The Difference between Economic- and Real Demand

Both of my grandfathers were farmers and so are two of my uncles. The other family members are all in some way related to the agricultural business. That’s how I – in one of our annual family gatherings – winded up in a discussion with my farmer-uncle about the current state of the agricultural business in Europe. He told me that the farmers – including himself – had to pay wholesalers – which are the parties farmers should be selling their crops to – for them to come and pick up their crops. So: instead of getting paid for cultivating their crops – which seems to be a pretty fair deal – farmers actually have to pay money for them to get rid of their unions, potatoes etc. That’s how low the prices of many crops are these days. And do you know why these prices are so low? Because there is no demand. I repeat: there is no demand. So while there are – as we speak – people are starving in Africa, our farmers have to pay money to get rid of their crops because there would be no demand. This is how far we have gotten in this 21th century of our human civilization.

But let’s take a closer look at the situation: why is there what seems to be a structural oversupply of certain crops? When asking this question to my uncle, he explained to me that the farmers kept on producing this much unions – for example – because they were hoping for some disaster to occur in a country abroad – like a flood in Russia or a drought in Spain – which would make the supply of unions drop, the prices rise and the revenues of Dutch farmers increase. It seems that the act of speculating has crossed the boundaries of the banking sector into the agricultural industry.

However, knowing the farmers’ motives for continuing the supply of unions is not in itself sufficient for coming to understand why there is this oversupply in “the West” and this starvation in Africa. After all, one cannot blame the farmers for trying to make a living, right? So maybe we should put the blame on the Africans. They are after all the ones that are too poor to help our farmers out, right? That’s true, but that is also very twisted. But where to put the blame then? Why is this economic game being played so far away from what we – the human species as a whole – seem to need?

Maybe there is something fundamentally wrong with the economic paradigm. With the economy as being the domain of the profit-maximizing individual. The domain in which the market takes care of itself. The domain of the exchange of goods and services in order for the overall utility of society to increase. Maybe the economic paradigm has lost touch with reality and with why it was invented in the first place: to help us human beings live together peacefully. And since no money equals no goods, and since people are not willing to provide their goods for free, the poor are screwed, right?

But maybe there is a way for the market and ethics to converge. That is: maybe we should stop looking at money as being a universal instrument of valuation and start looking at the goods and services people worldwide have to offer. I can imagine that Africa – because of its climate – has the right conditions for growing agricultural products that are totally different from those being cultivated in the much colder regions of Europe. So why not focus ourselves upon producing and exchanging these goods? No money involved. Just trading the stuff each of the counties is capable of producing with stuff they are unable to produce. We should look for ways in which we – the countries of the world – might be able to complement each other. We have to – as a world – see which countries are – whether it is because of natural resources being present or because of beneficial geographical positioning – most capable of fulfilling a particular task and let each country focus upon performing that task. This is the only manner in which we can fully benefit from the differences that inevitably exist between countries, without ending up in an imbalanced economic situation like we are today. We have all got something to offer each other. That is what we have to realize.

Let’s make this more concrete. Let’s focus upon an example that shows the manner in which different countries could be able to use their regional advantages in creating value. Most of us do agree with the idea that fossil fuels are likely to be exhausted within a couple of decades, right? So that means that we have to switch to other energy sources. Sources like solar energy. And where is an extremely high amount of solar radiation waiting to be caught? A place in which unused space is abundant? Indeed: the African desert.

Think about it. Hereby we could make optimal use of the geographical differences between the world’s countries. In the West we could keep on having “old-school” food-producing farmers, while in Africa there would be an entire new group of “sun-farmers”. This development could turn the idea of what it means to be a farmer upside down. Both types of farmers are producing energy for us human beings. And each of them would focus its efforts on doing what it does best and exchanging these results with other countries.

Sounds good, right? The choice is yours: should we stick to the money-focused, profit-maximizing and individualistic approach currently being applied, or shall we start trying to obtain the most value from the differences that exist on the world and use these differences to create a fair and honest trading scheme.

What do you think?

Written by Rob Graumans

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