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Co$t of Inequality (part 2 of 2)
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In Part 1 of this post, I introduced the Kuznets Curve (see References) and the main ideas from the October 2018 article How Economic Inequality Harms the Environment. In Part 2, I’d like to provide more examples and supporting information for the concept and connect it more firmly to project management. As a reminder, the main point of the article is: When people who could benefit from using or abusing the environment are economically and politically more powerful than those who could be harmed, the imbalance facilitates environmental degradation. And the wider the inequality, the more the damage. Furthermore, those with less power end up bearing a disproportionate share of the environmental injury.
And as an example of how this manifests itself in real projects, here’s one from The Guardian: To take just one topical example, particulate air pollution is higher in the poorest 20% of neighbourhoods in the UK. But it’s a common theme. Ask yourself how often a new incinerator (project) is proposed for the middle of a millionaire’s row. People that are better off are simply more able to speak up – or perhaps more accurately, be heard – on things that affect them.
I promised that in this Part 2, I would go into more detail about how inequality is bad for business. Let me provide you this extract from The Borgen Project (Mission: The Borgen Project believes that leaders of the most powerful nation on earth should be doing more to address global poverty. We’re the innovative, national campaign that is working to make poverty a focus of U.S. foreign policy) which should help explain this:
Plainly put, extreme income inequality, such as the kind found in Sub-Saharan Africa and South Asia, cause economic inefficiency. The relatively wealthy tend to save a much higher proportion of their income than the poor. In order to grow economically, a society must have robust rates of consumption. However, if most of the wealth of a country is owned by a very small percentage of its population, that wealth is saved, not spent. These savings are then invested by individuals and financial institutions. In recent history, excess savings have fueled speculative investments, exacerbating asset price collapses like real estate bubbles, such as the ones that occurred in Spain, Ireland and the U.S. during the 2008 economic crisis. Furthermore, if consumption rates are low due to excess savings, the central bank of a country may lower interest rates to increase the availability of credit, which can further fuel speculative investment. Inequality peaked just prior to the Great Depression of the 1930s and the 2008 financial crisis, contributing to the underlying economic instability which caused those events. Instead, if the wealth is more evenly distributed among the lower income earners of a society, who spend much more of their income, consumption goes way up. Thus, the poorest individuals, if they are empowered through greater income equality, may drive consumption, opening up new markets and creating increased economic growth. An article recently published in the Washington Post says, Inequality hurts economic growth, especially high inequality (like the US) in rich nations (like the US). In 2014 the Organisation for Economic Co-operation and Development, a collective of the world's 35 wealthiest countries including the United States, found that rising inequality in the United States from 1990 to 2010 knocked about five percentage points off cumulative GDP per capita over that period. Similar effects were seen in other rich countries. “The main mechanism through which inequality affects growth is by undermining education opportunities for children from poor socio-economic backgrounds, lowering social mobility and hampering skills development,” the OECD found. Children from the bottom 40 percent of households (a huge chunk of the population) are missing out on pricey educational opportunities. That makes them less productive employees, which means lower wages, which means lower overall participation in the economy. While that's obviously bad news for poor families, it also hurts those at the top. If you're a billionaire owner of a retail or manufacturing company, you want people to be able to afford the stuff you're selling. Henry Ford offered his workers high wages not out of any altruistic impulse but because he wanted them to buy his cars. This also could affect the ability to produce the numbers of project managers needed for the future. Now, let’s return to the environmental effects of inequality. Below you see a graphic from the inspirational article that triggered this two-part blog post. In the first chart, you see the relationship between the degree of inequality (called the Gini coefficient) and the number of threatened species. The correlation line is definitely southwest to northeast, meaning that as inequality grows, the effect is a greater threat to species. That may not mean immediate loss – I mean, who needs the triple-banded yellow salamander, right? But in the long-run, as Philip Crosby pointed out with Cost of Quality, this could spell the end of a major crop or the availability of an essential natural resource – one needed to sustain an important business. In the second chart, you see which factors have the greatest impact on species loss – and there it is again – income inequality is “Pareto’ed” out as one of the top factors.
Source: Scientific American, October 2018 What can project managers do? Seek out meaningful projects. Encourage your companies to look at their own “About Us” pages and find – in their mission, vision, value statements, links to ‘making the world a better place’. I’m sure you will find such in your own organization’s messaging. Hold them accountable and keep them true to their own words. Point out the longer-term benefits of projects that have this aim. On your own, direct your project team to the ‘benefits realization’, post-project continuum that takes place after handover. Does your project provide sustainable economic benefit? Does it consider social and ecological aspects in the longer term? Simply considering that longer term, in and of itself, is a step forward. All things being equal, inequality is a biggie!
References: Article from The Guardian Graphics relating GINI and Environmental effects https://www.sciencedirect.com/science/article/pii/S0921344909002419 More on the Kuznets Curve https://www.intelligenteconomist.com/environmental-kuznets-curve/ |
Co$t of Inequality (part 1 of 2)
Categories:
Kuznets,
EKC,
economics,
inequality,
cost of quality,
cost of poor quality,
cost of good quality,
poor,
rich,
environmental degradation,
Boyce,
UMass
Categories: Kuznets, EKC, economics, inequality, cost of quality, cost of poor quality, cost of good quality, poor, rich, environmental degradation, Boyce, UMass
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Image (C) Megan Pendergrast
"In the fall of 2016 an environmental struggle in rural North Dakota made headlines worldwide. The local Standing Rock Sioux Tribe and climate activists were pitted against the corporate and government backers of the Dakota Access Pipeline, which was being built to carry oil from the state's Bakken shale fields to a terminal in Illinois. Private security guards unleashed attack dogs on protesters, and the police blasted them with water cannons in freezing weather. The tribe feared that a leak in the pipeline as it crossed under a reservoir along the Missouri River would contaminate its water supply. Climate activists joined the protest to fight ramped-up extraction of fossil fuels. Supporters of the $3.8-billion project argued that it would save the oil industry money, being less costly than the alternative of oil shipment by rail, and that its construction would bring jobs with multiplier effects to the local economy. Because the price of oil is set on world markets, the cost saving would not mean lower prices for consumers—but it would bring higher profits to producers. By December 2016 the U.S. Army Corps of Engineers announced that it would deny approval for the pipeline crossing, a decision greeted with whoops of joy at the protesters' encampment. But four days after taking office in January, President Donald Trump overturned the ruling, and a few months later the oil began to flow." Doesn't this sound like it comes from a leftist political magazine or Greenpeace website? But no, this is not political at all – this is scientific. Indeed, it comes from the oldest continuously-published magazine in the United States, one which has published authors such as Albert Einstein. It’s not from Mother Jones or the Democratic National Committee. It’s from a distinctly non-political, and very well-respected journal, Scientific American. In fact, the blue text above is the opening paragraph of an article written by University of Massachusetts, Amherst professor Dr. James K. Boyce. The article’s title, How Economic Inequality Harms the Environment caught my eye. After reading through the article, it further solidified the connection between this subject and the intersection of sustainability and Project Management. Let’s start with the connection to Phillip Crosby's concept - the Cost of Quality. As a PM we should be familiar with the concept. If not, check out the excellent short video below from ASQ (the American Society for Quality). Link directly to ASQ video: http://videos.asq.org/cost-of-quality Let's get back to the environmental cost of inequality, and the article from Scientific American. Here’s the main point of the article: When people who could benefit from using or abusing the environment are economically and politically more powerful than those who could be harmed, the imbalance facilitates environmental degradation. And the wider the inequality, the more the damage. Furthermore, those with less power end up bearing a disproportionate share of the environmental injury. The author debates (with himself) the idea that as economies develop and economic conditions improve, the environmental degradation would decrease. He doubts this, however, after reflecting on his time in Bangladesh, living among some of the poorest people on earth, and comes up with the theory that “inequality, not per capita income, might underlie environmental degradation: the two seemed to rise and fall together”. The author introduces the idea (of which I hadn’t heard before) of the EKC – the Environmental Kuznets Curve. This is a representation of environmental degradation plotted against economic improvement, and yields a U-shaped curve. See below for an example, and check the references at the bottom for great background in this concept.
Stay with People, Planet, Profits, and Projects for Part 2 of Cost of Inequality, in which we'll further connect this concept to project management and provide further research and wisdom from this intersection of economics, environment, and PM. References: http://isecoeco.org/pdf/stern.pdf Introduction to the Kuznets curve https://www.perc.org/wp-content/uploads/2018/05/environmental-kuznets-curve-primer.pdf Primer on EKC https://www.economicshelp.org/blog/14337/environment/environmental-kuznets-curve/ Introduction to the Environmental Kuznets Curve |
The Glory of Repair
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This post is about innovation and entrepreneurship. In a way. It’s about how maybe, just maybe, we put so much emphasis on innovation, that we have left some important values behind – like the value of keeping things running and doing a good job of maintenance to avoid throwing things away. I actually started my career in what was called, at the time, “repair engineering”. Our group supported the 23 national service centers for telecom equipment. Electronic units (they happened to be pulse-code modulation regenerators, for those who care) from underground and telephone pole equipment locations were shipped to these service centers where they were repaired, tested, and returned to a ‘new’ condition. These days, those same units would be thrown away. There could be a separate blog post (or two, or three) on the highly negative ecological and social effects of disposing of electronic components, so there is merit in repairing, especially if the non-economic costs of disposal are considered. I’ll keep the focus here, however, on the value of maintenance in and of itself. Aside from my own praise of maintenance, there was recently a “Festival of Maintenance” at the Museum of London. Its mission: The Festival of Maintenance is a celebration of those who maintain different parts of our world, and how they do it, exploring and recognising the often hidden work done in repair, custodianship, stewardship, tending and caring for the things that matter. To get a flavor for this, I found this interesting content at Makerassembly.org. Note: The “maker culture” is “a contemporary culture or subculture representing a technology-based extension of DIY culture that intersects with hacker culture and revels in the creation of new devices as well as tinkering with existing ones. The maker culture in general supports open-source hardware” (Wikipedia). A lot of maker culture is about making new things, and in many Western contexts, that’s making gadgets and gizmos that are fun for a while but generally then gather dust until eventually thrown away. Making and fixing useful things happens, but often in less visible places — farmers repairing and modifying their equipment, making and fixing in rural areas, and around the world local manufacturing and hacking and reuse where it’s the only option to save and sustain life. (We used to do more of that here, making do and mending, but of late that’s declined as consumer goods became more affordable, and often cheaper to replace than to repair — or even complex items designed to be thrown away.) We felt that making and local manufacturing of essential items would be valuable, even here in the UK, whilst imagining both dystopian and utopian possible futures. Measures of economic success are geared around innovation as well. Ever wonder why the Gross Domestic Product (GDP) is called Gross and not Net? The reason is that it leaves out the cost of wear and tear. You can find out more about the economics of repair versus replace in a very insightful article (Patch-up Job) in an October 2018 issue of The Economist. In this article you will also find an interesting discussion of the “right to repair” laws in the US and some similar proposed legislation in the EU. So: how does project management fit into this? As PMs we may want to work on the creation of something new, innovative, creative. Maintenance seems so … bland … compared to this. Indeed, maintenance is often dismissed as drudgery. But wait…maybe there are innovative ways to keep things up and running! Perhaps it would not be so bad to work on a project that breathes new life into an older building, network, or piece of software. Going back to my own 'ancient history', as a repair engineer, we ended up doing many innovative projects in the area of repair, including my favorite proejct: introducing a touch-screen based automated test system for these regenerators, back in 1982. Yes, you read that correctly - we were deploying touch-screen interfaces decades before smartphones. The outcome of this project - the test system - facilitated the repair, saved many difficult-to-troubleshoot units from the trash bin, reduced the repair cost and sped up the turn-around time. You can have your innovative cake and maintain it, too! Let me hear from you: What ideas or experience do you have in managing ‘maintenance’ projects and making that (important) work attractive, compelling, and interesting? |
Mean Business
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Nope. Not that kind of mean. Mean as in "we mean business". My last blog post (“Think Globally, Launch Locally?) was about Planet Labs and their partnership with the state of California, to launch microsatellites to track the earth’s climate. I left off in that post discussing the general trend towards businesses and states or provinces taking action when government fails to do so. The organization mentioned at the end of the post was the “We Mean Business” Coalition. This is the statement regarding “what we do” on their site: We Mean Business is a global nonprofit coalition working with the world’s most influential businesses to take action on climate change. Together we catalyze business leadership to drive policy ambition and accelerate the transition to a low-carbon economy. “Coalition” sounds a bit too small. The numbers give away its size: 822 companies with almost $17 Trillion (with a T) in market cap are participants. What’s motivating them to join and take action? Of course altruism – doing the right thing – is one of the motivational factors. However, on their web site, they say that they “recognize the transition to a low-carbon economy is the only way to secure sustainable economic growth and prosperity for all”. Note the stress on economic growth. These companies are basically – on a large scale – investing in the “Cost of Good Quality”, something we as project managers know about. If you need a refresher, this is the concept from quality guru Philip Crosby that says money and effort invested up front in things like training, incoming inspection, better planning, thoughtfulness is worth it because the “Cost of Poor Quality” – in this case, a failing planet, is so much higher. Here’s Jesper Brodin of IKEA discussing how climate change is affecting his company right now and why IKEA is in the We Mean Business Coalition. That’s just a brief sample of what you will find at the Coalition’s website. How about something more significant? Here’s a case study from Google regarding their move to full 100% renewable energy: https://www.wemeanbusinesscoalition.org/blog/google-carbon-neutrality-100-renewable-energy-beyond/
If you are studying sustainability in project management, what a rich source of research you have on this site. Case study after case study are available showing the economic justification for investing in climate action. Click here and research away! Just in the past few months, case studies have been posted from Danone, Tesco, Google, and Coca-Cola. The organization also sponsors conferences, both face-to-face, and webinars, for example this one: https://www.wemeanbusinesscoalition.org/event/practice-guide-develop-green-energy-procurement-plan/ See if your company is one of the participants by clicking here. https://www.wemeanbusinesscoalition.org/companies/ If not, perhaps you can be a change agent and get them to join, by clicking here. Don't be mean! Mean business instead. And it turns out that planning for a better future for earth is good business. |