Glossary of terms used in this article
Mercantilist tapped his walking stick on the oak floor. "Hmmph. This kind of mess would never have happened in my day."
The Market Analyst on TV droned on about how the dropping value of the US dollar will affect trade in China.
"Never, I tell you," Mercantilist insisted. "The money for this day and age is useless. In my time, we collected gold and silver, and the value never dropped. Our kings also took care of us. We didn't have all this rubbish like Free Trade. Imagine buying cotton from a country outside your own at a cheaper price than what you can buy from your own people. No wonder there is so much trouble."
Physiocrat raised a bushy eyebrow, "Oh really. In your day, the only way to expand wealth was to war and plunder. That is what happens when government take part in trade affairs. People should be allowed to buy and sell freely. This will in effect introduce more of what people need and less of what they don't need. Anyway, gold and silver are just intermediaries. Without food, all the gold in the world will be worth less than its weight in sand."
Classical School interjected, "Land that produces food is not the only contributor to wealth. Both Labor and Capital are also critical to growth. You have to admit, self-interest will drive people to produce goods that society needs at a faster and cheaper rate. For example, a man in a factory can be trained to do one thing really well and fast. That way the work of 5 such men who combine their skills in one product can be equal to the amount that 20 men can produce if they were to work alone. That is the magic of laissez-faire, am I not right, Physiocrat?"
The man addressed said, "You are right Classy. Though you must admit, labor is so bountiful that land ownership carries more economic weight."
The younger Ricardian said, "Not in my days Physio. Population and capital had grown so much because of the opportunities created by laissez-faire that conflict between labor and capital became quite common. Though the fixed supply of land would bring up prices of rent, it kept the price of wages and profit down. That is because, when more capital is used to pay for rent, then there is less left over for profit and wages."
Malthusian added, "You are right about the fixed land supply. Living standard was very bad in my day because population growth was too much for the agricultural sector to handle. Imagine trying to feed a population that grows geometrically when food production can only increase mathematically. The only clear solution to this problem was war and colonization." He shrugged. "Although modern technological advances in the agricultural industry has made my theory pretty much obsolete."
Marginalist would not remain silent. "Technology advances is dependent on consumer needs. If consumers are willing to sacrifice a large amount of their income for a certain good, then businesses will try their utmost to supply those goods. Demand creates supply, and the amount of supply at any one time determines prices."
Classy said, "How can consumers control prices? Prices are dependent on production cost. No entrepreneur will run a business that looses money long-term."
Marginalist said, "There is more than one way to loose money; one of which is producing more than what the market needs. Another is to sell at a price that is outside the range of price the consumers are willing to pay. Laissez-faire created a situation where business owners are forced to compete with each other. Each must find ways and means to keep production cost down so they can sell cheaper than the competition."
"That is ridiculous," boomed Mercantilist. "That will destroy businesses."
"No, it won't," was Marginalist's heated reply. "Because by the 19th century population that can afford to buy goods had grown so much that mass production became lucrative. Traders and producers became creative about how they can save cost and in effect created another group of suppliers who help them find ways to keep cost down."
"Of course they do," a fiery-eyed Marxist said. "They exploit people. They make use of them like slaves, then pay these poor souls barely enough for food and clothing. Real wealth is not in land or money; it is in labor."
Physiocrat said, "Free Trade dictates that it is the man or woman's choice to either accept or reject an offer of wage."
Marxist insisted, "That is easy for you to say. But in actuality, capitalist pay low wages so they can keep the surplus of the revenue for themselves."
A chorus replied, "It's called profit!"
"And it creates a class of greedy individuals who exploit the skills and labor of others. Society is not made out of an ever moving mass of people. People are made out of communities and families; individuals don't uproot as easily as your graphs show. Society will break down if they do."
Classical School said, "It is their choice to either leave or stay. Choosing family or community over a career is an economic choice."
Marxist turned to face her. "But that means that capitalists will continue to exploit groups of people who are forced to remain in their surroundings because of personal reasons. Wealth comes from labor. People must begin to realize it, else they will not understand what their rights are."
Keynesian put down his newspaper. "People has already begun to realize it, and they have also begun to realize a lot of other things. All entities in a market need each other to prosper. The consumer needs businesses to keep prices competitive; businesses needs labor to produce products and services; and labor needs businesses to earn wages. That is why at some point, the government must get involved. Roads, hospitals, utilities; all of these are critical areas for society. Government can create legislation that will determine minimum wage as well as provide equal education opportunities."
Marxist banged the table, "That is why some businesses moved to other countries that has weaker legislation. Poisoned fumes from one factory is moved to another, low wage is moved from one country to another."
Physiocrat raised his voice, "You have to admit though, that the market has advanced society and even those living with minimum wage have the benefit of education and healthcare that their parents used to only dream about."
The heated debate continued as Classical School took a seat next to the window and picked up a half-knit scarf. People will continue to change and evolve for it is human nature to do so. In the age of the educated masses, every generation will make new discoveries, new mistakes and new rules. Sometimes the market move according to the whims of the ruling class, sometimes it moves according to the whims of the masses. Each group will give in, give way or give up rights that they find too troublesome to defend. Economics sway the sentiment of people like the weather; when it is hot, it made them long for cold, when it is cold, it made them long for heat. Who knows where it will swing to next.
Read more fable-styled articles.