The Production Tier

Have you ever been in a car with several people on the way to some destination when, while you all agree on what the destination is, everyone has a different opinion on the best route to get there?

Well, economics is the same way. Some say that the best way to get to where we want to be is free-market capitalism, others lean toward communism, while the rest fall into the various shades of socialism in between. With all of our wrangling about the best route to take, we have badly lost sight of what the destination itself should be.

Today, why don't we put aside all of the usual route-based thinking concerning economics, all of the debate about capitalism, socialism and, communism, and refocus on our destination?

Remember that terms like communism and socialism are from the Nineteenth Century. At the time, the vast majority of workers were engaged in work that actually produced something so that the bloat in non-productive workers in the economy that I described in "The Extreme Inefficiency Of Wealth Production" , on the economics blog, was not yet an issue.

Have you ever wondered why since productivity has drastically increased over the past few decades, most people are hard at work, we have more knowledge than ever yet, there is so much lack and want?

Part of the reason is that we have drifted into a situation in which only a relative few are engaged in work that actually produces anything tangible. There is much talk about "creating jobs", the question is: "jobs doing what"? Our economy is designed for efficiency on a local scale, but is highly inefficient on a large scale because one of the weaknesses of the free market is that it lacks big-picture, long-term thinking, and this is the result.

Suppose that there was a factory owner who had hired the workers he would need to operate the factory. Some workers would be production workers inside the factory, while others would be drivers to get the finished goods to market and sales people to bring in new orders.

Wouldn't it be logical to have only as many workers as necessary working as drivers and salesmen, so that the maximum number of workers can be actually producing goods? Why don't we have this vision for the economy as a whole?

The way I see it, there is a "production tier" of workers. I have referred to this in previous postings on economics. All workers are not created equal, the tier is as follows:

1) Those who make things. This includes researchers, non-fiction writers, programmers and, education workers, because I define knowledge as wealth.

2) Those who fix things. This includes medical workers, mechanics and all emergency workers.

3) Those who move things. This includes salespeople, merchants and, all who facilitate business connections.

4) Those who run things. This includes politicians, management, the military and, legal workers.

I define our fundamental goal as having as many workers as possible as high as possible on the tier, regardless of what "route" we take to get there. These "routes", like capitalism, communism and, socialism should not be ends in themselves, but only means to ends. We have lost sight of this production tier simply because at the time economics was broken down into these rival systems, the vast majority of workers were engaged in actual production.

Of course we need those workers in the lower tiers, I am not stating that we should scrimp on them in any way. But our goal should be to have only as many workers as necessary there so that as many workers as possible can be engaged in actually producing wealth. One factor that hides the production tier is the fact that the most powerful people in society are actually on the lowest tier.

This certainly does not mean production just for it's own sake. It means production of those goods that are real needs. To do this, we obviously need a continuous flow of new ideas to balance increases in productive efficiency so that the maximum number of workers remain in productive work.

I say that when it comes to economics, there is really no substitute for actually making things. An economy based on actual production of goods that people really need is always more secure and stable than an economy based on moving paper around.

Notice how, in the recent economic downturn, China was virtually unaffected and Germany was shown to have the most stable economy in Europe. The reason is that the economies of both countries are based on actual manufacturing. Tourism is very fickle as a source of income and resources are vulnerable to fluctuations in demand and prices.

What about national security? Isn't a country really more secure if it is capable of making and growing all that it needs, if necessity demands?

So, we can say that politics made really simple is based on paying workers the right amount relative to the work that is being done. Pay them too much and it just equalizes in the form of inflation. Pay them too little and it does not leave enough money available to buy all of the goods and services being produced in the economy, leading to a cutback in production and a recessionary spiral.

Now, we can add this production tier to basic politics and economics. Get as many workers as possible as high on the tier as possible, but they must be producing goods that there is a real need and demand for.

This is related to the concept of "fundamental importance" that I outlined in the posting "Economic Boom And Bust Cycles" on this. When investing in a given sector of the economy, it must be remembered that some sectors are dependent on other sectors and we only create a "bubble", that will eventually burst, when we invest so much in one sector that it upsets this balance.