Economics: Production, Distribution, and Consumption
Goods and Services
Definitions
Goods are all material things taken from nature or produced to satisfy human needs.
Services are economic activities aimed at satisfying needs that are not directly related to the production of goods.
In any economic activity, goods and services are interrelated and interdependent for a functioning economic system. Both result from transforming resources into useful objects through work in production processes.
Production, Distribution, and Consumption
Through work, we produce goods and perform services that we eventually use. An individual cannot produce everything they need. Collectively, people participate in economic life, with production, distribution, and consumption of goods and services as main activities.
For any good or service to be offered on the market, it must first be produced.
From Raw Material to Final Product
The main factor in the production process is work. The production process consists of three main components:
- Work
- Raw material
- Instruments of production
Human Labor
Every human activity that results in goods and services is considered work. Every job is a combination of two types of activity:
- Manual
- Intellectual
No labor is purely manual or intellectual, but rather predominantly one or the other.
The Value of Qualification
Skilled labor requires learning and technical knowledge. Example: Computer Technician.
Unskilled labor can be accomplished with minimal learning. Example: Mason’s Assistant.
Raw Material
Raw materials are the initial components of a product that are transformed during the production process to acquire the form of the final good. Example: Wood.
Before being processed into raw materials, these components are found in nature as natural resources.
Natural Resources
Humans use resources such as soil, rocks, rivers and waterfalls, water, oil, etc., for production. Example: Tree.
Means of Production
Means of production are all objects that directly or indirectly allow us to transform raw materials into final goods. This includes tools, equipment, and machinery.
Raw materials and instruments of production together constitute the means of production.
Productive Forces
The entire production process combines work with the means of production. The combination of human labor and means of production is called productive forces.
Relations of Production
To produce the goods and services they need, humans establish relations of production. The most important relations of production are those between owners and workers.
Property
Property relations organize and define society. Ownership is a key aspect of these relations.
The mode of production encompasses the set of productive forces and production relations. According to Karl Marx, the mode of production is the structure of society, defined by the relations of production and productive forces.
How Society Is Transformed
The mode of production is how society produces, uses, and distributes its goods and services.
Each society has its own mode of production, consisting of dynamic factors that are constantly changing: productive forces (changing with the development of working methods, technology, and science) and relations of production (also subject to change, but more slowly).
Before Capitalism
Modes of production do not appear in pure form in real life but are mixed with elements of other modes of production. Capitalist productive forces imposed their rhythm on the economy and society.
Primitive Community
Initially, humans lived in nomadic groups, dependent on natural resources. They survived through hunting, fishing, and gathering. Later, cultivation and animal husbandry led to settled, sedentary lifestyles, still reliant on nature for basic needs.
Asiatic Mode of Production
The Asiatic mode of production prevailed in ancient India, Egypt, and among the Incas, Mayans, and Aztecs. These were closed societies with strong states and efficient bureaucracies, maintaining full state power over society.
The Capitalist Mode of Production
The capitalist mode of production involves employment relations and private ownership of the means of production by the bourgeoisie. Under capitalism, workers are free to work wherever they choose, as long as a capitalist accepts them as employees. The desire for profit drives production.
A New Mode of Production?
Karl Marx recognized the economic and cultural impact of the bourgeoisie and believed capitalism would stimulate the development of productive forces. He envisioned a revolution in developed capitalist countries, placing the proletariat (working class) in power. Socialism, a new mode of production, would replace capitalism.
Characteristics of Socialism
While capitalism is based on private ownership of the means of production, socialism is founded on social (collective) ownership.
In socialism, there are no private companies, as the means of production are public or collective. Its goal is the complete satisfaction of society’s material and cultural needs, achieved through a planned economy focused on meeting the population’s basic needs, not profit.
Future of Work
Paid work, essential for social and economic engagement, is in crisis.