Importance of Consumption and Production - Case Study Example

Consumption and Production The purpose of this essay is to critically analyze the relation of the consumers and the producers in the economy. The paper starts with a brief introduction to the concept of consumption and production and the benefits of both to the economy. Then it moves onto discuss the major theories relating production and consumption namely the Marxism, Foucault and the Frankfurt school. Thesis statement and Research Methodology The paper basically elaborates on the relation of the production and the consumption sector and aims to find out, through the discussion of different theories, the relative advantages to the consumers and the producers. For the purpose of research, I have basically analyzed different literature reviews. Introduction Consumption and production are the two most important sectors in the economy. According to Reisman (2006), both consumption and production are the two fundamental views of economic life. He explains that throughout history there has been a debate over the introduction of policies that can improve the consumption or the production. While in some of the Eras economists like Adam Smith argued that there should be an emphasis on the expansion of production, others from the seventeenth century gave more importance to the consumption sector. The economists from the twentieth century have also stressed the expansion of the desires of the consumers rather than the opposite expansion of the production. Overall, there have been many theories about the relative importance of both the consumption and production. This paper discusses a few but before the theories are discussed it is important to know why the consumption and the production are the two crucial determinants of the success of an economy. Importance of Consumption and Production Since the concepts relating the consumption and the production are different according to different theories, there is no set definition of consumption and production. However, consumption may be crudely defined as the final purchase of goods and services. Production on the other hand is the economic process that converts the inputs into outputs. Hence, the production includes the creating of the output and the consumption constitutes of the buying of the same output in the form of finished goods and services. Consumption and production are very important because they are actually the building blocks of the economy. Production means that the firms and the organizations can make use of raw materials to produce goods and services for the consumption process. The consumers on the other hand consume the products and the services and provide revenues and profits to the producers in the economy. Both the processes are important because result in an exchange between the consumers and the producers that may further lead to an increased flow of income and wealth in the economy. Consumption is very important because it is a major component of the Gross Domestic Product (GDP) of any country. Similarly, the production process is vital because it leads to the production of the goods that are to be consumed. The production process is so significant that Marx believed that without the production ‘citizens die, economies flounder, and countries collapse’ as Twigg (2006) relates. Since both the consumption and the production processes are the central processes of the economy, there have been many theories relating the two. Following are the few. Marxist beliefs about Consumption and Production For Karl Marx, according to Twigg (2006), the part of the Capitalism that was related to the production was troublesome. This was because he believed that the production in a capitalist society was carried out in such a way that it led to the exploitation of certain classes of people while some rich classes enjoyed all the benefits. Marx believed that the concept of production was not just restricted to the production of goods and services. Rather, he believed that the production process should occur among ‘individuals.’ Karl Marx believed that the production process itself was a two-fold consumption process. Firstly he believed, as Twigg (2006) relates, that the individuals that are involved in the production process enhance their abilities in the production process by the interaction with other individuals. It is due to this fact that they ‘consume’ their abilities and use them in the process of production to create products that are a source of the fulfillment of the needs of other people. Secondly, Marx believed that the production process could also come under consumption because the factors of production are also ‘consumed’ in the process. The use of the raw materials and the resources in the manufacturing process leads to the formation of better-finished products. So, the raw materials are also made use of and consumed. As a result, as Twigg (2006) discusses, for Marx ‘the act of production is therefore in all its moments also an act of consumption’ Marx’s theory suggests that the both the acts of the production and the production form a circular relationship such that one affects the other directly. He believed that the relation between the consumption and production was three fold. The first one was that of ‘immediate identity’. According to Twigg (2006), the concept of ‘immediate’ identity meant that the production was basically consumption. As previously mentioned, Marx was of the opinion that the abilities of the workers and the raw materials and resources were ‘consumed’ in the production process. Similarly, the consumption process also comprised of the production process. Since he believed that both the consumption and the production processes were similar, he often referred to the two processes as ‘Consumptive Production’ and ‘Productive Consumption’, as Twigg (2006) relates. The second relation of the two processes, according to Marx, was that of ‘mutual dependence.’ This meant that the two processes are mutually dependent on each other. As a result, one is incomplete without the other. This does make sense because if there is no consumption then there would be no need for the producers to produce anything. Similarly, if the production process were absent in an economy, the consumers would not have anything to consume. Therefore, an object is produced because it has to be consumed and an object is consumed once it is produced as Twigg (2006) relates. The third way through which the consumption and production processes were related is the notion that “each supplies the other with its object.” In accordance with the said concept, the production process would lead towards the development of the subjects that are for consumption purpose. Similarly, the consumption process leads to the creation of the objects that have to be produced. Therefore, as previously discussed, the production would not occur if the producers do not have the relevant and the required resources to ‘consume’ and the consumption would not take place if no object is ‘produced’ that has to be consumed. Overall, Marx believed that the production and the consumption processes are two fundamental views of economic life that are greatly mutually dependent and are incomplete without each other. Since for Marx both the processes are equally important therefore it is important that neither the consumer nor the producer is exploited. For the processes to continue, it is important that the producers attain the required profits and the consumer gets the desired satisfaction. The exploitation of any agent (producer or consumer) can therefore lead to a reduction in the incentive and motivation (profits for the producers and the derived utility for the consumer) and hence a hindrance in the two processes. Therefore it can be argued that the Marxist notions about consumption and production are such that they do not lead to the exploitation of one sector at the hands of the other. Although Marx did argue for the rights of the laborers that are a part of the production process and demanded more rights for them, he did not state explicitly that the producers should be less advantaged than the consumers. For the circular cycle to continue, the needs for both the consumers and the producers needed to be fulfilled. Frankfurt School-beliefs about Consumption and Production According to Kellner (2004), the Frankfurt School was often referred to as ‘Fordism.’ This was because Frankfurt gave much more importance to the expansion of the production process. Frankfurt’s era was one in which there was mass production and there was an increased need for the production of different products that could be produced to satisfy the needs of the consumers. Although it can be argued to some extent that Frankfurt’s work resulted in the creation of other better products for the consumption process, it would not be wrong to argue that Frankfurt completely ignored the process of consumption. Kellner (2004) argues that the Frankfurt notions of the economy were based on the dominance of the state and the development of the monopoly capitalism. This means that Frankfurt believed that the state had the authority to intervene in the economic processes. Also, the monopoly capitalism meant that the producers (generally giant organizations and institutions) could easily exploit the consumers. Frankfurt did agree with Marx on the safeguarding of the rights of the laborers to some extent, however there was no emphasis on the safeguarding of the rights of the consumers. Kellner (2004) believes that the emphasis on the mass production and the new and improved production technologies led to the empowerment of the giant organizations onto the individuals. Unlike Marx, Frankfurt did not emphasize the importance of the consumption process to the production one and completely ignored the mutual dependence of the two. Overall, the Frankfurt era mainly involved the mass production of homogenous and better products for the consumers. Ignoring the consumption process completely, Frankfurt basically gave more powers to the producers. As a result, the consumers were severely exploited. Foucault School- beliefs about Consumption and Production The Foucault theories, according to Wagler (2009), were related to the ‘consumer’ culture. Although Foucault did not study the consumerism in much detail, he did propose some of his theories that were related to the consumption instead of completely ignoring it. Foucault did not study the consumer culture directly. Rather he based his work on the modern institutions and the authority that was connected to them as Wagler (2009) explains. For Foucault, this was important because it could help him determine the ways in which the producers could exploit the consumers. The study of the organizations led him to get a better idea of the consumer-producer relationship. Here, he proposed different theories that could improve the relation and ensure that none is disadvantaged. Foucault’s theories also included emphasis on the environmental degradation. According to him, the actions of each of the agent have a direct impact on the other one. Therefore, according to Wagler (2009), Foucault’s ideas transformed the ways in which the producers or the owners of the giant organizations (who had a lot of authority) viewed the consumers. Overall, Foucault’s ideas were in the favor of the consumers. This was because the environmental degradation theories ensured that the authority was not exercised in the wrong way by the organizations. As a result, the consumers were not exploited by the means of technologies like advertising etc. Conclusion To conclude, the consumption and the production processes are the two most important determinants of the success of an economy. There are various theories that relate the two and focus on their relative importance. While some of the theories like that of the Frankfurt School ignore one process (consumption in this case) completely, others like Marxism emphasize on the significance and mutual dependence of both the processes. As a result, the relation of the two is a critical factor that affects the benefits of consumer and the producer. In other words, different theories about the production and the consumption processes lead to different definitions of the processes. The definitions then determines who is more empowered, the producer or the consumer. References Ettlinger, N. (2004).Toward a Critical Theory of Untidy Geographies: The Spatiality of emotions in Consumption and Production. USA. Feminist Economics. Volume 10, pages 21-54 Kellner,D. (2004).The Frankfurt School. USA. UCLA. Reisman, G. (2006). Production versus Consumption. Austria. Mises Daily. 17Th March. Twigg, L. (2006). Karl Marx versus Adam Smith. Rebirth of Reason. Wagler, R. (2009). Foucault, the Consumer Culture and Environmental Degradation.USA. Ethics, Place and Environment. Volume 12, pages 331-336 Read More