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The ABCs of the economy The ABCs of the economy
by Joseph Gatt
2023-05-19 08:33:32
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How do you get your “sick” economy back to work. I hope the information provided here will help “heal” your economy one way or the other.

First thing you need to know is, in modern times, there are four types of economy:

-The militarized economy: With the help of military forces, paramilitary forces or armed forces, economic agents use threats and violence to gain considerable amounts of money, often through coercion.

eco00001_400The militarized economy is one that uses titles for individuals. The militarized economy then often purchases products from wealthy economies that it sells at the local market, using coercion. One type of coercion is to prevent local economic agents from producing the product that they sell. Another type of coercion is to force distribution centers to sell their product. Another type of coercion is to limit the supply of essential products to artificially jack up the price.

The problem with militarized economies: first problem is such economies tend to cut corners. They often start by producing their own products before gradually selling products made in wealthy countries.

I have a personal example of that: I used to work for a militarized company whose original vocation was to sell fishing products. But, as time went by, the company started selling other companies' products that they would vaguely claim were their own products.

So first problem is: such economies are not productive. Second problem is such economies tend to be violent. You need martial arts training is such economies. Insults, death threats, anger, coercion, intimidation are part of business. Economic agents in such economies use threats against individuals, their families and their friends.

Problem with violence being that violence tends to spiral out of control. So you get wars between militias and rival gangs.

-The tribal economy: The problem with colonialism was the establishment of “modern” urban cities by European colonial powers. Such urban centers became the capital cities or larger cities in countries where tribal and ethnic affiliation is very, very important.

Let's imagine that in Europe all the big cities were relegated to the rank of small cities and all business was done in London, Paris and Frankfurt. That would mean you would have Spaniards doing business with Polish people, with Slovenians, French people, Dutch people, all with their own mentality.

That's exactly what happened in African and Asian countries. You had people of different ethnicities and cultural codes all gathered up in capital cities that used to be controlled by European colonial powers. And those big cities became a mixture of different mentalities that really had nothing in common. Sometimes they had religion in common, sometimes not even that.

So, in this mix of different ethnicities and cultures, each tribe wanted to get ahead and move forward, bring their clan into business. And each tribe was very, very suspicious of outsiders.

So you had family-run government offices and business offices where anyone who is not a family member is viewed with suspicion. So business tends to be very slow, and outsiders are not trusted at all.

In addition to trust problems, tribal societies tend to try their best to portray their tribe in a positive light. Imagine this: you are French and move to an American university to study. There's another French guy in your class. You would probably pressure the other French guy into behaving in ways that would not cause confusion over your own behavior. Such peer-pressure is very common in tribal societies, where tribal members are pressured into behaving “properly” to prevent the entire tribe from having problems.

Free economies: these economies are simple. Any individual can supply any legal product he or she wants. Any individual can purchase any product he or she wants. No peer-pressure, no coercion. You want something, you can afford it. Buy it. You want to produce something. You can afford to produce it. Produce it!

Now in militarized economies you're going to have to convince war lords to drop their weapons and free their economy, meaning you will allow peaceful economic agents to compete with them in peaceful terms.

In tribal economies, if you want to free the economy, you are going to have to find ways to get people from different tribes and different families to trust each other more.

-Fourth type of economy: the collapsed economy. You steal a cell phone, sell it at the black market. If someone buys the stolen cell phone, you buy groceries with whatever money you made selling the stolen cell phone.

The next day, you try to steal something and sell it on the black market. That's basically how collapsed economies work.

So, the big question is: how does the economy work?

-The economy needs to work to enable households to survive. So the economy works for the household. In any economy, you produce products that individuals, their families and friends will use to survive, have fun or thrive.

-Individuals work in the business sector or in the non-for-profit sector to make money so they can help themselves, their family and friends survive.

-So the business sector has two missions. Mission number one: produce products that will help other businesses or households survive. Mission number two: hire individuals who, via their paychecks, will help their family and friends survive.

-The financial sector makes sure that money is what people trade with. So rather than exchanging your watch for fruits and vegetables, you will exchange money for fruits and vegetables. So the financial sector needs to make sure such transaction run smoothly, by making sure that there is enough money in the market and those individuals and businesses have their money in safe places.

-The government: needs to make sure individuals and businesses don't get hurt doing business. That's the government's main mission. To make sure that individuals don't get hurt doing business.

-Why the economy has such a bad name: in many countries and cultures, respect is more important than money. If you do business in countries like France, Japan, Saudi Arabia or many other countries, people won't sign any deal if they are not shown a very decent amount of respect.

So in some countries like in the US, you can sign a business deal and leave without even knowing your business partner's name. But in countries like Saudi Arabia, you need to show your counterpart that they have your utmost respect, and keep putting respect ahead of any deal.

Respect is tricky territory. Respect means that, for example, you don't point out lies or inconsistencies. You act like you heard nothing. Respect means you keep negative things somewhere in the back of your head, and that you have to be playful and skilled by sweeping all the negative stuff under the rug.

More importantly, respect means you need to take your time, because the best way to show respect is by establishing respectful relationships over time.

-What is the economy: the economy means transforming “raw materials” and exchanging those transformed raw materials to households, businesses, the government or the non-for-profit sector in exchange for a negotiated price, or a fixed price.

Note that raw materials can be physical items (fruits or biscuits) but can also be “knowledge items” (a doctor's opinion or a lawyer’s opinion and so on).

Production means transforming raw materials and selling them on the market. There are two types of sales:

-Bandwagon sales: your product is available in the market under different brand names, and you add your own brand to the list of brands.

-Innovative sales: your product is new, no one really produces it. The disadvantage is that you're going to have to convince clients that your product is useful, and you need to get clients to trust your product.

The advantage with bandwagon sales is that the product is available on the market, so you can follow whatever recipe other brands are using.

-Who buys what?

Households: they are consumers, not producers. They buy stuff, but don't sell anything.

Businesses: they buy AND sell stuff. They buy stuff to operate their business, the kind of stuff that will help assemble the product (anything from human resources to raw materials to office space). And they sell their product.

The government: usually buys stuff. Many governments sell products, but mostly in the form of taxes. Many countries have the government operate businesses in strategic sectors, such as electricity production, telecommunications etc. Basically any strategic sector that private investors would find too costly and complicated to operate, the government takes over and operates the sector. Because the government is less worried than private investors about losing money or failing to operate the business properly.

In most countries, healthcare is considered a strategic sector, and is run by the government. In other countries, health is considered a private issue, and is entirely or partly run by the private sector.

The non-for-profit sector: raises funds to advance causes. Buys basic stuff, sometimes sells stuff, but the main issue is the cause they are trying to move forward.

Now, to the key question: how do you get the economy to work?

-You need to enable households to get the kind of jobs that can help them raise the kind of money that can get them to purchase items that they need to survive.

Easier said than done. Some countries put so many premiums on the notion of respect, that households keep losing their jobs because they had a bad day or a bad night of sleep and failed to show respect on one specific day, and no amount of apologies helps them keep their job.

In other countries, harassment is so prevalent that households would rather stay home than work and get harassed on the job.

In some countries violence is just part of the game. And households need to retreat every now and then and only work when they have the kind of energy needed to put on a good fight.

In other countries too many raw materials are hard to find. In other countries the banking system is opaque. In other countries bureaucracy is ridiculous, usually in the form that you're only allowed to do business inside the city or town you were born in.

-You need to enable businesses to buy AND sell whatever product they are making

The problems are the same as for households. Sometimes raw materials are hard to find. Sometimes human resources are hard to find.

And sometimes company leaders like to make it sound like it's all going good and will harass any worker who makes claims that there are problems within the company or the market.

A lot of times, businesses have no exposure. A lot of times, the market does not have enough individuals who know how to talk the talk and sell the product.

A lot of times, businesses just copy whatever products are being sold overseas, when such products have no demand on the local market.

-You need to allow the government to oversee the market

A lot of times, government officials take care of personal business (either family issues or some personal business they have) and do not oversee the market.

The government is about market oversight (and social oversight). But, a lot of times, governments are too busy handling their own personal business to take care of oversight.

-You need to make financial transactions easy

You need to make spending money an easy thing. And you need to make saving money an easy thing. And you need to make receiving money easy.

Many countries, unfortunately, make it hard for individuals to make money, to spend money or to save money. Specifically because they want such individuals to become loyal gang members first before they make, spend or save money.

Those are the ABCs of any economy. Maybe some day I'll discuss the DEFs and so on.

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