Thursday, 3 March 2016

Investigating climate change and its influence on Egyptian Old Kingdom collapse


Background

In recent decades a theory emerges that link the chaotic period in Egyptian history during the end of Old Kingdom and beginning of first Intermediate Period to climate change and climate-induced catastrophes (Bell, 1971; Bernhardt et. al, 2012). This essay aims at reviewing evidences of social unrest and a major climatic event that caused severe aridity throughout the African continent during the period. The latter half of the essay aims at assessing climatic impact on Egyptian society and examining the climate as a possible driving force behind social changes during this period.

Period of Examination

The practice of dividing Egyptian history into distinguishable phases originated from 19th century historian (Shaw, 2000) and is a common practice in studying ancient near-Eastern civilizations (Bryce, 1998). Historians conveniently divide Pharaonic Egyptian history into three kingdoms namely Old, Middle and New kingdom, alternated by periods with major decline, namely the first and second intermediate periods (Bryce, 1998; Shaw, 2000). The Old Kingdom of Egypt is an important period in ancient Egyptian history which flourished from 27th to 22nd century BCE. During the Old Kingdom, Egypt saw a significant increase in monumental construction projects, with the most well-known example being the Great Pyramid on the Giza plateau built during Khufu’s reign. Its end is marked by major decline of centralized government and is traditionally dated by Egyptologists to around 2,160BCE (4,160yBP) and is associated with political and economic instability (Shaw, 2000). This essay will examine social changes and climate evidences during the late third millennium BCE.

Written record and archaeological evidences

Towards the end of Old Kingdom and the beginning of first Intermediate period, we have historical evidences showing it is a time of systemic collapse of centralized governmental administration, political and economic instability, internal war among provincial leaders and external troubles such as invasion of nomadic tribes in Egypt. Whether it is a rapid collapse or a more gradual decline is still subjected to debate, and many social-political factors have been proposed as possible causes of the decline. They include decline of economic power of the king due to ideological factors, collapse of fiscal system and ambitious local leaders. Scholars have yet to conclusively pin-point a single most important factor in the collapse and disagreements remain. However, the generally accepted base-line is that the first Intermediate Period is accompanied by crisis (Shaw, 2000; Hassan, 2007). Textual evidence of a major social unrest can be found in tomb inscriptions. According to the autobiographic inscription on Ankhify’s tomb, which is dated to the first Intermediate period, it recorded a dramatic chapter of famine and massive population migration. The hieroglyphic text recorded widespread hunger in Upper Egypt and contained description of people even reverted to cannibalism (Laurent, 2008). Other literary sources dates to the same period also revealed the phenomenon of consistent low Nile inundation and grain shortage. However, written records are criticized to be vulnerable to biases and unreliable, precise dating of these records is also troublesome (Hassan, 2007).

In order to further confirm the major social upheaval recorded by text during the late Old Kingdom and early Intermediate Period, archaeological evidences are of critical importance. There are indeed archaeological excavations suggesting widespread armed conflicts during the same period (Hassan, 2007). When textual accounts are read in combination with archaeological evidences, the case sounds convincing that the fall of Old Kingdom and the Intermediate Period are temporarily correlated with a time of bad harvest, food shortage and social unrest. However, food shortage can be due to many reasons; it could be that political instability and war that leads to farmland abandonment or climate-induced crop failure resulting in economic turmoil, reduction in tax revenue and state failure. Correlation does not automatically imply causation and geological evidences of low Nile at that time is necessary to establish the causation relation. Textual references give us little insight apart from descriptions of Nile inundation, and since reliability of such sources are subjected to question and debate (Hassan, 2007), more circumstantial evidences are needed. In order to further investigate the case and establish the link between climate, agriculture and the demise of Old Kingdom, reconstructed past climate proxies are used for further analysis.

Reconstructing past climate

Oxygen-18 content in the ice core obtained from Greenland ice sheet is a useful proxy in approximating past temperature fluctuations in a hemispheric scale. When the raw data available from the NOAA database is examined and plotted on a graph, it clearly shows a period of hemispheric cooling which peaked at around 4,700yBP (Bintanja et al., 2005). However we must be careful not to draw premature conclusion based on the reconstructed temperature data only because of resolution and dating issues, and also the location where the core is obtained may not reflect local climate variability which can affect the climate condition in the area under investigation. Furthermore, the time period of cooling does not match the Old Kingdom collapse and the two events deviate by centuries. Drilling of sediment core in the Nile Delta region revealed a possible dry-up of the delta, confirming decrease in Nile flow recorded the ancient texts. Investigation on sediment samples obtained Memphis near modern day Cairo revealed increased desert sand deposition, indicating possible expansion of desert area and even engulfment of human settlements (Hassan, 2007). One of the most important pieces of evidence for a severe drought in the Nile delta area came from Burullus Lagoon, Egypt. A 27.5m long sediment core collected in the lagoon shows a significant decline in Cyperaceae pollen and elevated level of deposited microscopic charcoal at around 5m depth, which its deposition can be calibrated to around 4,000yBP. The reduction of Cyperaceae pollen indicated arid climate and elevation in charcoal particle indicated increase occurrence of fire in proximity (Bernhardt, 2012). Evidences found in Israel and Jordan also revealed widespread aridity and desertification affecting the Middle Eastern region (Hassan, 2007). These reconstructions of past climate echo with the written records of ancient Egypt and demonstrated that the references to low Nile described in these texts during the first Intermediate Period are well supported by available geological evidences.

Reconstructions of precipitation pattern and lake levels in different parts of Africa revealed reduction in rainfall and resulting in dry climate in those regions, providing possible explanations for consistent low Nile during the time period (Gasse and Champo, 1994). Furthermore, Bernhardt (2012) suggested that Southward shift of Inter-tropical convergence zone (ITCZ), a line where wind originated from the North and South hemisphere met can result in the decline in precipitation in the upstream region of the Nile. Reasons proposed for the shift in ITCZ include influence from solar radiation and ocean conditions (Gasse and Champo, 1994). Since the precipitation pattern in the area directly determines the amount of water going into the river flow, this in turn affected the Nile inundation.

Climate and Egyptian Society

In order to understand the cause-and-effect relationship between climate and Egyptian society, we need to investigate the basic: Egyptian agricultural system. The Egyptian agricultural was and still is heavily concentrated at proximity of the Nile River. The Nile was regularly flooded and this provided fertile soil for cultivation, and the whole Egypt depend on it to survive. Since the Egyptians practice irrigation to expand the area of cultivated farmland, agricultural production in ancient Egypt is expected to be more sensitive to Nile flood than to local precipitation condition (Shaw, 2000). If there was insufficient rainfall in a particular year, the Egyptians can often mitigate the problem by diverting more water from the river flow to compensate. On another hand, upstream precipitation which affected the regular flooding of the Nile and the amount of water flow in the Nile itself, are expected to be of critical importance to the harvest in the river valley because the Nile both supported the irrigation system and brought fertile soil, these two factors are important factors that determine the carrying capacity of the Nile valley. When the climate changed and the level of Nile receded to a low level, the area of land that can be cultivated declined as the available amount of water extractable from the river decreased. Prolonged failure of inundation also makes the soil less fertile. These would have been a double blow to the Egyptian agriculture and economy. When grain shortage became a serious problem and the basic needs of the population can no longer be satisfied, these would have resulted in collapse of civil society (Shaw, 2000; Hassan, 2007). As the previous discussions have demonstrated, currently there are multiple evidences showing climate catastrophes indeed occurred approximately at the same time as the Old Kingdom collapsed, the Nile provided the necessary link between changes in climate and influences on Egyptian agriculture. The availability of multiple independent evidences are so convincing that even if climate is not the sole factor that contributes to the collapse, it is among one of the most important factors that destabilize the society.

Although various climatic reconstructions support the hypothesis that around 4000yBP there was a widespread aridity in Eastern Africa, questions still remain because not all evidences fit into the picture nicely. According to Bernhardt (2012) the reconstructed drought period began long before the Old Kingdom collapse and lasted well into the early 2nd millennium BCE. It peaked at 3,800yBP and this is already centuries after the collapse of Old Kingdom. However, political unity in Egypt was re-established under the Middle Kingdom around 4055yBP (Shaw, 2000), this means the onset of severe aridity overlaps with the restoration of political order in Egypt. This centuries-long-gap between late Old Kingdom collapse and the peak of the drought period remain unexplained. Although it could be partially attributed to dating error using different methods, this still serve as a reminder that researches attempting to explain Old Kingdom collapse from the perspective of climate change is still ongoing.

Human Adaptations and speculations

Climate change can bring miseries to societies such as famine and poverty; however it can also be a catalyst to changes because humans are capable of adjustments and adaptations. By examining the social and political changes during the late Old Kingdom and the early first Intermediate Period, many of these developments in fact make sense and can be seen as adaptations to climate change.
First and most important of all, there are evidences suggesting that the Egyptian society did not enter into a total collapse and there existed “Striving culture among the population of lower economic status” during the period (Shaw, 2000). Therefore, the downfall of a strong centralized state can also be viewed as a shift of power balance away from the court of Pharaoh towards provincial, local communities and towns. This represented a drastic change in social institution. When facing environmental disasters, provincial leaders adopted loss reduction strategies and devised innovative solutions to survive. Nomarchs could keep local irrigation canals and infrastructures in good shape to extract the maximum they could get from the river (Hassan, 2007). The rationale behind their decision to break away from the central government, and replace it with self-autonomous governance, might also be to avoid taxation and surplus redistribution by the central authority. During these difficult times, local leaders must keep whatever they could keep to ensure maximum security of food supply. These are reasonable speculations given the situation they were facing.

Apart from the dissolution of a strong central government, the elevation of armed conflict and civil wars can also be explained because bad time could promote mutually hostile behavior between groups of people due to intensified competition for resources. Towns and provinces endowed with less fertile land might have resorted to location changes for survival, and the process might not be always peaceful. Provinces fought each other in order to take possession of other’s surplus grain and cultivated land. Widespread aridity in the African continent can also explain nomadic incursion of more fertile Nile valley (Shaw, 2000). When nomadic tribes living in proximity with Egypt were hit by environmental catastrophes, they might turn to the Nile valley itself where land productivity was still much higher than surrounding desert and semi-arid areas.

Another adjustment of the Egyptian society could be associated with the decline of monumental constructions during that period. It is generally accepted that the labor force that construct the Great pyramids were not slave labors but rather Egyptians farmers. This means in order to satisfy the labor demand for the construction of the Great pyramids, a significant number of people must be diverted away from agricultural production. A large amount of surplus grain is necessary to support those people who are engaging in construction activities, and this involved redirecting surplus grains and could put great pressure on the agricultural system (Shaw, 2000). This might be an affordable luxury when the harvest was good. However when climate changed and the land carrying capacity shrank, one adjustment is that the Egyptian authorities turn away from constructing epic-scale monuments to conserve labor for agricultural activity. This explains the drastic reduction in scale of construction during this period when compared with earlier buildings erected during the golden age of the Old Kingdom.

Despite the environmental catastrophes and the daunting task of mitigation, Egyptian civilization survived the crisis and was reunified under a central government before the turn of the century. Chaos probably lasted for only decades (Hassan, 2007). The Middle Kingdom was established around 2,055BCE and it strived for some 400 years before the onset of another Intermediate period (Shaw, 2000). Nevertheless, this chapter in Egyptian history served as a witness to the flexibility of human civilizations and the capability of men to adjust and adapt to changes.

Conclusion

To conclude, paleo-climatology studies have shed light on the climate change event during the end of 3rd millennium and beginning of 2nd millennium BCE and contributed to a plausible explanation to the Old Kingdom collapse. Researches provided strong evidence that climate is a likely factor that caused social instability during the end of Egyptian Old Kingdom and many social-political changes documented during these periods can possibly be attributed to human adaptations to reduction in land carrying capacity. Although the theory has gradually gained mainstream acceptance in the field of Egyptology, reflected by its mentioning in standard textbook of Egyptian history (Shaw, 2000), unexplained mysteries remained and more works remained to be done by historians, anthropologists and paleo-climatologists.

References

  1. Bell B. (1971) The Dark Ages in Ancient History: I. The First Dark Age in Egypt. AJA 75 pp.1-26
  2. Bernhardt et. al. (2012) Nile Delta vegetation response to Holocene climate variability. Geology 40 pp.615-618
  3. Shaw I. (2000) The Oxford History of Ancient Egypt. Oxford University Press, Oxford.
  4. Bryce T. (1998) Kingdom of the Hittites. Clarendon Press, Oxford.
  5. Hassan F. A. (2007) Droughts, Famine and the Collapse of the Old Kingdom: Re-Reading lpuwer. The Archaeology and Art of Ancient Egypt: Essays in Honor of David B. O'Connor vol.1 pp. 357-378
  6. Laurent C. (2008) Famine. UCLA Encyclopedia of Egyptology. Department of Near Eastern Languages and Cultures, UCLA. Retrieved from: http://www.escholarship.org/uc/item/2nv473z9.pdf
  7. Bintanja et al. (2005) Global Temperature, RSL, Ice Volume (δ18O), 1,000,000 Years. World Data Center for Paleclimatology. NOAA. Retrieved from: ftp://ftp.ncdc.noaa.gov/pub/data/paleo/contributions_by_author/bintanja2005/bintanja2005.txt
  8. Gasse F. and Campo E. V. (1994) Abrupt post-glacial climate events in West Asia and North Africa monsoon domains. Earth and Planetary Science Letters 126 pp.435-456

Wednesday, 2 March 2016

Flexible Automation and The Rise of Small Firms in late 20th Century



Abstract

Since the 1970s, empirical evidences have suggested that small-sized firms have been playing increasingly important role in economic development, particularly in the United States. The first part of the essay is going to examine evidences for the rise of small business and changing firm size distribution. Then, to understand the roles played by small firms, the causes and consequences of shift in firm size distribution will be discussed. In this essay focus will be put primarily on how interaction between consumers and small firms, and how competition between small and big firms give rise to the rising importance of small firms in the late 20th century and how these interactions give insights to small firms’ function and characteristics in economy. Finally the findings about what role small firm play in modern society will be summarized in the conclusion part.

Rising importance of small business

Historically, especially from late 1940s to 1970, social, economic and political environment in the US provided favorable conditions for the rise of large corporations. Under fixed wage, stable price level, interest rate and exchange rate environment, these large firms took advantage of mass production technologies like highly specialized machinery to achieve maximum cost saving from exploiting maximum increasing return to scale (IRS) effect1. In this period manufacturing market was highly concentrated with few firms; price remained stable without intense price competitions2. The trend continued until the 1970s, when it reversed and small firms were observed to be rising rapidly, eroding large firms’ market share. Take manufacturing industry as an obvious example, small firms generate more new jobs than large firms and small firms’ share of employment experienced substantial increase. Number of firms experienced surge, while output per firm, firm size and plant size shrank in the same period1, 2. Small firms were also observed to be gaining market share from 1970s to 1980s. This recent trend is common among many developed countries including the US, UK, Finland, Japan, Italy, and Denmark, all showing consistent trend, with FRG (Western Germany) and Sweden as exceptions1.

Changing consumer preference

The rise of small business is not a simple phenomenon, there are more than one reason underlying this change. Basically the proposed reasons can be classified into demand side and supply side factors. Change in demand and supply characteristics of the market interact with each other to produce a market environment more favorable for small business in the late 20th century.

First of all, since the 1970s there had been a shift in consumer preference for product differentiation and new type of commodities, and weakening demand for mass-produced, standardized products. It is suggested that improvement in educational level, living standard, income and more intense import competition had resulted in higher willingness to pay higher price for more personalized goods and more consumers considered homogenous products with lower price inferior1, 2. As demand for mass-produced commodities weakened, large firms and their strong economy of scale technology no longer maintain an advantage above small firms. This newly created demand for innovative and diversified products, unfilled by any standardized off-the-shelf commodities, created a vacuum unexplored by existing producers. These unsatisfied market niches created favorable condition for potential entrants.

Organizational flexibility of small firms

From the producer side, small firms are not exactly “large firms with small size”; small and big firms are inherently different. They have different cost curves due to the different technologies they adopt and different management organization2. This determines the difference in ability between the two types of firms to respond to the increasingly volatile market.

First of all, small firms have inherent advantage in organization structure. Small firms usually have much fewer employees; they lack complex managerial structures and highly risk-adverse behavior in large firms1, 4. This also means that small businesses are almost free from bureaucracy problem which is one main cause for decision inefficiency in large firms’1, 2. Small firms also tend to have better complimentary and integration between different parts of the firms, also product innovation is often complemented with organizational innovation and adoption of new technologies (such as I.T. for management purpose) 3. This give small firm an advantage of quick and efficient decision making procedures and hence rapid response to any slightest change in demand characteristics, and ability to capture profit opportunities arise from “product spectrum vacuum” more quickly. Furthermore, this advantage is greatly reinforced by the technological innovation enabling highly flexible automatic production, which will be discussed later.

Finally, it is suggested that labor working condition in small firms has contribution to higher labor productivity. Large firms have more rigid working conditions linked to their bureaucratic management style. When compared with large firms, small firms offer more flexibility in working condition and more innovative and exciting work. Small firms also have much weaker unions primarily due to small workforce size in each firm. Thus, small firms are inherently less prone to worker dissatisfaction, strike and demonstrations which reduced labor productivity and hurt competitiveness of the firm1.

Adoption of new technologies in small firms

One of the most important differences between small firm and big firm is the difference in fundamental production technology. Small firms benefited largely from the rapid improvement in electronics in the late 20th century. Empirical study showed that small firms as well as large firms increasingly adopt newly introduced flexible automation technology such as numerically computer controlled (CNC) machinery and industrial robots2, 4. When compared with traditional specialized mass-production (mechanical automation) technology, CNCs are much more programmable and adaptable for large variety of tasks2. When these CAM technologies combined with Computer-aided design (CAD), design changes can be implemented rapidly4.

It is commonly argued that adoption of flexible automation leads to rise of small firms. In a highly volatile market with high demand for product differentiation, Output size for each specific product declined. Mass-production technologies no longer maintain competitive and cost advantage at lower output level, oppositely, flexibly automatic CNCs with batch production offer lowest production cost in the low output range1, 5. CNCs also enjoy lower set-up cost, fixed cost and inventory level the firm needed to keep4. With the rapid diffusion of flexible technology, entry barrier gradually broke down; small firms out-compete their large competitors by exploiting their own advantage in rapid product type repositioning and modifications to fill up fluctuations in market demand4.

The argument is never free from controversy and criticisms. As both large and small firms increasingly adopt CNCs in their production line1, it is unclear whether the overall effect will be in favor of small or large firms. In fact, because large firms usually depreciate more machineries than small firms, they tend to introduce new equipment sooner than small firms4. Also, arguably, large firms have more financial resources from retained earnings than small firms and can adopt better and more sophisticated DNC technologies, in contrast with lower efficiency CNCs adopted by small firms4. Besides, advancement in integrated electronic and computer-controlled production technology does not benefit flexible automated machines only, but also mass-production assembly line. That means after adoption of electronic control systems in mass-production machinery, they become more flexible and more capable in competition with flexible automation technologies4. As both arguments in favor for and against the hypothesis that adoption of flexible automation technology promoted the growth of small firms, statistics is necessary to check and determine the correlation between the two events in the real world.

In fact, empirical findings have shown that adoption of flexible automation technology has statistically significant negative influence on change in mean plant size in engineering industry, while mass production technology favors large firms2. Also, it was found out that although there is increasing trend in adopting CNCs in production in both large and small firms, small firms tend to reprogram CNC machines more and hence more likely to exploit the benefit of using CNC1. In spite of criticisms, the hypothesis that increasing adoption of flexible technology promoted market entry and growth of small firms (and hence driving down average firm size) stands the empirical testing. Moreover, another empirical study in 1990 showed that in engineering industry, large firms were often slower in adopting flexible automation machinery. The same study confirmed that firms were shifting out of mass-production technology and adopting flexible one during the time period 1978-1983. Besides, low quantity production, product diversity, complexity and technological level also favor shift into flexible production technology5.

Innovative small firms and technological progress

Another important reason small firms are becoming more and more competitive with respect to large firms is because the more innovative nature in many small firms. In a technologically advanced society, innovation is very important component because there is continuous competition among firms to introduce new products into the market in order to establish first mover’s advantage in the market.

1982 data from U.S. Small Business Administration showed that although in terms of absolute amount large firms have more innovations than small firms; innovation per million employees in small firms is significantly higher than that of large firms1. This shows that small firms employ people who were more productive in terms of innovation creation. Another evidence supporting small firms are more innovative is the fact that small firms only account for 3% business R&D expenditure, but contributed to more than 30% significant innovations3. One possible explanation to this observation is that there are many high-tech firms which are small firms in the industry3.

New technologies are becoming increasingly complex in the late 20th century and successful inventions involve cross-disciplinary knowledge. Small, high-tech firms do not have financial resources comparable to that of large multinational corporations, small high-tech businesses are usually supported by venture capital in early R&D stage and often have trouble raising sufficient capital. Small firms are often unable to undertake large investment projects like large multinational corporations due to resources constraint. Innovative products also targeted international market and generally have long investment horizons, increasing the uncertainties in the research project. The financial pressure and inability to undertake potentially highly profitable projects make collaborative network a much more attractive alternative solution. One of the most important strategies is technological collaboration between firms (in form of technological alliance, joint project and acquisition). Cooperation between firms and research institution/universities is also a common strategy undertaken by small businesses. These joint projects involve transfer of knowledge and specialization of expertise. International cooperation is not uncommon because such products often target international market3.

Another important strategy of small firms is high commitment in developing core technology. Small firms often devote a lot of resources into R&D effort. In research and development effort, retaining key personnel who possess critical knowledge and skill for the continuation and success of the product is particularly important in this technology building process3.

Apart from cooperation and technology building, some small firms interviewed by researchers stated that one important strategy is to produce a simpler product to generate cash flow to support development effort of new, sophisticated product. Small firms also target leading users and avoid competing directly with potential competitors by focusing on one or few particular market niche3.

Conclusion

Due to advancement in flexible technology since the 1970s, small firms are playing a more and more important role in the economy. While at the same time, small firms contributed significantly in developing new technologies via continuous R&D efforts. Technology advancement and rise of innovative small firms in fact reinforce each other, bringing faster overall technological progress in the society. Entry of small firms into industries increases competition intensity, shortening product lifecycle and promotes introduction of new products, demolishing monopoly power of traditional large producers and force them to change. It also increases product differentiation, as a result, consumers benefit. Entrance of small business is also a signal of profit opportunities, if small firms successfully develop a product to capture this profit opportunity, producers benefit. The overall consequences of the rise of small, innovative firms are strongly positive from consumer and firms’ point of view. Improvements in technologies also have long run effect on the continuous and healthy growth of macro-economy. To sum up the role small firms in a technologically advanced society is very important and it is important for policy makers to notice this and adopt favorable policies for the continuous entry and growth of small firms.

References
  1. Acs, Zoltan J. and David B. Audretsch, “Small Firms in the 1990s”, in Z.J. Acs and D.B. Audretsch (eds), The economics of small firms: a European challenge (1990), Kluwer Academic Publisher.
  2. Acs, Zoltan J., David B. Audretsch and Bo Carlsson, “Flexibility, Plant Size and Industrial restructuring” , in Z.J. Acs and D.B. Audretsch (eds), The economics of small firms: a European challenge (1990), Kluwer Academic Publisher.
  3. Dodgson, Mark, “Technology Strategy in Small and Medium-Sized Firms” , in Z.J. Acs and D.B. Audretsch (eds), The economics of small firms: a European challenge (1990), Kluwer Academic Publisher.
  4. Calsoon, Bo, “Flexibility and the Theory of the Firm”, International Journal of Industrial Organization 7 (1989), 179-203
  5. Taymaz, Erol, “Flexible automation in the US engineering industries”, International Journal of Industrial Organization 9 (1991), 557-572