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Monday, December 3, 2012

The Metaphysics of Economics - I

The incident of the changing tide of the ocean in the previous post is analogous to our current economic situation.  The tide of our economy is changing and we are required to adapt to it.  We must learn to form a "partnership" with it. 

Furthermore, history has taught us that, in the case of economies, when the tide settles, the "ocean never returns to its previous state.  Humans started in a hunter-gatherer economy.  That was transformed into an agricultural economy, which was then transformed into a merchant economy.  Then came the industrial economy.  Now we are in what we call the postindustrial economy.

Each of these economic transformations produced major ad long lasting social changes.  Hunter gathers required tribes.  Agriculture led to settled villages.  Merchants required city-states; and industrialization led to nations.  Notice that each transformation contained the seeds for the next, which, thus far, have been irreversible.  Each of these transformations has also impacted on the life and role of individuals.  This is one example of the principle of connection in the lives of individual people.

What is our current transformation?  We have already named it, the global economy.  The great technological advances in communication and transportation have changed the nature of the connection among people.  The craftsman does not have to live in the same city.  The manufacturer no longer needs to be in the same country.  The strength of distant connections has increased.  Now we must adapt to those forces that impact on us.  First, we must recognize that we cannot "swim back to the same spot on the beach" and succeed.  We must accept that we will end up in a new and different reality and prepare ourselves for it.   We must align our self (From now on, I will use the word "self" instead of "inner world".) with a new reality.

Let us look at that new reality.  After World War II, the United States was the only significant industrial nation.  There was huge demand for manufactured goods and only the US had the capacity to respond.  With the help of the Marshall Plan, the US became the leading manufacturer, and the richest nation, in the world.  This also was the time when the power and value of labor increased.

Over time, the other nations began to catch up.  The major cost in manufacturing is labor.  The advantage began to shift to those nations that had manufacturing capacity and low labor costs.  The balancing forces of supply and demand kicked in.  Over the past forty years, the world has been remaking itself.  A current example is found in the following quote: "In just five years, China has surpassed the United States as a trading partner for much of the world, including U.S. allies such as South Korea and Australia, according to an Associated Press analysis of trade data." (AP 12/2/2012).

In this emerging world, the rich nations must learn to provide high value labor that is not available elsewhere.  An example of this is the company that used to produce computer-based design and support for special manufacturing equipment, and then manufactured the equipment.  After a while, they found that their overseas customers were using their designs to build the equipment cheaper than they could.  The company fell into serious trouble, and was planning to shut down.  Then they came up with an adaptive solution.  They would shut down manufacturing and sell their design and support services under an exclusive proprietary contract to those overseas companies that manufactured their equipment.  They thrived.

You might ask, what happened to those who did the manufacturing?   I am not sure.  But, as someone who is experienced in the application of Statistical Process Control, I do know that the people who do the manufacturing are best equipped to recommend what is needed for performance and process improvement.  Some of them could have been retrained, at little expense, and incorporated as advisors to the design and support teams.

Thus, the metaphysical principles of connection and balance apply to economic pragmatism.  In Part II we will examine how these principles may apply to the individual.



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