30 January 2011

Away from the income statement/P&L

Commodities is another name for extractive resources. 
Goods and services that require institutional infra-structure base their economics on the theory of the firm in a way the suppliers of commodities do not. Commodity suppliers don't need to create a culture of productivity to ensure good harvests and proper supply conditions. They depend more on the management of risk. Theirs is an asset-based economics and so their welfare depends more on the rise and fall of the value of their assets – their wealth – than it does on the maintenance of their income. 
In late 20th century America the managers of the nation's industrial base transformed its productive culture from one focused on income to one focused on wealth. As such, they linked themselves up with the farmers and the resource extractors and combined them all with the financiers so as to re-engineer and re-structure the American economy away from the income statement/P&L and toward the unsustainable balance sheet leading to the inevitable meltdown. 
Post-meltdown, the task of the economic planners needs to be to re-engineer and re-structure the American economy to introduce institutional infra-structure into the extraction and exploitation of commodities. That process is organizing itself under the banner of the green movement. 
The teaching of the Bible is that the values of stewardship are the values of institutional infra-structure coupled to a respect for property and covenantal relationship. 

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