What Causes Poverty?
Supply or Demand Prioritization
The chapter argues that if we were to only look to satisfy demand then we would never innovate and would instead begin to stagnate and even decline as a society. I believe this to be incredibly false as innovation is created purely because a demand is not being satisfied. An innovator would have no idea what to create if there was no demand. If people were perfectly content with what they had there would never be a new phone or computer. We would never make new cars or better T.Vs. This is due to a demand. Now the demand isn’t exact. For example I don’t think ‘I want a computer that can have x amount of frames and runs so and so fast for however many years’. No, the demand instead is in the shape of complaints about the current product with desires for a better one in the future. The colored T.V didn’t come out of a vacuum but out of demand for a T.V. that could show more color than simple white and black. New computer parts are created and sold because the people demand faster and more reliable equipment. New cars are made because society has seen climate change and demands safer, cleaner, and more efficient cars. Supply can only exist when some demand exists. Even if there is more supply than demand the demand must exist on some level to encourage the innovator to make the product. This demand could be imaginary in the mind of the innovator who thinks that people want something based on assumptions but the demand is there non the less.
Correlation, not Causation
The chapter argues that if society stagnates and starts to put more importance on demand then supply that it would cause inflation and a decline in productivity. These are false statements because they assume that one causes the other without looking at the context of the situation. As time passes, every currency in the world generally starts off weak then gains power as the country gains power before falling off as the rest of the world catches up, also called inflation. This is a natural occurrence and would happen no matter if society was focused on supply or demand. This is because something initially has no value until it is backed by something that does have value. For example the US currency was mostly useless until it was backed by gold which had value and thus gave value to the currency. Then as the currency spread and spread it rapidly gained value until everyone more or less had it. This caused the growth of it to stagnate massively and the author views the cause of switching from supply to demand prioritization. However this is just because as more and more people get the currency it inherently loses value and thus inflation occurs. Productivity is actually the opposite problem. When we first start making things, we are incredibly bad at it and our productivity is awful. Then we start to reach a peak in productivity as we discover how to make the item or service on a mass scale. Then our human productivity falls as we learn how to automate the process which causes many people to lose jobs and is seen as ‘lost productivity’ when actually we are just getting more efficient at the job.
Perfect Capitalism Doesn’t Exist
Sometimes I get annoyed when people will call communism an idea that could never work in practice but believe that unchecked capitalism is perfect and could never fail. The idea is incredibly hypocritical and completely ignores the fact that capitalism itself is inherently against a fair market. Capitalism encourages any tactic that could increase the wealth of an individual no matter how ethical or moral. Thus it encourages businesses to undercut or force out new or existing competition. Wealth and Poverty actually makes a great point about this as it states that a perfect market relies on the facts that everyone understands everything and nobody can change the price or products be changed which means that neither supply nor demand could be changed. This is just plain false as the market inherently tries to subdue change and protect the status quo. This is seen in companies dropping prices to cause a local competitor to go under before raising prices again to maintain their market control and profit margin. This also acts like corners won’t be cut to decrease costs which could lead to the harm of innocent workers who had no idea or control of the practices of the business. For examples look at all the companies being taken to court for using underage labor like meat facilities or coal mines in the past.