The Logic of Increasing Industrial Productivity


Since labor costs are the largest single part of many company’s budgets, it seems logical that a company would try to control those costs.  If you can cut labor costs, but maintain production, then the company profits should soar.  Automation and outsourcing to low wage countries are very logical ways of keeping costs down.  Such efforts have helped companies to increase their profits, their stock values, and their executives’ wages.

In a purely capitalist system, there is no reason for any well run company to pursue any other strategy.

Of course company executives want to eliminate as many workers as they can and cut the salaries and benefits of the workers that they cannot eliminate.  What they also want is for their customers to keep buying the company’s products.  This would all work if the population of workers did not overlap with the population of customers.  For most large companies that make products for the middle-class consumer, their is tremendous overlap in the population of their workers and their customers.  This is certainly true for the economy as a whole.

There seems to be a conflict in what is logical for one company to do  and what is logical to support the well being of the whole of society.  As a citizens of the society as a whole, should we just ignore this conflict and hope it will all work out? Or should we be looking for solutions that make society work for all of our benefits?

Think about this when you vote for a politician who tells you that her or his business experience will make her or him particularly adept at running the government in a business like way.  How many business people consider it a primary business responsibility to hire as many people as they can and pay them as well as they can, so that the workers can live a decent life?  As a politician, they will tell you that they want to create well paying jobs, but their primary mission as a business person was never that; it was the opposite.

Another way for a company to cut costs is to try to get some other entity to pay for the resources a company needs. This shifting of expenses works well for educating people to be able to do industrial work.  It works well for creating the infrastructure of transportation and energy distribution that a company uses.  It also works well for providing the legal framework and the enforcement mechanisms that make running a business possible.  Exposing the logical fallacy is to ask who is going to provide the money for this other entity to provide all these freebies to the company?  Does your business savvy potential political leader who has made a career of foisting the costs onto others have the requisite knowledge for providing those services they have previously shunned?

Ideally, we should be looking for political leaders who understand what motivates business, what makes it succeed, and what are the needs of the whole system that makes it all work.

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