It is theoretically very important to differentiate supply and demand. Almost
without exception theoretical discussion on economics revolves around the
supply side. People pay always attention that there are enough capital to make
new investments.
I think that this is wrong, but we should look more about the demand side of
the economic coin. I would say that it is far more important and especially it
is now, because supply side is expanding ever increasing pace, but consumers
has not enough purchasing power to meet the supply. Of course this has problem
that prices are dropping, but I think that the drop in price only drives
weakest manufacturers out of the market and those are winning, who can produce
with cheapest costs. And today it always means misusing cheap labour force in
developing countries.
Therefore I would say that it far more important to boost demand side as much
as possible. This gives the actors in the market better opportunities for
honest choice, where also quality and ethical foot print are also evaluated.
Not always the cheapest price is the best option for economic growth developing
new innovations.
Also when demand side is optimised, there is more room for different
competitors to push into market, because there are also more niches for
different producers. When cheapest price is the strongest denominator, there is
little room for competition, because the economy of scale will triumph the
market.
And more importantly, if demand side is high, supply side will always meet the
demand, because production and selling products is more profitable. Therefore
finding capital is not the problem.
And last, but certainly not the least argument is, that if there are too much
wealth used for investments, it goes without saying, that there are huge
amounts of misinvestments occurring. But if markets are controlled by demand
side, then probability for misinvestments is greatly reduced.That is mostly
because new entrepreneurs are starting with low capital, but they can quickly
accumulate capital by selling products into market that are rich in demand.
This gives successful enterprises huge potential for accumulating capital and
thus, they do not even need investors for supplying initial capital to the
company.
This free market economy side is often neglected although it is a polar
opposite to more commonly discussed capitalistic side of the economy.
We have very simple means to optimise the demand in the market. And up to
1970's United States had world's highest relative demand in the market. But
these days are now gone and demand side of the economy is ever decreasing and
Europe is rapidly catching America's, because here we have higher emphasis for
demand side. Although I think that this is a problem also here in Europe,
because demand is relatively shrinking, but not as rapidly.
–Jouni
For reference, here is the well known and very scary graph how demand side has
fallen in the expense of supply side in USA:
http://dl.dropbox.com/u/28230378/family_income_median_income_growth_productivity1.png
On 17 Feb 2012, at 17:07, Jed Rothwell <jedrothw...@gmail.com> wrote:
> This is a political topic which, as Robert pointed out, should be moved to
> vortexb-l. However I would like to make some apolitical comments which I hope
> will not be considered controversial.
>
> I am a big fan of capitalism. I think I made that clear in my book. It is not
> perfect, but no system is. It must be regulated. Some things, such as
> building roads and health care are best handled were paid for by the
> government because of the nature of the technology. it just happens that was
> early 21th first century healthcare costs are very high for various reasons.
> One of these reasons is that the technology of healthcare is changing
> rapidly. The pace of change will slow down in the future and medical
> equipment cost will fall. Anyway, people cannot afford to pay for
> catastrophic healthcare themselves. This was not true 100 years ago and it
> may not be true 100 years in the future.
>
> Perhaps I am the proverbial man with a hammer who sees all problems as a
> nail, but from my point of view technology is both the source of many of our
> problems and the cure. Many problems which politicians and opinion makers
> assume must be solved with social policy or tax policy should actually be
> solved by inventing new technology, or by forcibly abandoning old
> technologies such as coal-burning generators. Obviously cold fusion is most
> dramatic example of a solution that will obviate the need for sacrifice,
> difficult choices, wars for oil and so on.
>
> People are seldom aware of how important technology is or how much we have
> benefited from it. They take things for granted. When personal computers
> first appeared they seemed miraculous to most people. The ability to type a
> document without retyping seemed wonderful to people who were used to
> typewriters or pen and paper. nowadays we take them for granted and we
> complain about their shortcomings more than we appreciate their benefits
>
> Even though I appreciate what capitalists have done, I believe engineers and
> scientists have contributed more. Steve Jobs was a great businessman, but we
> can thank Woz for the Apple. Woz and the people at Xerox Parc. If cold fusion
> succeeds, I predict that in the long view of history, Fleischmann and Pons
> will have contributed more to our happiness and to the survival of the human
> race and the ecosystem than all 20th century capitalists combined.
>
> Fleischmann, Pons, Mizuno and most other cold fusion researchers are not
> motivated by capitalism. They are driven mainly by curiosity, an instinct far
> more ancient and fundamental than acquisitiveness. Curiosity is exhibited by
> animals as small and simple as the guppy, a creature which certainly cannot
> conceive of ownership and probably has no sentience or sense of self. (A
> cricket cannot distinguish other individual crickets from one another, or
> even from a plastic cricket held by a biologist.)
>
> - Jed
>
