Why production for consumption

Why production for consumption is essential for healthy economy

Production for consumption is one of the basic and essential principles of PROUT’s Decentralized Economy. The motive of production should always be for consumption not for profit.

What!! No profit!! No, it doesn't mean no profit. It means production should be based on demand and not just putting money where there is profit. There should be reasonable profit, to have entrepreneurial motivation and innovation, but it should not be exorbitant.

Take the example of real estate in Delhi NCR. Prices of real estate were increasing and people started investing more and more money for profit's sake. Numerous projects were launched without doing any feasibility prospect that how many actual homebuyers or end users are. Now, we are witnessing that in absence of bonafide buyers projects started with much fanfare are in tatters and incomplete. 

This industry demands heavy investment and such huge number of half built inventory is lying unused. It means, money invested is stuck and these inventories can’t be utilized for any purpose. People are paying EMIs for something, which they can’t use and they are compelled to minimize their other genuine expenditures. This is not the story of real estate only but from biscuit to motor cars everywhere unsold products are lying in showrooms and warehouses. Even a layman knows when such huge money is stuck, economy will weaken and prone to invite recession.

Another burning example is of stock market where people pump so much of money in speculative trading. This pumped money isn't utilized in economic development and growth but for profit motives only. The stock prices are too high as compared to book value or actual equity value of company because of speculation.

Another example is there are so many engineers passing out every year in India and most of them are unemployed. There are other fields which require lot of manpower like agriculture, animal husbandry, health care etc. but people are not interested opting other fields. This process of excessive engineers need to be pruned to avoid unemployment and it should be balanced in such a way that the labour deficit industries should get adequate and qualified workers. Life should be made more comfortable for those in the field of agriculture and animal husbandry as food is the first and foremost priority of human beings.

Another example is we have excessive supply of readymade garments but there are not so many consumers in that proportion, which culminates in to unsold garments incurring loss to many in the supply chain, from production to shop owner.

For a healthy and welfare economy, resources should be utilized first for utmost important things or basic necessities and then for semi essentials followed by luxury things. Every resource has multiple usage but it needs to be prioritized based on necessities.  

If there is fertile land, it should be used to produce food instead of growing flowers and carnations. If there is sufficient food in the socio-economic unit, then go for producing flowers.

Another glaring example is of Thamirabarani river in Tamil Nadu where farmers were protesting that they are not getting sufficient water for farming whereas the government has given rights to big industries to withdraw the water for softdrink makers. We must prioritize the need and accordingly resource should be utilized.

In my previous blog of 'Decentralized Economy', I explained that every socio-economic unit should try to be self-sufficient. It’s not possible that everything be grown or found in every socio-economic unit. Suppose Rajasthan produces good amount of copper but is not able to produce tea. In such a scenario, Rajasthan can get into agreement with Assam to get tea in lieu of copper. In this way of barter system, money will remain with respective socio-economic unit and an economic equilibrium will be maintained between production and consumption. In nutshell, production without consumption should be avoided for healthy economic development and growth. 

I don’t think Adam Smith’s capitalistic theory will work in current scenario where he says that markets will adjust automatically based on demand and supply. I am not an economist but I feel when people are just profit oriented, money is pumped into the fields from where they can earn excessive profit, based on artificial demand generated through advertisements, hype and hoopla.

Money can’t be utilized to its value and we face recession cycles. We all know that millions of people are scarce of food whereas deodorant and perfume industry is doing business of thousands of crores.

There should also be balance between nature and human beings. We should utilize our natural resources judiciously and avoid over exploiting it. Recently we have witnessed the floods in most of the states and these are resultant of excessive exploitation of riverbeds or are ill managed manmade disasters resulting in to loss of crores of properties along with untimely death of people and cattles. Hence, we must have to go in a planned way to avoid any further disaster or recession.

Please let me know your views in comment section.