- Published: Monday, 05 June 2017 07:00
This is was to be the last installment in the “Everything is Rationed” series.
A woman taking care of her children while the man is out gathering food for the family is the very foundation of everything we have today. That’s because what kind of society we end up with depends on what the mother instills into her offspring long before the father gets hold of the children to show them the world.
The ground floor of society built upon that foundation and upon which everything else stands is... the private business in a free-market economy. I can hear the snorts of derision and eye-rolling from here, but hear me out.
I know the United States is founded upon the myth of the “rugged individualist,” the guy (or gal, I’m not sexist) who can survive on their own out in the wild. This is a myth because one person can’t do it all. You might think of frontiersman like Daniel Boone and his ilk. Those guys actually had a pretty extensive logistical train behind them. The rifle and ammunition they carried, the saddle and shoes on the horse, the preserved food they carried and more. All these goods were produced by someone, not to mention the reason why those men were out there in the first place was to provide a service, namely to explore the land, determine its resources and how to move people farther West.
I’m talking the “Man vs. Nature” level where you have nothing but your mind and your hands. Think of the tasks a single person has to do every day to make sure they have a good chance of survival:
- Gather/kill food
- Build/maintain shelter
- Develop tools/weapons for protection
- Gather wood to build a fire
- Build/maintain a fire with the gathered wood for warmth and cooking food
A single person does not have enough hours in a day to do all of these things at a level where they can survive for an extended period.. You spend a day building a shelter and you go hungry because you didn’t gather food to eat. Build weapons and spend a chilly night without heat.
This is why people started communities and societies. One or two people can hunt/gather for the entire village, one can build tools and weapons for everyone and so on. This was how bartering started. Trading whatever you have developed/gathered for what another has developed/gathered. Half a pig can get you a stone axe or a spear. A couple of chickens can get you some treated animal skins for clothing and so on.
The barter system is the first stage of a free-market economy. The shortcomings of a barter system is you can have more goods and services that you need, yet the people who offer what you need aren’t interested in what you have to offer. If the Tanner already has a bunch of chickens and all you have to offer him are more chickens, he won’t trade with you. You have to trade your chickens for bread from the baker, then trade half of the bread with the butcher to get some beef, then take those items to the Tanner to get your skins. A lot of your time gets wasted in trading for other things to get what you need. This is how money got invented, but that’s another article at a later time.
A business who combines ethical practices with reasonable profits is our goal. All businesses should and need to “charge for all the market can bear,” meaning that it is a balancing act between the available supply and the overall demand of the product or service.
Using the free market to determine the price of a good or service is not perfect, however it is the best system we have. If a business charges (or is forced to charge by government) a price that is below the costs incurred, then the business must close.
Example: net cost (all expenses, no profit) for a business to produce a widget is $100. The business sells it for $110 to make some profit. If the market won’t buy it at $110, but will at $90, the business either has to find a way to product it for a net cost of $80 or close. Same thing, if the government mandates that it be sold at $90, there is no reason for the business to stay open (unless it’s at the barrel of a gun).
In times of crisis/unrest/upheaval, prices will swing drastically in response until things are normalized.
Let’s say there are 50 gas stations in a town, when the town gets hit by a hurricane. 49 of those stations have their gasoline ruined by floodwaters. For whatever reason, that last station keeps their gasoline uncontaminated. This station owner now has a choice. He can either sell his product at the pre-hurricane price, not knowing when he will get a new supply (a day, a week, a month), running out in an hour and facing thousands of angry people demanding his product,
He can charge an elevated price to discourage many customers, have more money for himself and employees to live off of until the supply resumes, and he can pay the elevated price for the next tanker truck to restock his tanks. Because if the refinery is nearby, they will also likely have damage, contaminated products and the refinery faces the same dilemmas the gas station owner does.
In the overall sense, the consumer is at the end of a long train of transactions that culminate in the product or service they purchase. There are hundreds of businesses mining the raw materials, producing components, assembling the final product and the transportation for all of the bits and pieces between companies and delivered to your door.
When I grew up near Warren, Ohio, I drove by the Lordstown plant all the time. This plant made the wiring harnesses for GM vehicles. Metal and plastic went in one end and completed wiring harnesses came out the other end. They made the wire, coated it with the insulation, made many of the clips and connectors and put it all together, under one roof. This kind of manufacturing does not happen anymore.
Today a constant stream of pre-made wire, clips, connectors, and all the other parts are made by sub-contractors, which ship their product to the new plant (Lordstown closed in the 80’s) who then does the work necessary to turn the components into wiring harnesses. Then those finished products are shipped off to the various assembly plants across the country and the world, to be one of the many components that make up an automobile.
I just realized that I need to expound on the “ethical dimensions of a responsible business” to tie this whole series up and that will take up a whole article in and of itself. Research for that one is ongoing and hopefully I will have it done in time.
Look back here next week for the fourth part of this three part series.