Economic Systems: Production, Distribution, and Consumption

Posted on Dec 6, 2024 in Economy

Goods are all material things taken from nature or produced to satisfy human needs. Examples: Food, cleaning products, or home appliances.

Services are economic activities aimed at satisfying needs that are not directly related to the production of goods. Examples: Paying bus fare or a medical consultation.

Production, Distribution, Consumption

While working, workers are engaged in production. As purchasers of goods and services, they participate in distribution. When consuming these goods and services, they are participating in economic activity as consumers.

The production process consists of three main components: labor, raw materials, and production tools.

Labor is all human activity that results in goods or services. It results in two activity types: manual and intellectual (in varying degrees as they enter the production process). Manual: physical effort. Intellectual: mental effort.

Predominantly manual: Work of a laborer.

Predominantly intellectual: The work of an engineer.

Skilled work: Cannot be achieved without some degree of learning and technical knowledge. Example: Computer Technician.

Unskilled labor can be accomplished with virtually no learning. Example: Hodman.

Raw materials: The initial components of the product in the production process are transformed to acquire the form of the final good. Examples: Cotton (raw material of cloth), metal (raw material of brackets). Natural resources: Components that are in nature and subsequently generate raw materials. Examples: Soil (for agriculture), rocks (mining).

Instruments of production: All the objects that directly or indirectly allow us to transform raw materials into goods and services. Examples: Machinery and lighting.

Means of production: Consists of raw materials and production tools.

Productive forces is the sum of the means of production and human labor.

Relations of production: Value established between human beings to produce goods and services.

The entire production process always has at least two basic social agents: workers and owners of the means of production.

Production mode: A set of productive forces and production relations. It affects social, political, and spiritual processes.

Communal Mode of Production

Some groups began to cultivate the land, producing cereals, vegetables, and fruits, and to raise animals. Gradually, people stopped being nomads and began to settle in certain regions, becoming sedentary. People worked in close cooperation. The land was the main means of production. Both the land and the fruits of labor were communally owned. Production relations were relations of cooperation. The forms of social organization were communities based on kinship ties. Solidarity prevailed rather than competition. This mode of production can be observed today, with some modifications, among non-acculturated indigenous peoples of Brazil and among the Aborigines of Australia. There was no state.

Slavery

The means of production and the slaves were owned by the lord. The slave was regarded as an instrument and had no rights. The masters were the owners of the labor force, means of production, and work product. They suggested forms of government to ensure the interests of the dominant group. Work was seen as punishment.

Asian Mode of Production

Characterized by closed societies with a strong state and an efficient bureaucracy, able to maintain the full power of the state, to which the entire society was subject. The means of production and workforce belonged to the state.

Feudalism

The relations of production under feudalism were based mainly on the ownership of land and the agricultural labor of the serf. It was structured primarily on the division between masters and serfs. Power was decentralized. The middle classes began to revolt over high taxes, rising trade, and increased manufacturing output, creating a new social class: bourgeois merchants. Cities grew. Urban populations sought to establish their own courts, laws, and tax systems, leading to a new mode of production dedicated to meeting the immediate needs of people.

Capitalism

Characterized by the employment of production relations and private ownership of means of production by the bourgeoisie. The bourgeoisie owns the means of production and circulation of wealth. Employees are not required to stay on the same farm, company, or urban area. They can work where they choose, provided that a capitalist will employ them. Companies are driven by the desire for profit. The transition from feudalism to capitalism was marked by mercantilism, whose main principles were:

• The wealth of a nation depends primarily on the accumulation of precious metals.
• Therefore, exports must exceed imports, maintaining a favorable trade balance.
• The government should strictly control industry and commerce to ensure exports exceed imports; the state must intervene directly in economic life.
• To balance supply and demand, the government should avoid competition by fixing prices.
• The more coins in circulation, the more prosperous the country will be.

The absolutist state intervened heavily in the economy and encouraged colonial and export monopolies.

Pre-Capitalism

Trade and craft production began to expand. Independent artisans, owners of their means of production, dominated.

Mercantile Capitalism

Self-employment still prevails, but the employed system expands, with most profit concentrated in the hands of traders.

Industrial Capitalism

Capital is primarily invested in industry.

Financial Capitalism

Banks and other financial institutions took control of other economic activities.

Post-industrial Society

With globalization and the development of computer networks, large amounts of capital are invested in countries offering higher profitability.

Adam Smith believed that labor and trade, not commercialism, are the main sources of wealth. He argued that wealth growth and better income distribution were possible if the state did not interfere in the economy, such as by fixing prices. Competition is the great engine of capitalist society.

Socialism

While capitalism is based on private ownership of the means of production, socialism is founded on social ownership. In socialism, there are no private companies, as the means of production are public or collective. The goal of a socialist society is the complete satisfaction of the material and cultural needs of society: employment, housing, education, health, culture, entertainment, etc. To achieve this, the economy should be planned to meet the basic needs of the population, not for business profit.

The Bolshevik party advocated a proletarian and peasant revolution to transition immediately to socialism.

Globalization is characterized by the universalization of production, circulation, distribution, and consumption of goods and services.