Productivity gains are the steps toward humanity happiness

It began with agriculture.

The productivity gains of agriculture in France have allowed the development of other activities for the well-being of men and women. Let’s start from the state where each farmer planted for his own use, about the case of the 10th century, France. He has built his house, has been able to buy bad tools and an animal. He is in balance, he manages to feed and clothe his family. The lord collects taxes for his own needs and those of his army. The clergy collects the tithe to finance its activities. (see agriculture in the Middle Ages). Almost 100% of the activity and wealth is agricultural, the cities are little developed.

In the 12th century, thanks to the progress of agricultural techniques, farmers will make more surplus, which they will be able to sell and improve their situation. During this time, other activities will appear, textile industry, craft industry, which will take advantage of the agricultural surplus to sell products and goods to the farmers. This results in the development of cities. These times of betterment also saw an increase in population and, caught up in a virtuous circle, pushed farmers to greater productivity gains.

However, it is all a question of equilibrium.

If productivity gains are faster than the growth of the population to be fed, there is overproduction. The relative value of agricultural goods falls, farmers buy fewer goods and services, which are themselves in a situation of overproduction and see their relative price fall, while taxes and tithes increase to maintain government services at the same level.

If productivity gains are slower than population growth, it will be necessary to expand agricultural activity and, relatively speaking, to reduce less essential activities, such as textiles, industry or services. In this case, the well-being of humanity stagnates or decreases.

In the event of a shock, such as a bad harvest, supply becomes scarce, prices rise temporarily, but the system quickly returns to equilibrium.

In the tenth and twelfth centuries, most exchanges were done by barter and few, notably goods and services, required money, which then allowed those who possessed it to buy in return the agricultural goods that were to feed them. The currency is indexed to the quantity of gold or silver that composes it.

The same mechanism has made it possible to install the benefits of technical progress in our Western societies and is now playing out in all the societies of the planet, accelerated by globalization. It has become more sophisticated, goods and services have multiplied, the management of money, whose role is to allow the continuation of exchanges by playing as little as possible on the value of goods and services, has become more and more complex.

These economies are prey to numerous shocks, which do not only affect agricultural activities, but also industrial and service activities.

It is still a question of equilibrium.

If some produce goods or services that are indispensable to others and maintain a high price, they capture the surpluses and productivity gains of others, who see their well-being diminish. Imbalances are also the consequence of mispricing goods or services. When some goods or services are too expensive, they capture part of the productivity gains and reduce the well-being of part of the population. If this were to become widespread, those whose welfare does not improve would no longer make productivity gains, so the pressure must be measured, and prices must be kept high, but not so high as to extinguish any mechanism for progress.

All the agreed price mechanisms participate in this imbalance, the wages within a firm, the price on captive markets where an artificial scarcity is maintained. Some are excluded from work, others can no longer buy basic goods and services. The mismanagement of money, which is too abundant and does not influence prices, allowing the acquisition of means of production or real estate at lower cost, amplifies this imbalance. If money influences prices, then it is inflation or deflation.

In conclusion

Basically, a healthy evolution of the economy leads to a greater well-being of men and women. With progress, economies are becoming more and more complex. They are dynamics whose balances must be managed. They are constantly evolving. We need to invent fair pricing mechanisms that allow for this permanent adaptation so that the economy benefits everyone. How can we determine the right price for one job compared to another? How can a more productive worker benefit from the surplus he generates and not be robbed of it? How can we ensure that the price is the price in low-transaction markets, when it influences the valuation of all assets?

If all these questions are the current and future challenges that we and our children must take up, we must not lose sight of the fact that the well-being of all is based on the capacity of societies to develop and control the exchange of goods and services.