Production and Productivity

Stated most simply, if we wish to reduce the size of the economy without inducing great suffering and disruption, we need to both consume less and find ways to produce less at the same time. A balance between consumption and production will still hurt business, but not nearly as much as just a drop in consumption would do. It might not hurt ordinary people at all.

How do we accomplish a reduction in production? Let’s look briefly at what economics has to say. Different economists differ in their precise list of the “factors of production.” For our purposes, the cost of production may be seen as the product of three factors:

  1. Workforce Productivity. The output for each worker-hour. Productivity depends on many factors, including the workers’ skill levels, capital investment, technology, resource consumption, worker motivation, and the organization of the workplace.
  2. Labour. The number of people working and the number of hours they work.
  3. Resources. The energy and other natural resources (gifts/thefts from nature) consumed in producing goods and services.

Productivity

Productivity is the be-all and end-all of industrial society. Capital investment, technological innovation, and the consumption of energy and other resources are all done in the interest of increasing the productivity of labour and capital. This is justified because it increases the availability of goods and services, increases the incomes of workers, makes more money available for government, and (not incidentally) increases the profits of investors.

From an ecological perspective we should re-define productivity not as the productivity of labour or capital, but as the efficiency with which natural resources are used. Earlier I discussed how taxation might be used for this purpose. In the last post I discussed the value of “green consumption” in minimizing energy and resource use. These are worthwhile things to do, but they don’t reduce the size of the economy.

Labour

To reduce this factor, we need to work less.  More time off for education or other purposes, shorter hours per week, more and longer vacations, and earlier retirement are all ways to reduce the amount of work. I remember that back in the 1950s many people thought mechanization and automation would reduce the hours of work and increase leisure time. Instead, mechanization and automation have advanced and the paid workforce has dramatically grown with the inclusion of more women.  Yet there has been no reduction in the work week.

Why do people produce so much?  Why do people work? Why do we work for money? These questions, which are spiritual and psychological as well as economic, will be considered in a future post.

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