We can all make a profit from each other.

Some 50 years ago, Lord Stokes, then chief executive of British Leyland — a national amalgamation of several failing car firms — was asked about population growth on BBC Any Questions.  “Of course, we need population growth,” he replied.  “How would we succeed otherwise?”

This revealed one weakness and one fallacy.  The weakness is that many producers will take the easiest way out of a problem, even if it’s only of short-term benefit.  Instead of making their production methods more efficient in the 1960s order to make cheaper cars, failing car firms were grouped together in order to reduce their unit overhead costs among a larger number of customers. (British Leyland failed anyway !)

The fallacy is that Lord Stokes obviously saw car-buying consumers as a separate part of the population — to be exploited by producers — rather than part of two-way transactions in which both producer and consumer feel they’ve made a profit.

The fallacy still pervades most economic thinking. This is why most economists cannot envisage how a stabilised world economy could work.  It needs a growing number of customers all the time, they aver.  They fail to see that all consumers of some things are producers of others. Both can benefit almost whatever the size of the population above a threshold which will have a sufficient number of innovators..

But where will profits come from, and thus savings and thus investments for the future? they ask  Profits come from making production methods steadily more efficient.  Every marginal gain in efficiency is the same as increasing profits.  Nobody and nothing need be exploited.  We can all make a profit from one another.

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