Nov
6
The only practical solution to remedy the problem of poverty is undoubtedly the increase in productivity of individuals, workers and the market as whole.[1] As productivity of individual workers and the market depends on the rate of technical advancement, inventions and innovations in the process of production, the most fundamental necessity to eradicate poverty is to provide a system for maximum possible technical advancement, inventions and innovations.
A free society working on laissez-faire free market capitalism provides the impetus to continuous economic progress by means of the profit motive that acts as the agent of continuous progress in production.
Cycle of profit motivated Innovations
To make profits above average and hence to be successful businessmen, entrepreneurs need to foresee changes in consumers demand before their competitors, to provide new improved products in the market ahead of their competitors or to cut the cost of production before their competitors may do that. Eventually, every innovation becomes general and the other producers and businessmen also either adapt the innovation or improve it further. Thus, the profits of the first businessman who introduced the invention decrease again. The only way for him and others to make higher profits again is to introduce further innovative improvements in the production and quality of products to satisfy the consumers demand at further lower prices. Thus, for any firm to continue making above average profits, it must frequently outrun its competitors and must act as an agent of continuous economic progress.
The competition for making higher profits increases the total production of market many folds and decreases the poverty of masses. A firm that brings upon an innovation in production increases its production, sales revenues and profits at the expense of the other producers who are not yet able to increase their production. Consumers shift to the products of that firm because it has better or equally good product to provide them at considerably lesser prices. The innovator hence makes outrageously high profits while other producers’ lower profits or outright losses compels them either to renovate and improve their production or to duplicate the innovation brought upon by the first producer. In a free-market, innovations hence, are not only necessary to make higher profits, rather they are necessary to make any profit at all, if no innovation and improvement, one may loose his business, profit and consumers totally. As the innovation becomes general, the total production of market increases manifolds, increased supply of products decreases the selling prices, and hence reduces poverty to great extent. Furthermore, generalization of innovation and decreased selling prices reduces the profit of producers and hence compel them to modernize, improve and invent further to bring more satisfaction for the consumers. The result obviously comes out to be in favor of consumers that may gain the better products at lesser prices and this is reduction of poverty. Thus, free market provides the profit impetus to innovate, improve production, and hence reduce poverty of masses. In addition, a special profit of innovation tends to disappear as the innovation become general and every other producer adopts them. In order to maintain higher profits, every producer who want to keep maintaining higher profits to longer periods need to repeatedly innovate and improve the production and hence bring down the poverty in masses.
In absence of freedom as the government regulates the market and bar down the profits, this impetus for innovation and invention decreases substantially and the consumers suffer poverty.
Government regulation is unable to provide impetus for economic progress
In a free market, the production and business is open to everyone. Even a penniless individual newcomer may start his new venture and bring upon innovative techniques of production to make profits. Those who have innovative ideas but lacks investment to implement can offer partnership to others who may invest in their ventures. A free market capitalist society provides enormous resources of investment for the new innovative ideas and that is absolutely impossible in a government regulated mixed socialist economy. In a free-market, where an innovative individual (though he has no money) need only to convince some of the financiers to invest in his innovative ideas, easily gets a chance to progress. In addition, the financiers keep looking and encouraging the innovators for making higher profits as that is necessary for them.
On the other hand, in a socialized government regulated market, the innovator need to convince everyone, a majority or at least a significant minority of his fellow citizens in order to implement his innovation. Even if he succeeds anyhow to convince the majority (most of whom have no idea of production process and innovation), he may not be able to get necessary finance because of government licensing system. Furthermore, while in a free-market he can have any preferable and most profitable agreement of partnership with the few financiers, in case of regulated market, he has no way to bargain for his individual profits as government confiscates his profits for the cause of the majority.
Thus, the government regulated system is such that no new innovator actually feels it profitable to devote his hardship and intellect to actually innovate, as he may never be able to make any high profits. In addition, even if some young innovator tries to bring upon innovation and improved changes, he may never succeed because of the bureaucracy, license raj, and political corruption. In such scenario, only a few already established corporatists that enjoys the government support may succeed in bringing upon any innovation an hence the common man always fails to make any fortune on behalf of his inventive innovation. Furthermore, as such system discourages any innovative improvement, the businessmen of such mixed economy regulated market not only suffers lack of increase in production, they are forced to adapt the already introduced innovation in other freer markets.
The more freedom a government institution provides to the market, the more innovation and invention that market brings upon to the civilization. Even Indian government realized this fact after 1991 and hence adopted the process of disinvestment and freeing up the market. As the Indian market, producers and individual innovators will get more freedom to make use of the profit impetus of free market, they will experience their increased potential to bring upon major innovative inventions in every sector of production and general life.
Individual Freedom is the mother of progressive innovation and that is necessary for civilization to be free of corruption, poverty, wastage of resources and scarcity. Footnotes:
- The cure of Poverty is increase in productivity of Individuals of society, Population, Poverty and Productivity [↩]
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161 views4 Responses to “Continuous Economic Progress is the Cure of Poverty”
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Karma Says:
November 6th, 2009 at 4:11 amIt is not only the characteristic of socialistic or mixed economy democratic government, rather it is the characteristic of any form of government. If there is government, it is to curb the progress at all fronts, such is the nature of collective system of any order.
Columbus had to waste many years just to convince the then government of Spain to invest for his voyage and was extremely lucky to get some finance.
French academy of science actually termed Pasteur’s claim that germs causes diseases. Vaccination was hugely criticized an opposed by the government representing collective majority. Edison was ridiculed when he claimed that he might create electric light. Wright brothers were regarded as phoney and crank. All critically opposed Ford.
And the current issue of Tata Nano is no different. Inspite of awareness of all goods it may bring, Nano project was vehemently opposed by the system in W.Bengal and not only that, any such projrect do suffers the bureucratic and political consequential delays and retardation that would not be the case in a free market.
Often government claims that it is to protect innovators and hence provide encouragement for innovations and hence it plans for their protection by means of regulated finance and some ridiculous laws such as copyrights and patents.
As a matter of fact, patents reduces the chances of further improvement and innovations as the one who once introduced a new innovation never feels any necessity to innovate further as patents secures him against any further competition and he may keep enjoying the specific profits of his innovation for too long extent.
What it results in is the decrease in overall production of market and an irrational basis for the producer to keep the prices of products too high, as no other competitor can provide same improved product at any lesser prices, and that increases dilemma of poor as although there are better products, medicines, equipments that may help the poor, but the poor fails in gaining them because of high prices.
That is, government interference not only decreases the chances of further innovation and improvement, it causes further poverty and discourages other innovators.
Because of patents, the other innovators feels forced to find out some other method to achieve the same innovation without any improvement, while that same energy and strength could have been invested to improve the innovation further. Obviously, patents and copyrights cause wastage of resources.
Mammoth Says:
November 6th, 2009 at 8:13 amYou see you are really making me think again about my conceptions of the Indian Government and I feel weird about it. I can’t assume to know what to feel but it actually brings to mind that though Indians are quite active abroad in the Innovation Market in India somehow the people of similar mental profile prefer mete and dole jobs. Maybe a free market would atleast be a solution of that.
But the concept of a system without an order is chaos and so I still feel that some form of Government is an absolute necessity.
Mammoth´s last blog ..Mindreader in Deluge
Renegade Division Says:
November 6th, 2009 at 8:32 amThat’s a very misguided complaints. Why is Cuba lagging in innovation? What should Castro do to bring more innovation in Cuba? How should Sudan bring more variety of rice to its people? << — That’s how stupid the complaint about innovation and inventions are. If only by copying and duplicating we were able to fulfill the demands of everybody in the society then maybe we can complain about it. But the idea ‘India has less innovation’, is wrong on so many levels.
First of all how is ‘innovation of India’ matters? You can still buy original authentic innovation of America, sure the govt follows protectionist policies, in which case the argument should be, ‘Why are we being devoid of innovation?’. How does innovation of India helps me any more than innovation of America? Sure ‘prosperity in India’ is a different thing, if someone wants more prosperity in India, then its a different issue, the prosperity of America only marginally benefits me with the increasing investments etc(considering you live in India).
But if an American company invents something, should your complain be why isn’t that innovation available to us, rather than why don’t the people who hold the same passport as I do own that innovation.
This is not a IP issue, lets presume Apple/Nokia owns the IP rights of iPhone, they can still sell iPhones to you and me. What is the weird fetish that Reliance or Tata must be owning the IP rights of iPhone?
Secondly those people who are complaining about copying stuff, what do they care more? What world are these people living in? Do they care more that we have more innovation, or we live more prosperously? Contrary to what people in India may think, it is still a very backward country to be really getting worried about Innovation.
Maybe people living in big cities, or only in the prosperous India are somehow fooled into this idea that India’s next big problem is ‘innovation’, but they have no idea.
Our problem isn’t innovation, we are quite innovative for our means, our problem is CAPITAL. Even if we were to copy every technology America developed(forget the ridiculousness of IP rights for a minute), we still cannot produce all those things for our people. I donno what innovation some elites in India are missing(who I am pretty sure at the same time support 100% education for all, destroying the entrepreneurial capital even more), its easy to see that we don’t have the same innovation US has, but its really impossible to see the entrepreneurial capital we don’t have.
If there is Rs 1 Crore available for a project in India it will be spent on producing more iPhones(to bring its price down and make it more accessible to people), than trying to invent a Droid.
In all realizing stop selling innovation in India as something free market would accomplish, only the most prosperous economy in the world would be responsible for inventing 80% of all the innovation in the world, rest all will have to copy and follow. Unless we are knocking America off from the ladder, there is no way we are getting any innovation as people in India would like to see.
kohinoor devroy Says:
May 20th, 2010 at 3:55 amAgreed that the government regulated system is such that no new innovator actually feels it profitable to devote his hardship and intellect to actually innovate, as he may never be able to make any high profits.
India is still awaiting its tryst with its developmental destiny. The MDGs represent a web of overlapping deprivations. Achieving them will not only change the face of the country, it could go some way in addressing the million mutinies that are raging, or will rage in the near future. All insurgencies, after all, are fuelled by a sense of grievance and powerlessness among ordinary people, whether in the Northeast or in Chhattisgarh.http://bit.ly/bMq17o