May 232014
 

Both vertical and horizontal integration being tedious, the new business model is getting out of the business of making things and into the business of control.

So many people are already good at running little sweatshops and raising cattle, why bother?

To capture the profit in the beef industry, you don’t need to actually raise animals. Indeed you don’t even need to sell them. The key is to seize control over killing and chopping up cows. Implement a bit of horizontal integration by purchasing the largest facilities and driving all the small ones out of business. For the latter, the key is to influence the law to increase the costs of regulatory compliance. If only your facilities meet requirements, you don’t actually have to triumph through the ordinary process of competition. Once you have a chokehold over a key part of the commodity chain, you can dictate financial terms to the parties on either side. Tell farmers what you’ll pay for cattle, and tell retailers the price of beef. You keep the fat.

A similar model enabled fashion brands to avoid liability for working conditions. Thousands of tiny sweatshops could compete for contracts. None of the risk or moral responsibility came under the purview of the brand.

Now we can watch the same process unfold with the “creative industries”. Just as farmers love farming, video game nerds love making games. They’ll keep doing it, even when the media conglomerates close down those “risky” divisions of their portfolios. Because, as Marx so rightly pointed out, one of the great pleasures of being human is making things. So creatives invest their own money, time, and risk instead. And the corporations focus on the chokehold: To get the game to market, you have to comply with one of the platforms. Porting to another platform raises costs exponentially. Whichever platform you choose strips away jaw-dropping shares of your revenue (30%) simply for allowing you into the market. That doesn’t include advertising and promotion or any other market services, it’s just to allow your product across the digital handshake that is now the “market”.

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But in the world of food, farmers, fans, and ethical investors are fighting back. They’ve created new, principled intermediaries called “food hubs”, designed to support farmers and provide the highest quality to eaters. They don’t see farms as input to profits, but as the focus of concern, creating complex systems to keep the farm name on the product all the way through, so that food doesn’t become a nameless commodity.

The specificities are different for every industry. But the process of taking advantage of consumers is the same. We need to know where the chokeholds await, so that we can create alternatives to protect producers before they are lost to this cruel strategy.