Conclusion
ALLOW me to borrow and tweak former US President Clinton’s campaign slogan but, this time, emphasize the importance of physical-wealth creation or the physical economy, or the lack of it as causing mainly massive local poverty: “It’s the [physical] economy stupid!”
Fair pie-sharing vs increasing the pie
INEQUITABLE or unfair distribution of the pie is a valid concern. More so with prevailing oligarchic control and presence of rentiers and rent-seekers in society, or those enjoying benefits from the labor and ideas of others, without investing anything except the privilege of connections.
Marxist-Lefts carp about the pie not equally shared. What if the theoretical pie is now equally shared, but you have a shrinking pie, or no pie to start with, will everyone be equally better? Of course not, as economics is also more about increasing the pie—or production and being creative.
Biblically, the original economics in Eden, and long before the God of Abraham, the Jews, Christians and Muslims gave the 10 Commandments to Moses, He issued his
first economic policies to humankind in Genesis, page 1.
These were not distribution instructions or guidelines on handling market squabbles about pie-sharing, but clear-cut executive orders to be 1) fruitful and multiply, meaning be productive and reproductive; 2) have dominion over creatures and nature; and 3) live in the “image and likeness” of God, which cannot be defined in human physical attributes like race, color, etc., but must be abstract and ironically concrete, being the epitome of metaphor and, by deduction, can only mean being righteous and, because He is the Creator, becoming creative as well.
By being productive, having dominion over nature and being creative means conquering nature’s inherent limits by making it sustainable through human creativity, science and technology, i.e., discovery of agriculture, livestock growing, reforestation, etc. Multiplying means reproduction as a product of love for each other, to perpetuate life itself and in recognition of what Julian Simon considers “humans” in his book as “The Ultimate Resource.”
Marxists, free-marketers are flipsides of same coin?
MARXIST-socialist-leftists on one extreme and free-market capitalists on the other extreme are actually flipsides of the same coin, but we were made to believe both extremes were diametrically opposed ideologically, which they are. But talking about coins for a change, both have something in common. Both squabble over the sharing of the economic pie. Marxist-leftists believe the pie is unfairly shared, which make it inherently political and contentious. Marxists claim assets of the wealthy are “congealed labor” or accumulated surplus value from the toils of the exploited throughout history, and their solution is a class struggle or bloody revolution.
Similarly, free-market capitalism is a permanent battle about sharing the pie, a dog-eat-dog market competition that smacks of social Darwinian “survival of the fittest,” which reduces humans into beasts. Here, humans survive like wild predators without concern for others in the “law of the economic jungle,” whereby you end up with winners and losers.
Many also die, even in greater numbers from diseases resulting from poverty, albeit not too drastic and noticeable, being slow deaths. Mortalities from respiratory diseases alone, which are curable and preventable, total about 85,000 a year. More die from poor hygiene and lack of potable water and toilet facilities.
Financial growth, but declining physical wealth?
IT’S undeniable markets and freer distribution of products are vital, but what creates real value is physical wealth creation, a concept started by Gottfried Wilhelm Leibniz (1646–1716). Leibniz was a German scientist, founder of calculus and a polymath of many talents, whose ideas on physical economy and those after him, like Alexander Hamilton, were erased from history.
In short, the issue is not between protectionism versus liberalization, regulation versus deregulation, nationalism versus globalization, or totalitarianism versus democracy, or socialism versus capitalism or central planning versus free market. The real issue that is causing so much poverty is collapsing wealth creation, which produces real value and productive jobs.
Economic growth we see is often mere financial growth, but the real, physical economy may be collapsing. Agriculture as a percentage of GDP has steadily declined
from 31 percent in the late-1960s to only 9.7 percent in 2016. Industry as a share of GDP also plunged continuously, from 40.52 percent in 1980 to 27.8 percent of GDP in 2014, partly because of stiffer import competition.
When services don’t count
MAKING up for the difference are services, such as education, health, transportation, communications, trade, banking, security, music and arts, government services, etc., which are socially necessary as they complement and enhance the productive sectors—agriculture and industry.
Unfortunately, other services have dubious contributions to society, and the economy. Elevator boys who are found in many buildings don’t contribute any value but, because they get salaries, they are counted as part of services and, therefore, contribute to the economy. We don’t need PHDs—“Push Here Dummies”—to run our volatile elevator economy up and down. Similarly, new jobs like dispatchers, barkers and fare collectors, have been created at jeepney terminals. But are all nonproductive jobs, sharing in the income of the driver.
At our subdivision, from one sari-sari store, there are now two inside and two right outside, all selling to the same households. Can we say the economy grew because retailers increased four times? But the pie is not increasing; more are just sharing in the same pie. One sari-sari store closed shop after SaveMore and Robinsons set up nearby.
Physical economy in agriculture
IN the agriculture-market nexus, both farmers and consumers are at the mercy of traders. We can’t blame traders, as they simply follow their business instinct for maximum profit and what is logically convenient in least efforts and costs but may translate to retail prices hitting 10 times farm-gate prices.
Given a choice between trucking 10 tons of vegetables a day and 100 tons a day but earning the same, a trader will logically choose 10 tons a day, as that’s what’s taught in business school; and it’s common sense. If he chooses 100 tons a day, he spends on 10 more trucks, 10 times more storage, 10 times more drivers and personnel, 10 times more fuel, 10 times more toll fees, insurance fees, etc. A trader has no loyalty to production, and his master prophet is profit or higher margins even at lesser volumes. Given a chance to earn more from imports, he won’t hesitate.
In contrast, a farmer will go for 100 tons, which means 10 times more output, 10 times more jobs, 10 times more packing, 10 more times storage, 10 times more trucking, etc.
Consumer symbiosis, trader-farmer paradox
FARMERS and consumers have this symbiotic relationship.
If farmers produce volume and more variety, it means cheaper prices and more choices for consumers. Unless farmers are empowered and organized complete with all logistical support of his own, the middleman-trader will always meddle with the imperfections in the market.
Expectedly, traders will only procure our example of 10 MT a day, leaving the farmer with unsold harvests that dampen farm prices. Farmers, ironically, become the victims of their own successes in production, as their produce are not all absorbed by traders, resulting in a production paradox with traders, who will always prefer to profit from higher margins than from burdensome volumes in an imperfect market.
We cannot simply leave the imperfect market alone to the machinations of Adam Smith’s “invisible hand,” which could legitimately be pickpocketing the wallets of the helpless farmers and, thus, also contribute to why farmers remain shackled in poverty.
Image credits: Nonie Reyes