The People’s Republic: The Forces At Work

CONTINUED FROM LAST WEEK

The producers too are many in number, and their activities also are unrelated and unco-ordinated. In their case, they come into the market with what they have got.

If there are more than 10 yams in the market for our two consumers, the price offered for each yam will be less than 1/-, and the farmers who produce at l/Id each will be unable to sell at that price. If the latter withdraw from the market, and there are only 7 yams left for sale, the consumers will scramble for the 7 yams and will be prepared to pay as much as 2/ 9d. This situation would encourage some of the producers who have withdrawn from the market to return, and would, at the same time, serve as an invitation to new producers to enter the market.

If as a result, only three more yams are brought into the market, the price would now go down to 1/- In this hypothetical case, both the suppliers and the consumers will arrive at a state of equilibrium – a state in which the ‘quantity supplied is exactly the quantity demanded, at a price acceptable to both.

In all this process of collision of wills on the part of the consumers and the producers, there are times when the consumers are in a stronger position, and there are other times when it is the producers who are in a stronger position. In the case of necessaries, the consumers, unless there are suitable substitutes, are more or less at the mercy of the producers. The latter could deliberately raise their price in order to make more profits; and the consumer would still have to buy in such circumstances, because he cannot afford to forego yam, maize, and salt completely. He can reduce the quantity he consumes of these goods, but only slightly; so slightly that it is bound to be less than proportionate to the increase in the prices of these commodities. Furthermore, the prices of certain commodities may be less in certain areas, but because of inertia on his part, because of custom, inconvenience in travelling, or even lack of adequate transportation, he may be unable to take advantage of these lower prices.

Similarly, the producers may be strong or weak, all depending on the type of goods they produce. If the goods are quickly perishable, like ripe banana, they must sell at any price or lose all. If it is yam, they may be able to withhold supply for a few weeks; if it is textile, for a few years – that is if they have the wherewithal for making a living, and carrying on their businesses in the meantime. Also, the producers may be unable to take advantage of higher prices for their commodities in certain areas for the same reasons as the consumers are unable to take advantage of lower prices.

The unfairness brought about by the processes which we have been considering has impelled some consumers to get together to form Consumers’ Co-operatives, in order to protect their combined self-interests. When certain classes of goods are in short supply, consumers compete amongst themselves to get as much as they individually require. But because of the presence of substitutes, because of competition amongst producers to meet consumers’ demands, and because of lack of a profit motive and a number of other subjective factors, competition amongst consumers has never been stiff or prolonged. Consequently, associations of consumers have always been designed for self-defence against producers, especially those of them who are monopolists or oligopolists, and who more often than not tend to and do sometimes indulge in creating artificial scarcity of goods, in order to enlarge their profits.

Also in the pursuit of his self-interest, each producer strives very hard to out-do, out-bid, and ‘out-smart’ the others, More often than not, the selfish activities of the individual producers, and the struggles by each to get the better of the others, do lead to violent conflicts and cut-throat competition. While the conflicts and struggle last, any method at all is permissible. It is the end which is selfishly sought by each producer that counts and predominates. There is little or no place for morality or clean play. In the process, many producers succumb, leaving the field to either one survivor, or a small group of survivors who now combine to protect their joint interests. The former becomes the monopolist, and the latter the oligopolists. In the main, therefore, monopoly and oligopoly typify the survival of the fittest, the strongest, or the most unscrupulous, in the violent struggle or war amongst producers. But there are certain commodities which, more than others, lend themselves readily to monopolistic or oligopolistic control. And there are still others in which it is in the interest of the public that they should be so controlled. Enterprises in which very large capital is required, and a good many public utility concerns fall within these categories.

In addition, the producers have devised means – through skilfu! advertisement – by which they can induce the consumers to desire the things they produce for them, instead of those for which tl1e consumers, acting independently, have preferences.

Speaking generally, in this lawless jungle the consumer is an absolute monarch in the short run, and his will prevails. In the long run, however, it is the producer that reigns supreme, because he can only produce and sell if he is able to cover his cost as well as make a little margin of profit.

It is clear from what we have said that the forces which determine value, and hence the share of reward which goes to each factor of production, are very blind and chaotic. So blind and so chaotic that they favour the strong, however wicked, and discriminate against the weak, however just his cause may be. This assertion will be borne out by an examination of the relative strength of each of the factors one to another in this violent struggle, and the share of reward which the inherent and acquired strength or weakness of each factor enables it to attract from the common pool.

Land is dormant without labour: it is when labour is applied to land that the latter, generally speaking; becomes dynamic and fruitful. Capital is the offspring of the union of land and labour, and entrepreneurship is, as we have said before, a specialized kind of labour, The supreme importance and indispensability of labour in economic activities is, therefore, incontestable.

CONTINUES NEXT WEEK

 

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