Reaching for Economies of Scale

One of Rural System’s foundational principles is the idea that economies of scale must be achieved for a rural community to succeed. Small businesses struggle on their own in the present American economy. With Walmart and other massive corporations and franchises dominating the scene, the small business is finding it difficult to compete. Rural areas especially are suffering from poverty and unemployment. In such a climate, Rural System proposes developing many small businesses at once that can work together, and so creating the much needed economies of scale.

wheel of success

As a wheel with many spokes is well-supported and well-prepared to carry weight forth, so does an economy of scale carry small businesses forward into the future.

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Here’s why economies of scale matter:

  1. Efficiency: In systems of many interlinked businesses you will find increased specialization in labor, which permits managers to gain expertise in their functions and to spend time on tasks where their knowledge and skills are appropriate.
  2. Effectiveness: Specialization also allows for direction of expertise where it is most needed. This is only enhanced by the aid of a prescriptive software system.
  3. “It takes money to make money”: Only large units with capital can efficiently employ available technologies such as those of precision agriculture.
  4. Synergism: Several methods, programs, or committee actions can be meshed to achieve the efficiencies of interaction and to regulate better the outputs to meet demands.
  5. Bulk advantage: Large-scale purchasing or selling has price advantages.
  6. Stability: Temporal and seasonal differences can be accommodated better in large than small groups.
  7. Resilience: Uncertainty in demands and costs can be better hedged against in large groups.
  8. Waste reduction: Large scale users can typically better use by-products and recycle substances.

Economies of scale are critical to creating and maintaining effective systems. In the absence of an economic system that favors the small business, Rural System proposes creating local systems that allow small businesses to work closely together and so thrive. What do you think- can this be done from the top down?

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About Laurel Sindewald

Laurel is an alumna of Warren Wilson College with a BS in Conservation Biology and a BA in Philosophy. She is a writer for Rural System, Inc.

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