Whether it’s a good economy or a bad economy depends on the system of production and distribution
What people think that economy is...
Most people would be hard put to describe what an economy is. They would, at best, say that it’s a system of buying and selling, and if there is a lot of buying and selling, that would mean that there is a lot of production, and that in a supposedly good economic system, this would result in a lot of sales which would, in turn, result in lots of jobs (which would be well enough paid for most people to live well). In a bad economy, there may or may not be a high level of production, but there would definitely not be a lot of sales, and this would mean lower employment and lower wages/salaries. This is an incorrect definition of an economy.
What an economy really is.
An economy is a system of production and distribution. In the communism of the old USSR , a handful of people decided which products were to be produced and where and how distribution took place. Whether the cost of production was affordable, whether the people wanted the products, whether the products were being distributed to the people who wanted or desired was not taken into consideration, and the system, therefore failed miserably.
In capitalism, the prevailing understanding is what people are buying will be an indication of whether the products are desired or not, and this will indicate which products are to be produced and whether they are to be distributed.
So, to repeat, an economy is a system of production and distribution.
Does free market trade produce a good and fair economy?
Before one can answer that question, one has to define what a free market is.
The free market is a business concept that if government does not regulate or legislate laws that interfere with how business wants to conduct its trade, then business will flourish and everybody will live happily ever after.
The happiness-ever-after module will result because if people don’t buy a product, this will mean that business is producing the wrong product that they will, therefore, discontinue the production of that product, and that will result in only products being produced that the market will need or desire. The other idea is that if consumers object to the way a company runs its business, i.e. by harming the environment, then consumers will boycott the product and, consequently, the business will either go out of business or change its practice.
The holes in this viewpoint are numerous. Firstly, as a result of public relations and spin, most of what companies do is behind the scenes. Consumers don’t know what is being done, and it is sometimes extremely difficult to find out. In addition, it can take a decade or three before the effects are known, and by that time the company or corporation has racked up sufficient money to pay the fines with ease plus have no further need to make any more money. Many companies repeatedly indulge in harmful practice because it is highly profitable. So if there is no legislation against it, there would be an enormous increase in these practices. So a free market might make a tremendous amount of profit for business, but it would destroy our planet as a consequence.
The second objection to the idea that a free market is a happy-ever-after solution is that the only way that most of the products can be sold is to advertise. Without marketing and advertising, there would be no ‘market.’ People would simply not buy the products. So why is advertising and marketing so necessary to so many products?
The major reason for the Great Depression was that the largely rural population of the 20s and 30s did not see any reason to buy yellow rubber ducks (and those kind of products). People of that time were sensible; why buy something that has no long term use?
At the end of the Great Depression, it was decided that there must never be another depression again. So Edward Bernas, the nephew of Freud, came up with a commercial brainwashing solution – advertising. Advertising would work by repeating the same message over and over again, “Buy this red balloon because it will give you a greater feeling of satisfaction.” After repeating it three times in an hour program on TV each day for three weeks, people would be buying red balloons because they wanted a feeling of satisfaction. The fact that red balloons did not bring satisfaction, and the fact that they would all land up in landfills, didn’t appear to be of any concern. So the belief that only products that are desired and needed in a free market is not true. It would be true if there was no commercial propaganda (advertising and marketing.) But that’s not what those who agitate for a free market mean. What they mean is an environment without legislation and regulation that can use brainwashing (commercial propaganda) to promote useless products.
There will be those who say that advertising and marketing play a role. They are correct. Indeed. However, responsible advertising and marketing would NOT utilize brainwashing and/or methods of indoctrination to get its message across. Instead there would be a library of product information available which people could search in order to fill their personal requirements and desires.
The last objection to the concept of a free market is that it products don’t reach areas where they are not sufficiently profitable. That does not mean that those products are not required there. It just means that the five or six people who need a particular product aren’t able to get it without a great deal of trouble and expense because it wasn’t in the interests of the commercial entity.
In other words, the free market works for business; it does NOT work for the general population and it does invite a clean and safe planetary environment.
The for-profit motive
There is a belief amongst many that if people did not make a profit, then there would be no reason to go into business, and if there was no business, then there would be no production or distribution. This argument also has many holes.
Firstly, most people do NOT work for profit. They work for wages or a salary. A profit is something quite different to a wage or salary. A profit is the excess money that is left over after all wages, salaries, and business expenses have been paid. The profit then either goes to the owner or is split amongst shareholders.
The idea that there would be no innovation and that research and development would disappear is not supported by evidence. Tesla worked for no other reason than to uplift humanity. Alexander Flemming did not invent antibiotics in order to become rich. His motivation was not wealth. The Wright Brothers did not find methods of flying because they were after profit. They did it to prove the concept. Charles Babbage did not lay the foundation for computers because he was after a profit. James Watt did not invent the steam engine because he wanted to make a name for himself or pocket some wealth. Indeed, most inventors and discovers have remained poor in the past, and in recent years, while they are better off, they are not the receivers of great wealth. So innovation and research would continue without the profit motive.
Another point often raised it that there would be no investment by shareholders if profit wasn’t on offer. That is correct. However, crowdsourcing is now taking off big time, and so investment is very much available to inventors, researchers, and discovers. In addition, far from being a dominant market for investment, the share market is a vehicle for speculation. Enormous sums of money change hands simply in order to make money out of money. As a result, most people lose money on the stock market in the long term. Those who make money tend to have had insider information, regardless of their denial of this.
Lastly, there is the reasoning that while the inventors and researchers might produce the product, they don’t distribute it. And that is true. But then we come back to whether profit enables an economy that works for all (a good economy) or whether it only works for the few (a bad economy). Quite clearly, we do not have a good economy despite the fact that enormous profits are being made currently. The majority of humanity live in dire straits
A sustainable system of production and distribution that works for all
So we know that a centrally controlled economic system doesn’t work in the medium to long term (only a few at the top live well) and we see the same thing in a system driven by profit ( increasingly, only a few at the top live well).
A system that would work for all would have the following attributes.
- Commercial brainwashing (current styles of advertising and marketing) wouldn’t be required to sell the product. The product would be needed and desired without having to persuade people to buy it. In this way, far fewer products would be required and our landfills would be more empty. In addition, there would be far less pollution and our use of our resources would slow down. Our resources on this planet are finite
- Distribution would reach all people, regardless of whether the people who did the distribution felt that it wasn’t worth the effort. People in far flung rural areas need as much access to products and services as people in central cities do. In fact, it is the height of insanity to have so many people living in cities. For the sake of the environment and human well-being, it is essential that people not only live in smaller communities, but that they are more scattered across the geographical terrain.
- That people’s access to products should not dependent on whether they have a job or not. This is particularly true at this time as within the next five to fifteen years, the advent of AI (artificial intelligence), commercial drones, and soft robots, will result in half of humanity being without work. A system needs to be developed that ensures that most of the world’s population does not sink into extreme poverty while the top ten or twenty percent have an extremely wealthy lifestyle. Quite apart from the dystopian horrors of this, it is inevitable that violent revolution would follow.
- The cycle of haves and have-nots which has been a part of most economic systems for millennia needs to be eradicated. There is no reason why this cannot be done. We have the knowledge and the tools. We lack only the will to do this.
Are you able to design a new economic system?
If you are starting a business, this has proven to be a successful and community friendly option. In terms of growth, Mondragon is the most successful co-operative in the world.
The reason that politicians are unable to fix the economy is that the issues with the economy are systemic. That means that it can't be fixed because the system itself is unsustainable and inefficient.
© 2015 Tessa Schlesinger