Disintermediation

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From the Wikipedia at http://en.wikipedia.org/wiki/Disintermediation

See also their article on Reintermediation

Definition

"In economics, disintermediation is the removal of intermediaries in a supply chain: "cutting out the middleman". Instead of going through traditional distribution channels, which had some type of intermediate (such as a distributor, wholesaler, broker, or agent), companies may now deal with every customer directly, for example via the Internet. One important factor is a drop in the cost of servicing customers directly.

Disintermediation initiated by consumers is often the result of high market transparency, in that buyers are aware of supply prices direct from the manufacturer. Buyers bypass the middlemen (wholesalers and retailers) in order to buy directly from the manufacturer and thereby pay less. Buyers can alternatively elect to purchase from wholesalers. Often, a B2C intermediary functions as the bridge between buyer and manufacturer."

http://en.wikipedia.org/wiki/Disintermediation 2006

In economics, disintermediation is the removal of intermediaries from a supply chain, or "cutting out the middlemen" in connection with a transaction or a series of transactions. Instead of going through traditional distribution channels, which had some type of intermediary (such as a distributor, wholesaler, broker, or agent), companies may now deal with customers directly, for example via the Internet. Hence, the use of "factory direct" and "direct from the factory" to mean the same thing.

Disintermediation may decrease the total cost of servicing customers and may allow the manufacturer to increase profit margins and/or reduce prices. Disintermediation initiated by consumers is often the result of high market transparency, in that buyers are aware of supply prices direct from the manufacturer. Buyers may choose to bypass the middlemen (wholesalers and retailers) to buy directly from the manufacturer, and pay less. Buyers can alternatively elect to purchase from wholesalers. Often, a business-to-consumer electronic commerce (B2C) company functions as the bridge between buyer and manufacturer.

http://en.wikipedia.org/wiki/Disintermediation 2017-01

Discussion

The Coming Great Disintermediation

John Michael Greer:

"One of the results of the contraction of the real economy is that the costs of intermediation, financial and otherwise, have not merely gone through the roof but zoomed off into the stratosphere, with low earth orbit the next logical stop. Health care, again, is among the most obvious examples. In most parts of the United States, for instance, a visit to the acupuncturist for some ordinary health condition will typically set you back well under $100, while if you go to an MD for the same thing you’ll be lucky to get away for under $1000, counting lab work and other costs—and you can typically count on thirty or forty minutes of personal attention from the acupuncturist, as compared to five or ten minutes with a harried and distracted MD. It’s therefore no surprise that more and more Americans are turning their backs on the officially sanctioned health care industry and seeking out alternative health care instead.

They’d probably be just as happy to go to an ordinary MD who offered medical care on the same terms as the acupuncturist, which happen to be the same terms that were standard a century ago for every kind of health care. As matters stand, though, physicians are dependent on the system as it presently exists; their standing with their peers, and even their legal right to practice medicine, depends on their willingness to play by the rules of intermediation—and of course it’s also true that acupuncturists don’t generally make the six-figure salaries that so many physicians do in America. A hundred years ago, the average American doctor didn’t make that much more than the average American plumber; many of the changes in the US health care system since that time were quite openly intended to change that fact.

A hundred years ago, as the United States moved through the early stages of its age of imperial excess, that was something the nation could afford. Equally, all the other modes of profiteering, intermediation, and other maneuvers aimed at maximizing the take of assorted economic sectors were viable then,since a growing economy provides plenty of slack for such projects. As the economics of growth gave way to the economics of stagnation in the last quarter of the 20th century, such things became considerably more burdensome. As stagnation gives way to contraction, and the negative returns on excess complexity combine with the impact of depleting nonrenewable resources, the burden is rapidly becoming more than the US economy or the wider society can bear.

The result, in one way or another, will be disintermediation: the dissolution of the complex relations and institutions that currently come between the producer and the consumer of goods and services, and their replacement by something much less costly to maintain. “In one way or another,” though, covers a great deal of ground, and it’s far from easy to predict exactly how the current system will come unglued in the United States or, for that matter, anywhere else.

Disintermediation might happen quickly, if a major crisis shatters some central element of the US economic system—for example, the financial sector—and forces the entire economy to regroup around less abstract and more local systems of exchange. It might happen slowly, as more and more of the population can no longer afford to participate in the intermediated economy at all, and have to craft their own localized economies from the bottom up, while the narrowing circle of the well-to-do continue to make use of some equivalent of the current system for a long time to come. It might happen at different rates in different geographical areas—for example, cities and their suburbs might keep the intermediated economy going long after rural areas have abandoned it, or what have you.

Plenty of people these days like to look forward to some such transformation, and not without reason. Complexity has long since passed the point of negative returns in the US economy, as in most other aspects of American society, and the coming of disintermediation across a wide range of economic activities will arguably lead to significant improvements in many aspects of our collective life. That said, it’s not all roses and affordable health care. The extravagant rates of energy per capita that made today’s absurdly complex economy possible also made it possible for millions of Americans to make their living working in offices and other relatively comfortable settings, rather than standing hip deep in hog manure with a shovel in their hands, and it also allowed them to earn what currently passes for a normal income, rather than the bare subsistence that’s actually normal in societies that haven’t had their economies inflated to the bursting point by a temporary glut of cheap energy." (http://thearchdruidreport.blogspot.be/2014/10/dark-age-america-involuntary-simplicity.html)

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