1.2 Of Industry
Few items of human consumption are "spontaneous gifts of nature" - and those that are have little value in economic exchange. The air we breathe and the water we drink are extremely precious and necessary to basic survival, but have no price as they are readily available. But for the most part, the items that are necessary to our existence, and those which merely contribute to our comfort and happiness, must be created or provided by some human effort, our own or that of others.
The Nature of Industry
The term "products" denotes the material things that require an act of human effort to achieve a state of usefulness.
It is solely be means of industry, effort applied to a goal, that mankind is furnished with the material objects he wants or needs:
- Agricultural industry focuses essentially on the collection of nature's bounty, with some activity to cultivate it.
- Manufacturing industry place more emphasis on the labor applied to raw materials rather than the gathering of them.
- Commercial industry plays little interest in the materials themselves, but are focused on "placing within our reach objects of want"
Left to its own devices, nature provides very scant subsistence to a very small number if human beings. There are yet societies in which "savages" and "wretches" depend on primitive hunter-gatherer techniques, but the author does not consider them to be industrious (EN: I think he overlooks the fact that hunting animals and gathering edible plants requires considerable effort and there is still some labor to prepare them for consumption. The only difference between a farmer and a tribesman is that the farmer cultivates the plants and animals rather than seeking them out - which requires less effort and risk, but is essentially the same activity.)
In the present age, a particular product is rarely the result of one branch of industry exclusively. A farmer grows grapes (agriculture), a winery turns the into wine (industry) and it is transported to a marketplace for sale (commerce) - which is to say nothing of the bottle or the cork or the paper and ink of the label.
A repetition from the previous chapter: no human being has the faculty of creating matter - the product is created from materials that already exist to grant an intrinsic value to the resulting object produced by his effort. Value is also created by movement - transporting crops from field to mill, transporting goods from mill to market. Things in their natural state, and in their happenstance location, are not particularly useful, have negligible value, and are not considered among the total wealth of a community.
(EN: this does not allow that some things are considered to be valuable because of their potential to generate utility. An unplowed field, an uncut forest, and an unworked vein of ore are each considered valuable because of their potential to produce in future, rather than their qualities at present.)
Profit and Wealth
It is suggested that no profit can be made from industry, because a manufacture is prevented by competition from ever raising the price demanded above the bare amount necessary for producing a good. What they receive from a buyer is more or less exactly what they invested in the creation of a good. This theory clearly does not hold in reality.
The profit generated is the value contributed by human effort to the materials of nature in order to transform and transport them for use by others. At minimum, the profit generated from the sale of manufactured goods must cover not only their cost, but an additional margin to provide for the necessities of the producers and their families. Ant it can be readily witnessed that those involved in agriculture, manufacture, and commerce can amass wealth and personal fortunes from their involvement in industry.
A pause to dismiss those whose criticism of commerce (logistics and retail) maintains that it produces nothing: such critics fail to recognize that an object that is useful delivers no value if it is not made available to the consumer - and making it available requires expense and effort that demands and deserves compensation. Thus while these activities have no bearing on the transformation of material, they contribute to its value to a given consumer.
There was likewise in the author's time a prejudice against manufacturers, owing much to the same short-sightedness. The miller who does not grow wheat, but merely transforms it to flour, is seen as some to be parasitic on agricultural producers - but in reality, without his contribution, the raw product of agriculture would have less utility.
This considered, the profit of industry is generated by the utility that is added to the consumption of a product - such that the manufacturer and merchant are compensated for the effort they have contributed to the value the consumer derives from having a product - and the "having" is as necessary to deriving value as the "product" itself.
The economy within a nation thus consists of an exchange of the efforts of some for the efforts of others, embodied in the physical products that are traded among them. The product being a visible and tangible artifact has led it to enjoy too much attention, and led economists to the most absurd pronouncements. It is the effort of transformation/transportation and the value of consumption that contribute to its value.
(EN: JBS does not at this time consider the disparity of the two. Much profit is made if the value of consumption leads buyers to pay far more than the costs of production to obtain a given good. This is a significant source of profit, though it would be necessary to consider on a case-by-case basis to determine the extent to which this factor influences pricing for a given good and in a given market.)
Some reference is made to the economic exchange among nations, but this is merely a broader perspective on the same phenomenon: whether a trade is executed between neighbors in the same village, people in different villages, or people of different nations is inconsequential.
From the perspective of the producer: with some effort, a man may provide a quantity of goods that can be traded for the basic necessities of life. With greater effort, he may produce more goods and obtain an increasing amount of conveniences. With greater effort still, he may produce at a level where his needs and wants are completely satisfied, and amass wealth.
JBS then dismisses the notion that wealth is fixed, and that what is gained by one must have been lost by another. This notion has led to the unjust characterization of manufacturers and merchants as a species of thief upon the people who benefit from the goods they sell. Such a perspective is plainly absurd, especially when goods are traded, as a seller gains of others by providing goods to them: he is thus rewarded for improving their welfare, and the greater the amount of benefit he delivers, the greater the reward he receives.
In practice, we notice how men and entire nations ho are involved in commerce are mutually benefitted by the arrangement. It is also obvious in comparing the welfare of people in different nations, or the same nation at different times, one of which has manufacturing and commerce while the other is limited to agriculture or tribalism - it is clearly evident that the citizens of the former en\joy more of the necessities and conveniences of life than those of the latter. Were it true that manufacturing and commerce were detrimental, we should expect to see the opposite.
We must conclude that industry produces wealth, and the greater the effort expended in industry of all manners, the greater the prosperity of the people involved.