Chapter 7
Economics is a simple subject that everyone should understand its basics. When one understand through text books to articles on economics one might think that this is where the planning and execution to create poverty starts in any society.
Unfortunately we do not apply our mind.
The Economy is all about Product & People
(People = Producers + Consumers. If there is no product there would be no people and vice versa).
But the economic theories have nothing about people or their wellbeing. It talks mostly about profits maximizing.
The only relevant discussion about people—the common man—is Wealth distribution, the 80:20 Formula. That leaders of countries like India choose to ignore.
Let us understand the absolute minimum basics to understand how the economic theories, the Finance wizkids help create poverty.
People need products for survival. Products were exchanged between different producers. That is called trading and was known as Barter system of trading.
Our ancestors used the barter system of trading.
Which meant exchange your products and services with others in your society.
Prosperity of any citizen depended only on how much of real products made by a person.
Today the rich and super rich are those who produce pseudo products.
Barter system posed the difficulty to seller to find the right buyer to echange their products. Then the Money that was invented eased the exchange of goods.
That time in the history there were neither pseudo money nor super rich.
The crooked in the society started misusing a great idea of money to exchange products found ways of becoming Rich and Super rich without producing any useful product or service, back to the society. If this is not stealing, it is day-light robbery.
Many became rich, some by printing and minting the money, some others fake judicial stamp papers, a few others faking ownership documents to become rich.
According to economic surveys, highest portion of world’s money today is “stock market capitalisation”, the pseudo money. It is not the gold or any other asset.
The life revolves around Products & Services. Besides pseudo products some product types made one richer than the others. What are they?
1. Primary Product
2. Primary Services
3. Secondary Product
4. Secondary Services
Farm Products like Rice wheat cereals pulses vegetable and fruits are nature’s gift. Successful production of the estimated produce can fail due to pests rodents and other life forms.
Successful Production of primary products depend on nature and often a victim of nature’s fury. Examples: Flood, Famine, unseasonal rains and delayed monsoon.
Their job is the riskiest. They get very little compensation for their efforts. They continue to remain poor for generations.
Some of them can be consumed without any processing. Most others need processing. Wheat is powdered before it can be used at home to convert it into bread or Roti as food.
Primary products take several months to an year to produce.
There are millions of services that we need in our life. The people who deliver are of very wide range of capabilities.
Some calls for skills, some needs both knowledge and skills, some calls for knowledge alone. There are also some physical services that do not call for skill or any domain knowledge.
Theatre Artists who entertain with very rare skills. There are artisans like carpenters, smiths, painters, electrical technicians, service technicians for various gadgets, lawyers, teachers, clerks, managers, musicians, barbers, packers, cooks. Drivers, cleaners are a few among them.
Important and most ancient among services is Selling!
They take the products from producers to consumers.
This is a primary service. Unlike the primary producers the sellers have a small storage facility.
(There are a several large Secondary Service providers as sellers, who legally and illegally run very large storage facility all over the where the farm products are preserved. Though it is a licensed activity, what they really doing is hoarding, an illegal profiteering activity).
Farmers and common man produce a very large number of primary products rice, wheat, cotton, mining metal ore, coal, various minerals. vegetables and pulses. The poor fishermen risk their lives to sailing into high seas and gather seafood. To convert them into consumable form, many of them need to go through several processes with the help of machinery.
The traders are always plush with money. Because their job is not as taxing as the primary producers. They dictate both buying and selling price. They risk in their business is insignificant. When becomes a trader, he flourishes and grows his wealth.
Someone with wealth can have access to nation’s wealth through the financial institutions called Banks.
Those who produce secondary products are plush with money exploiting the weakness of the common man which include the producer and consumer.
Banks advance huge loans to the producers of Secondary products at very low interest rates.
Secondary services are more profitable like secondary products.
With every passing year several new Secondary services crop up. Secondary service providers use tools and money connecting the primary service providers and end users.
One may notice that the service aggregator make more money than the service provider who is really own the car, pay the driver. The price is increased a few times depending on the demand.
Rich people by themselves cannot earn their wealth, using their own knowledge and skills.. But they have a huge money at their disposal and the knowledge to earn using the skills and efforts of others.
How to understand this:
There are Cab aggregators in big cities in most countries, called OLA and UBER.
The taxies are owned by some one, driven by some one else. With a computer software the aggregators connect the customer who seeks to connect to a taxi driver. They earn the huge money for merely connecting a customer and service provider.
The taxi driver, the primary service provider, will never become rich. At best he will earn his living. The secondary service provider charges the cab driver nearly 50% of what he gets in a trip. The customer is charged further large sums with (more demand) with lesser cabs available.
The secondary service provider will grow richer year after year but not the cab driver.
The Elite, on the other hand, produce Pseudo products ( Example: Mutual funds, Stocks and insurance) that is redundant and produced effortlessly.
The invention of money and several pseudo financial products are the important two factors among the few important reasons for poverty.
1. People who produce only the Primary Products & Services are invariably poor. Ours was a large agroeconomy. Millions of our citizen are small and marginal farmers.
2. The poor economic background of primary producers, is exploited by secondary sellers plush with funds. In countries like India where majority are poor, both primary products and services are delivered by poor. The secondary sellers manipulate the procurement prices making the farmers to sell the produce at a distress price.
3. It can be stated the primary producers are poor because they were poor during thousand years of rule by aliens.
4. The alien rulers treated common man as animals, paid wages enough to survive, malnourished starved most time.
5. Most poor in every society were poor for generations. It can be said, because they were poor for several gener ations and they lacked capital and depended on their physical labour. Farming was the only option left to them.
6. Those malnourished suffer deficiency in Learning and thinking abilities. Such human being are vulnerable for exploitation.
7. Because the poor are vulnerable, a small population in the same society, the elite, exploited them and cornered the nation’s wealth though dubious financial system and practices.