united for freedom 

The Economic Pardox

The world is in the midst of a paradox. We call it the economy but it is an environment full of risk, risks do not make economic sense. This has not stopped innumerable economics, politicians and others from trying to make sense of this risk. But there is an inconsistency in the worlds economy and these cannot be reconciled.

At one time it is said we used stone tools and little else to produce goods, primarily these were foods and weapons. Over time the sophistication of our tools increased and our ability to use the things of the world to increase our efficiency multiplied many times over. Jamaica used to pay local farmers a stipend to clearn the road sides of brush. It was slow work with machetes and labour intensive. One year the government sent through a grader an in a few hours it had done the work of hundreds of men.

This road deflated in value. In economic terms the country got a better road for far less cost. This scenario is played out over and over again all across the globe in every industry and sector. Yet. we look back at by gone eras when money seemed to have value and goods and services seem to have taken far less effort to obtain. Much of this can be and is attributed to better products but in many other cases the quality has actually gone down.

We are able to grow more food on less acrage using less labour and yet food appears to consume a larger portion of the household budget.

With the United Nations reporting  record increases in global food prices in February, many Canadians are wondering whether these price hikes will affect them at the grocery store checkout.

George Weston Ltd., one of the country's largest bakeries, announced a planned five per cent increase in prices set to take effect April 1. It cited rising global prices of wheat, oil and sugar as the justification for the hikes.


The same source reports the price of bread rose by 12% 2008-9

The price of energy increased 183% and fertilizer 104% in the last decade compared to the preceeding one.

Farmers have been very successful in their ability to increase productivity as has most industries yet inflation continues to persists often to the point where it threatens economic collapse. We have to ask ourselves then is agriculture unable to feed the world? But this does not seem to be the case. Is there such a serious shortage in fibres that cloth cannot be made sufficient to clothe everyone? If not then why do some people not have proper clothing? In economics there is only one answer and that is cost. If people need things and do not buy them it is because they cannot afford them.

Food and energy prices may be high in Canada but they are comparatively worse elsewhere. Demand for food will push up prices if Demand outstrips Supply but at such times the economics of scale have ceased, production is at a peak and it has become a zero sum gain where an increase in consumption for one population has to be compensated by a decrease in the Supply elsewhere.

If there is slack in the productive process then an increase in Demand ought to reduce unit prices and economies of scale improve.

It is often remarked at the remarkable range of goods and services available at the local grocery and hardware store. This suggests surpluse productive capacity and an attempt to utilize economics of scale in a situation of declining Demand. The pool of shrinking consumers is more heavily targeted to the point of saturation even as a larger pool is marginalized by its being restricted to a very basic level of consumption.

The poorer one is the less discretionary spending one has. Ones spending becomes confined to basic necessity such as food, clothing and housing.

All of this constitutes various kinds of risk and a risk is always a threat of loss of ones assets. Risk hinders or even eliminate entrepreneurism, it slows Demand. An economy at risk is an economy that struggles. Rational Exchange is a method of reducing or eliminating risk.





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