the-bank Eldorado
for sellers too. If we can provide enough credit...
Remember that profit is the price of "iffiness" and that the major risk in production, next to "will it sell?", is "will I get paid". To make that trip to the bank merrier still, measures must be designed to extend more credit to prospective clients but, at the same time, to protect producers from the natural instinct in some buyers not always to respect their obligations. As we do that, we can make available to the consumers the great savings that will result from the elimination of collection fees and other nasty expenses resulting from this instinct. The best trick ever designed to guarantee payment is to get paid in advance. The modern way to do this is to withhold payment "at the source", so we'll do it.
Chances are that it will start with some friendly arm-twisting... "As a good American citizen and loyal employee of this zaibatsu my dear (Mary or John), wouldn't you like to buy one of our cars and help us reach the break-even point to begin production? Like right now, we mean... Agree to buy the personalized "Super Dooper Splashy Wagon" (delivery in two years) and, by the way, do not worry too much about payments: we will work it out off your pay check, with your agreement of course...."
It would be so practical. About one American worker in five, for instance, depends on the automotive industry and its suppliers for a living. Get this market well cornered, with prices fixed, dates of delivery set and installments withheld from the pay-checks, and you have a tool for equilibrium second only to the traditional Big Bang panoply. As zaibatsus spread and grow, it will become an increasing temptation.
It will undoubtedly be tried, and it will be the moment of truth. Because, if the Government cannot stop it there and then, it will mean that we have missed a turn somewhere. If large zaibatsus can pressure their employees, consultants and suppliers into buying only their wares, we will soon be out of this profitable market we call the U.S. and into as many segregated small markets as there will be baronial zaibatsus able to strong-arm their victims. The State will stop it, but the basic idea itself, however, will not be lost. It would be a disaster if any zaibatsu could corner the market of those who depend upon it, but a very positive step forward if all zaibatsus together and the State would agree that, with the authorization of the interested party, all payments due on the purchase of equipment could be withheld directly from the individual's pay check. How great if we could let people buy what they want and not bother them with payments and the like, just take it off their paychecks - good, with GIA, as that gold in Fort Knox !
As a final stabilizer of the production-consumption system, we must have universal credit , up to a proportion to be determined of the State-guaranteed income. How nice for a society committed to positive reinforcement! The State will intervene and grant us credit. Credit, but not for the purchase of everything: selective credit. The State will agree that, with the authorization of the interested party, all payments due on the purchase of goods from sectors in transition may be withheld directly from the individual's pay check.
Buy a car on credit, and installments will come off your pay check. It can be a car every three years, every five years, or, as we start making them to last, every ten years. It is flexible; this very flexibility will give us the proper tools for planning and for adjusting production to match the amortization rate we want on the equipment.
Give advance notice to the production system, and the system will bend
backwards to make sure that you get what you want and get it dirt cheap.
It will also manage to get you credit, enough credit, at least, to buy everything
that it needs you to buy.
The Company Store
In a buyer's market, a client found should not be lost again. For the enterprising zaibatsus, the next step will be to seduce the client, to hook him for life if possible and bind him fast to one's own production structure. There is a bright future for a formula that will let people pawn their soul for life painlessly at Cornucopia, our society's great collective "Company Store". Credit will be a good way to start, because most clients, even to-day, do not like to pay large sums of money all at once.
Let's take the car example once again. Most people, after an initial down-payment early in adult life, just bring in their used car for trade-off and never thereafter lay out anything more than installment fees that grow with their income. They act as if they were bound for life, if not to one producer in particular at least to the automotive industry.
It looks like a life lease, so more and more people just lease their car outright, rather than go through the boring exercise of buying it. Why not? Goods have no intrinsic value, just the use-value of the services we derive from them. To own anything at all is always a risk; the risk of paying too high at the time of purchase, the risk of malfunctions, the risk of losing on resale, etc... while "services" from a responsible supplier offer much less risks of loss or inconvenience: it works or you don't settle your bill.
Until now, manufacturers have tried to keep at arm's length from troublesome direct leasing, but withholding agreements and State-guaranteed universal credit will create a new situation. Market oriented zaibatsus will not be able to ignore the image, ever present in most of the customers' mind, that equipment leased directly from a manufacturer (Bell, Xerox, etc.) lasts somehow longer and needs less repair than any other type of equipment.
Smart zaibatsus will soon see the competitive edge for whoever sells "private-car transportation services" or "home television services", etc.; they will slowly withdraw from the business of selling durable goods - a selling job that has to be done and redone time and again - and move into the business of selling services: the "services" of leased durable goods. The sales pitch, here, may go like this:
"We are not selling you a car, we are putting a car at your disposal. If anything goes wrong, just phone, we will pick it up. Once a week, bring the car in for maintenance; while we toy with it, we will give you a similar car. Every three months, let us have the car a couple of days, for check-up and repairs, always on the same conditions. Next year, we will give you a brand new car, for the same price (indexed for inflation), unless you prefer to keep the same one and have a reduction on your lease price... Forget all the worries and troubles; for a price no higher than your present installment fees, we will put transportation at your disposal for one, two, five years... or until death doth us part. The longer the contract, the cheaper the price, for this is our way to thank you for loyalty to our zaibatsu..."
The zaibatsu will take care of maintenance and repair, lease used cars in good condition at a fraction of the cost of leasing new equipment, and will thus stabilize the used-cars market as well. The same pitch of course can apply to any durable goods. Maybe it will come from the same zaibatsu, as these will tend to diversify and sell everything to their clients. At this point, the client may become a shareholder in the zaibatsu he patronizes, and it may become unclear whether zaibatsus are really diversified trading/leasing companies, or consumers' purchasing agencies getting special deals from subcontracting production teams... a new shape for Cornucopia, indeed.
Lease, and let the installments come off your guaranteed income salary.
It makes for a flexible system, since interest and inflation are such significant
factors in the consumer's costs and we may decide that interest-free payments
are to be spread over three, five, ten years, spread over a lifetime...,
or delayed almost until Kingdom come. If need be, we can go one better even
on that one; on the purchase of certain types of goods, we may agree to
withhold payments only from eventual salary increases , so the buyer
may feel it's all free, a "boon" from the system, or something
of the sort. Selective "credit" but it would become in fact, selective
gifts, to make the most of what our system produces until we get the whole
This should be really popular with both consumers and manufacturers... After all that we have done to increase global demand for industrial goods, we still have a last ace in the hole. Only military production can be buried, or otherwise summarily disposed of without creating a scandal, but gifts are allowed, aren't they? We can make the final bold move that makes all demand effective: just give the darned things away!
Why should we give things away? Because a good many durable goods that will be produced from now on, if our productive capacity is let to run loose, will not be worth their real labour cost to prospective buyers: their production may go on only if it is subsidized. We, as a society, will pay the difference between what the buyer is ready to pay for these goods and whatever price will be necessary to maintain sales at the level that will prevent the industrial production balloon from exploding into our collective face
We are already "giving it away", in hush-hush fashion, when we subsidize agricultural products, when we sponsor research and development to keep our national producers competitive with foreign imports, or when we make loans to car manufacturers. We simply need look reality in the face and do systematically, with an eye to change, what we have been doing sporadically and haphazardly.
Let us take cars again, which are such an obvious example. We have in America a huge car building capacity - much in excess of our needs in terms of cars built to last - which it would be inconvenient to dismantle and to put into the garbage can: why sacrifice hundreds of millions of dollars of equipment and get us overnight into the huge problem of recycling millions of workers? We must phase out a surplus productive capacity - (the time-frame we may choose is immaterial to our discussion) - and dispose of the yearly surplus production during transition until we have reached equilibrium.
The minute we utter the ominous words "phasing out", though, the capital value of investments in the automotive industry would plummet and we would face a major crisis... unless there is a known threshold below which production or at least profits are guaranteed not to fall. The State can vouch for this steady demand, granting selective credit to buy cars at conditions that turn them into gifts, if it is deemed in our collective interest that a below-cost demand be satisfied, for the sake of a smooth transition to a new society.
State the Father has been making gifts for quite a while to keep the wheels turning. Because we were obfuscated by the sacred role of money as a universal exchanger, our way to make demand effective over the last decades has been to give money away, hoping that a surge in global demand could save the derelict producers. It was totally inept, because the extra money, as we have seen, was not used by the people to increase consumption of the durable goods which we wanted to sponsor but leaked, first into high services, and then into savings and investments. Great expenditures and little results. "Bound boons" are a more elegant and efficient way to do it: we may create and satisfy a demand to match exactly the needs of production.
We should not give money and hope people will buy more cars, more TV sets, more of anything on whose sales our economy and social equilibrium rest. What we need is selective, self-serving generosity that will not escape into the wrong hands. Once GIA fills their real needs, we should not give people more money, but give them, if need be, the cars, the TV sets, all the industrial goods whose sales we must temporarily promote to have a smooth phasing out. We will call it credit but make it selective to fit our production needs... and installments pegged to salary increases made to match inflation will postpone real payment indefinitely.
It should be very popular. Why should a government bail out car makers and look like it is spending the taxes of the common people to solve the problems of the uncommonly rich.... when it can achieve the same result by notifying its electors that, through some magic, they may now get a new fridge or another TV set, and pay for it out of a reduced salary increase from their employers, meaning that their new paycheck will still be higher and that the new apparatus will appear to come free?
We will offer boons, although they will be bound to the actual productive capacity of the system rather than to the client's priorities. We will have "bound boons", and a new relation between the consumer and the great Company Store that will take into account the power of State, the Crafty Magician, to wave his magic wand in more ways than one.
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