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TRANSCRIPT<br />
2002 Filmore Avenue<br />
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Phone: (888) 242-0563<br />
www.izzit.<strong>org</strong><br />
© 2006, 2013 izzit.<strong>org</strong><br />
V. 01/13
The Foundations of Wealth<br />
<strong>Transcript</strong><br />
For a list of additional resources to use with this video go to<br />
www.izzit.<strong>org</strong> and click on The Foundations of Wealth video.<br />
How It All Began<br />
MAN: I’m an average man.<br />
WOMAN: And I am an average woman.<br />
MAN: One thing about being the average man leading the primitive life – it gives you plenty of time for<br />
thinking. My wife thinks a lot.<br />
WOMAN: It’s true. Although we’re living ten thousand years ago, I do think a lot but then, so does he.<br />
Though being only average he only thinks average thoughts. In fact, we are both so average…sometimes<br />
we think the same average thoughts, so we don’t even bother to speak to each other.<br />
MAN: Hmm…you know, I could tell you precisely what she is thinking now. She’s thinking, “What<br />
would it be like to move forward ten thousand years in time and live in the twenty-first century”<br />
MAN AND WOMAN: Ohh! What’s that Oh!<br />
WOMAN: Ohh! It’s a time machine!<br />
MAN: Ohh, look at that!<br />
WOMAN: Hey! Hello<br />
BOTH: Uhh, ohh, ooh!<br />
MAN: What’s that<br />
WOMAN: Oh, I don’t know. What are those…those things he’s holding They look like square bits of<br />
…<br />
MAN: I-I don’t know. It’s all so complicated.<br />
WOMAN: Ooh!<br />
MAN: What’s that<br />
WOMAN: I don’t know. They seem to be doing things for each other all the time.<br />
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MAN: And everybody seems to be depending on those little pieces of …<br />
WOMAN: Oh, no, look…there are round pieces.<br />
MAN: Is she going to eat that Hey, they look just like us!<br />
WOMAN: Except they’re wearing those funny clothes. I wonder if they think like us.<br />
MAN: I bet they do. He’s thinking, “How did we get into this amazing state of affairs Wouldn’t it be<br />
lovely to have lived ten thousand years ago before life got so complicated”<br />
WOMAN: Yeah. And she’s thinking, “What was it like ten thousand years ago when there were no<br />
banks, no factories or offices, no post offices or mobiles or computers, no shops or supermarkets” In<br />
fact, what would it be like to be us<br />
MAN: I bet they got it all wrong. I bet they think it must have been paradise ten thousand years ago with<br />
nothing to do all day long except enjoy themselves.<br />
WOMAN: That’s right. They think we spent all day getting a nice sun tan, feasting on the bounty of<br />
nature. When you want something to eat all he has to say is…<br />
MAN: Is lunch ready<br />
WOMAN: Coming, dear.<br />
MAN: I bet he thinks he is completely independent of everybody else.<br />
WOMAN: Yeah, and that he’s his own master. Oh, dear, they’ve got a lot to learn.<br />
MAN: I suppose they imagine a community of folk, like us, living ten thousand years ago, in a wooded<br />
valley cut off from the rest of the world by high mountains.<br />
WOMAN: Hmm…the folk in Happy Valley, they call us.<br />
MAN: Just the life, really – enough work for everybody who wants it, no inflation. Ho, ho, who ever<br />
heard of inflation And, there’s no money.<br />
WOMAN: Umm, and there’s no problems with one person having more than the other. Everybody here<br />
is absolutely equal because everybody is in the same boat.<br />
MAN: Yes, and in the same conga line. Woo hoo!<br />
WOMAN: Oh, yes. Life is so wonderful here, isn’t it – so easy and playful and happy<br />
MAN: And that’s how they think it was. If only they knew the reality! For a start, there’s no machinery<br />
here to help us grow food. Everything is done by the painful sweat of the brow of you know who.<br />
WOMAN: And you know who. Have you ever tried grubbing away at poor soil baked like concrete by<br />
the sun Come on, get on with it.<br />
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MAN: Oh, you get on with it!<br />
WOMAN: Poor kids, they’re flaked out.<br />
MAN: Get on with it, I said. You want to eat, don’t you The back-breaking jobs you have to do just to<br />
keep alive and you have to be doing them over and over again, year in-year out until your dying day.<br />
WOMAN: And then one day some people think, “Ah-h, there must be a better way of life than this!”<br />
MAN: There will be those who say, “But we’ve always lived like this. My father and his father before<br />
him lived like this.<br />
WOMAN: Well, that’s no reason for going on the same way forever and ever.<br />
MAN: Uh, sometimes there doesn’t seem to be much choice.<br />
WOMAN: Until you think about it.<br />
MAN: The thing is, life can be rough and it can be short. Suppose somebody is taken ill.<br />
WOMAN: Well, there’s certainly no nurse or doctor just around the corner. When somebody gets<br />
sick…<br />
MAN: …they die. The average age a man can expect to live to is only about 30.<br />
WOMAN: Many children die very young.<br />
MAN: The truth is Happy Valley is threatened in lots of ways.<br />
WOMAN: Get up, quick!<br />
MAN: Oh, go back to sleep.<br />
WOMAN: Get up, get up, get up! I know I heard something, I did. There’s something outside!<br />
MAN: Go back to sleep. You’re always imagining things. Ooh, ooh! It’s a wolf, it’s a wolf!<br />
WOMAN: I told you!<br />
MAN: Ooh, ooh, and that’s how it is. When wild animals raid the valley’s livestock it’s a major disaster.<br />
WOMAN: The animals can’t be replaced overnight. Where would we get them from There are no<br />
markets, remember.<br />
MAN: And then winter comes and everybody has to live on grain or the few root vegetables they<br />
managed to save from the summer harvest, if they’re lucky.<br />
WOMAN: And that’s all there is to last until spring.<br />
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MAN: Don’t worry. It’s bound to be a mild winter. I can feel it in my bones.<br />
WOMAN: In a bad year there’s no surplus to put by. We have to rely on what’s dug out of the frozen<br />
earth, if anything.<br />
MAN: And, if you’re really unlucky, it can mean starvation.<br />
WOMAN: A mild winter, you said.<br />
MAN: Don’t worry, it won’t last, you’ll see. But somehow or other, people did survive. After all, we<br />
couldn’t be here talking about it if we hadn’t, could we<br />
WOMAN: That’s true. We had everything – snow, flood, wild animals – yet we survived. Still, there<br />
was one thing we didn’t have much of.<br />
MAN: What’s that<br />
WOMAN: Choice. For instance, they can’t choose one job in preference to another. They just do<br />
whatever’s necessary to stay alive and they do it hour in and hour out, day in and day out, week in and<br />
week out.<br />
MAN: This way of living is called a subsistence economy. It needs all the efforts of every able-bodied<br />
member of the community just to stay the way they are now.<br />
WOMAN: And there’s nothing to spare for anyone else. Anything they don’t need for themselves<br />
today- they keep for themselves tomorrow. And all this isn’t just a piece of history or a bit of<br />
imagination; it all happened thousands of years ago. It’s true…and it’s still happening today, for real.<br />
MAN: You know, about a quarter of all the people in the world today live on less than one dollar a day.<br />
They produce barely enough for their basic daily needs and sometimes not even that.<br />
WOMAN: In a poor country like this, for instance, approximately ninety-five percent of all adults work<br />
on the land. They are very poor and their lives are very hard. Of course, there are always those at the top<br />
who do very nicely even in a country like this- but most are constantly threatened by disease and famine.<br />
People like this are essentially living like their ancestors.<br />
MAN: They are on the very bottom of the economic ladder. They are one step above extinction. Ninetyfive<br />
percent of the population of many developing countries work to produce food just for themselves,<br />
and that leaves hardly anybody else to produce other goods and services.<br />
WOMAN: In Britain, only about one percent of the people work in agriculture, but more than half the<br />
food they use is produced on our own farms.<br />
MAN: In the U.S. just two percent of the population are farmers or farm workers- and they produce<br />
enough to feed the remaining ninety-eight percent of the American population, with enough left over to<br />
export vast quantities to the rest of the world.<br />
WOMAN: An American farmer producing one thousand tons of wheat a year will only need a few<br />
hundred pounds of it for his family. What he does, in effect, is to swap the wheat he doesn’t need for cars<br />
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and trucks and tractors and new fencing and all the other things he wants for his farm and everyday life -<br />
the goods, in fact, produced by the vast majority of Americans who aren’t required to work on the land.<br />
MAN: Just consider these two ways of life and the astonishing fact that they can both exist at one and the<br />
same time on our small planet.<br />
WOMAN: How could this have possibly come about Why this happened in some countries and not in<br />
others- even though they may have the same climates and conditions<br />
MAN: How can people at a subsistence level ever lift themselves off the bottom rung of the ladder<br />
What’s the secret<br />
WOMAN: The secret is producing more than you need for your own immediate use. The point at which<br />
a community can create a surplus- is the point at which it can begin its long march towards a wealthier<br />
life.<br />
MAN: It’s also the beginning of the science of economics.<br />
6
Division of Labor 1: Product<br />
MAN: Unh, oh, what did they say our way of life was called<br />
WOMAN: It doesn’t matter what it is called; still, if you must know, it’s called a subsistence economy.<br />
MAN: Subsistence economy. It’s terrible! I work day in, day out just to keep us alive.<br />
WOMAN: It’s not just him. Every human being here is just a machine.<br />
MAN: You fill them up with food and water and then you use the energy you get from food and water to<br />
dig the ground, to plant seeds, to grow grain and to keep the animals.<br />
WOMAN: And you eat the food you grow to give yourself energy to keep yourself alive to plant more<br />
seed to grow more food…<br />
MAN: …to give yourself more energy to plant more seed…<br />
WOMAN: …to grow more food to give yourself more energy…it’s a trap, you know, a subsistence trap.<br />
MAN: It needs a genius to get us out of this one.<br />
BOTH: Unh, ooh…<br />
WOMAN: Come on, kids. Run for it!<br />
MAN: Oh! It’s horrible!<br />
BOTH: Unh, ooh…oh, no!<br />
WOMAN: Oh, that landslide, it’s huge!<br />
MAN: And it’s blocked off the whole of the valley.<br />
WOMAN: Now we’ll never be able to get our cattle and sheep to the only grazing we’ve got!<br />
MAN: They’ll die and we’ll starve! If we could only get across the river…<br />
WOMAN: Oh, just look at that lovely green grass – enough to make any cow’s mouth water.<br />
MAN: But we’ll never get the animals across the river safely.<br />
WOMAN: Unless we build a bridge.<br />
MAN: But I only have enough energy to plant the seeds to grow the food to give me the energy to…<br />
WOMAN: Oh, we’ll never build that bridge. What we need is a genius.<br />
MAN: Wait, I have an idea!<br />
7
WOMAN: Oh-oh! He’s got an idea.<br />
MAN: Everybody around here is like us. They have one cow, two or three sheep, a few hens and a patch<br />
of ground for corn. They catch their own fish, collect fuel for cooking, build their own houses for<br />
themselves to live in and they make their own clothes for themselves to wear.<br />
WOMAN: Though some are better at some things than others.<br />
MAN: Precisely. For example, you make the best clothes in the village.<br />
WOMAN: You know. He can be quite flattering when he feels like it.<br />
MAN: Though I suppose it’s only because I’m so good at getting good wool from our sheep.<br />
WOMAN: The truth of the matter is that the man with the real knack with sheep is our next door<br />
neighbor, Mr. Shepherd. Not you at all.<br />
MAN: Oh, well, that’s true. I must be best at something though.<br />
WOMAN: Thinking, love. You’re very good at thinking.<br />
MAN: Hey! That gives me an idea. Listen, suppose we alter the system. There are ten families in our<br />
village as it is now. Every household has their own cow and their one sheep. They keep poultry, catch<br />
their own fish, grow their own corn and collect their own fuel.<br />
WOMAN: And they do their own cooking and they make their own clothes.<br />
MAN: Right. So in order not to waste time walking to the woods to collect fuel or waste energy by one<br />
man looking after one cow, why doesn’t each family specialize<br />
WOMAN: What – divide the labor<br />
MAN: Precisely! Division of labor – that’s what it’s all about.<br />
WOMAN: So only one family looks after the sheep.<br />
MAN: Mr. and Mrs. Shepherd. They’ve really got a way with sheep.<br />
WOMAN: And another family sees to the cows.<br />
MAN: The Cowherds– they’re marvelous.<br />
WOMAN: Yes. Another does the fishing.<br />
MAN: Mr. and Mrs. Fisher.<br />
WOMAN: And others do the farming, collect the fuel and do the cooking.<br />
MAN: And we make the clothes for the whole of the village.<br />
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WOMAN: The Tailors.<br />
MAN: Right!<br />
WOMAN: Oh, but leaves two families over – the Masons and the Carpenters.<br />
MAN: Ah, because eight of the families in the village specialize, they produce enough for ten.<br />
WOMAN: And that leaves the other two to build a bridge across the river to the new pasture!<br />
MAN: Brilliant! Let’s put it to the others and see if they agree. Besides, think of what will happen if we<br />
don’t do something soon.<br />
WOMAN: If we don’t, our animals will have nowhere to graze.<br />
MAN: And we’ll all go hungry.<br />
WOMAN: Well, that’s settled then.<br />
(Man grunting from carrying heavy load)<br />
MAN: It worked!<br />
WOMAN: Yes, who would have thought it<br />
MAN: Not only are Mr. & Mrs. Farmer getting bigger crops than any of us managed on our own, the<br />
Fishers are bringing in more fish, and the Shepherds are keeping all our sheep much better.<br />
WOMAN: Not to mention the fact that the whole village is better clothed now that the Tailors are in<br />
charge.<br />
MAN: But what about the Masons and the Carpenters They’re well-fed and well-dressed just like the<br />
rest of us- but now that the bridge is finished, there’s really nothing for them to do.<br />
WOMAN: I’ve got an idea!<br />
MAN: Oh, she’s got an idea.<br />
WOMAN: Mrs. Farmer over there – she spends most of her time carrying water from the river to water<br />
her crops. Well, if the Carpenters and the Masons could just be persuaded to dig a channel to take the<br />
water from the river to the fields…<br />
MAN: …not only would it keep the crops watered, it would save the Farmers’ energy, and they could use<br />
that for growing even more food for the rest of us.<br />
WOMAN: Brilliant!<br />
MAN: And that’s how it was.<br />
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WOMAN: When every family did everything itself everybody was working flat out from dawn to dusk<br />
just to stay alive.<br />
MAN: But now we’ve hit on division of labor.<br />
WOMAN: We’ve all become specialists, and we’ve all become more skilled in our specialty and as a<br />
result- we have a surplus.<br />
MAN: And that surplus is the Mason and Carpenter families – or rather, the product of their labor.<br />
WOMAN: They’ve opened up bigger, richer pastures for our cattle and sheep, and they’ve given us a<br />
regular supply of water, and that means better crops of vegetables and grain…<br />
MAN: …and all this is one of the most important things ever to have happened in the community. The<br />
surplus created by dividing the labor is the first step on the path to prosperity and it’s a tremendous step.<br />
WOMAN: Division of labor by product is at the heart of all progress and prosperity, and it’s not hard to<br />
see why. Well just think about the sort of food we eat every day – cheese from a huge factory in Holland,<br />
salads from specialist farms on the Channel Islands, and that ham is from one of the great Danish pig<br />
farms.<br />
MAN: More than one hundred-twenty thousand pigs a month leave Denmark as pork, and ham, and<br />
bacon and sausages to shops of the world.<br />
WOMAN: The bread comes to your table all the way from wheat fields on the Canadian prairie. The tea<br />
comes from northern India, where the villagers make a living by exporting to the rest of the world.<br />
MAN: By cultivating thousands of acres they produce tea at a price you can afford.<br />
WOMAN: That’s another bonus of specialization: a bonus of division of labor by-product- goods that<br />
come cheaper.<br />
MAN: But, of course, it doesn’t just happen in agriculture. Everything on this table is mass produced by<br />
specialists: plates, knives, forks, tablemats – the lot!<br />
WOMAN: And that leads to another step in specialization.<br />
10
Division of Labor 2: Process<br />
MAN: Good, isn’t it Remember what it used to be like<br />
WOMAN: Subsistence economy<br />
MAN: Mmm.<br />
WOMAN: I’d rather f<strong>org</strong>et it, working day in and day out, digging, planting seeds to grow the food, so<br />
that we could eat, just to give us energy so we could go on and do more digging…<br />
MAN: … and plant more seeds, to grow more food to eat, to give us more energy…and so on…<br />
WOMAN: …and so on…<br />
MAN: …and so on.<br />
WOMAN: Ah, but we thought of a way out of that.<br />
MAN: I’ll say! A bit of brain power…that’s all we needed. Instead of each family supporting itself by<br />
doing everything, we divided up the labor so that each family specialized in what they did best.<br />
WOMAN: And that way, the Shepherd family got even more wool from sheep, because they got better at<br />
raising sheep, the Farmer family grew even more wheat, and the Fisher family brought in even bigger<br />
catches of salmon.<br />
MAN: It’s happened with all the families.<br />
WOMAN: Mmm, and all that extra skill they learned, and all that time they saved from travelling about<br />
from place to place, and all the boring preparatory work they no longer had to do for all the different jobsmeant<br />
that eight families produced enough for ten. We had a surplus.<br />
MAN: And that surplus provided for the needs of the two other families, the Masons and the Carpenters,<br />
and they built a bridge so we could feed our animals on better pasture.<br />
WOMAN: Mmm, and then they made an irrigation system that watered the land, and gave us even better<br />
crops.<br />
MAN: I suppose you could say that the road to a bit of modest prosperity began with that one idea of<br />
mine.<br />
WOMAN: Yes, I suppose you would.<br />
MAN: Well, it’s scarcely a life of luxury we live, but at least we have enough to know that we and the<br />
children won’t starve, and we can even lay a bit by for tomorrow.<br />
WOMAN: And have a little bit of time for ourselves and the family to do other things…<br />
MAN: …like making that shawl.<br />
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WOMAN: …like making this shawl.<br />
MAN: That’s a nice shawl there.<br />
WOMAN: He says nice things sometimes…<br />
MAN: But the trouble is…<br />
WOMAN: …and sometimes he doesn’t.<br />
MAN: …it’s taken weeks to make – weeks.<br />
WOMAN: It’s true! It did take weeks – well, two weeks anyway.<br />
MAN: Shearing the sheep, washing the wool, spinning it, dying the thread, weaving it into cloth,<br />
finishing it off…<br />
WOMAN: So<br />
MAN: So, it’s a lot of effort to put into a shawl. It will be worn out after a couple of years. It’s nice,<br />
though.<br />
WOMMAN: Hmm. That’s what I call a wholehearted appreciation.<br />
MAN: Hey! What’s going on over there<br />
WOMAN: Hmmm What<br />
MAN: He says he’s from a village up the river.<br />
WOMAN: Oh. Just look at all that wonderful stuff he’s got in that boat!<br />
MAN: Ooh!<br />
WOMAN: Cooking pots to die for.<br />
MAN: Oh, yes – apples! Oh…wonderful red apples. Oh, I wish we had apples like that.<br />
WOMAN: And shoes for the children.<br />
MAN: Right, right…and axes and knives.<br />
WOMAN: Huh What’s he going to do with all that stuff<br />
MAN: He says he’s a trader.<br />
WOMAN: What’s a trader<br />
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MAN: He says a trader is somebody who exchanges whatever surplus goods he’s got- for whatever<br />
surplus goods you’ve got.<br />
WOMAN: It’s true we don’t live in a subsistence economy anymore, but we don’t have much to spare.<br />
We’ve got a bit of spare food, but it isn’t as good as the food he’s got. Our apples aren’t half as nice as<br />
his.<br />
MAN: Hmmm…<br />
WOMAN: Hey, what’s he doing Hey, if he thinks he can trade me in exchange for all that stuff, he’s<br />
got he has another thing coming. Tell him!<br />
MAN: Um, he says your shawl is cool.<br />
WOMAN: Ooh, he likes my shawl, and so he should! It took me weeks to make.<br />
MAN: He says he needs twenty shawls.<br />
WOMAN: Twenty<br />
MAN: He’ll give the whole boatload of stuff for twenty.<br />
WOMAN: Twenty<br />
MAN: They’re for the king of Wongaland. He’s got twenty wives.<br />
WOMAN: He what<br />
MAN: If he only gives one of them a shawl like that- the others get so jealous; his life simply isn’t worth<br />
living. Do we have another nineteen like that<br />
WOMAN: Do we have another nineteen like that That took me weeks to make – well, two weeks<br />
anyway.<br />
MAN: He said he’ll be back in two weeks.<br />
WOMAN: I’ve never seen cooking pots like that before.<br />
MAN: Aye… and those apples looked delicious.<br />
WOMAN: We could have done with a new pair of shoes for the kids.<br />
MAN: He said he’d give us everything in that boat for twenty shawls.<br />
WOMAN: Oh look, there are ten of us here with a bit of time to spare, but even if we all worked flat outwe<br />
would only make 10 shawls in two weeks.<br />
MAN: We need a genius to produce another ten shawls. – A genius or a miracle.<br />
WOMAN: Hey, I’ve got an idea!<br />
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MAN: Oh, oh.<br />
WOMAN: Why does it take so long to make a shawl I’ll tell you why. Because there are so many<br />
processes you have to go through, before you can turn what’s on a sheep’s back into something that you<br />
can wear. First you’ve got to catch your sheep, then you’ve got to shear it, you’ve got to fetch water to<br />
wash the wool, and then you’ve got to spin the wool into yarn. Hmm… there are dyes to make before you<br />
can color your yarn, and then you’ve got to weave your yarn into cloth, and even that isn’t the end.<br />
Putting on knots and tassels that give a finishing touch takes ages.<br />
MAN: Every one of those processes takes ages. You can see why – setting things up, putting things<br />
away again, and even if you’re good at weaving, it doesn’t mean you’re good at dying or spinning.<br />
WOMAN: And that’s where my idea comes in. There are ten of us here. Suppose we each did only the<br />
thing we were best at<br />
MAN: Ah!<br />
WOMAN: One will do the shearing – enough wool for twenty shawls; another would wash it – all of it;<br />
three would spin it into yarn, and one would dye the yarn. Well, that would leave two to weave it and two<br />
to do the finishing up.<br />
MAN: Ah! That means you wouldn’t waste time setting things up, and putting them away again<br />
WOMAN: Right!<br />
MAN: And there’s something else that could happen, too. It needs a genius to see it. Since they are only<br />
doing the thing they are best at… everybody will get better with practice.<br />
WOMAN: Genius. Anyway, why don’t we give it a try<br />
MAN: Why don’t we<br />
WOMAN: Well, at first it looked like we’d never do it in time.<br />
MAN: Obviously the dyers and weavers couldn’t start until the dye was ready and the wool was spun, so<br />
they helped shear the sheep.<br />
WOMAN: It wasn’t long before we all got very good at our jobs, but we might not have been ready on<br />
time if the shearers and the spinners who finished their jobs quickly, hadn’t helped the weavers and<br />
finishers who were getting behind.<br />
MAN: But, we did what we set out to do.<br />
WOMAN: And in exchange we got what we wanted.<br />
MAN: Oh, lovely!<br />
WOMAN: Nice pot.<br />
14
TRADER: Oh, champion.<br />
WOMAN: There you are. And this is how we did it.<br />
MAN: We divided the work into separate processes, so that each one of the ten of us specialized in just<br />
one thing. The result was: we doubled our productivity; we produced twenty shawls in two weeks.<br />
WOMAN: Before, using the old ways, we would have produced only ten. We’d created the extra ones<br />
by division of labor by process.<br />
MAN: But this time we used the surplus in a different way. We swapped it for somebody else’s surplus.<br />
WOMAN: And the result is: we’ve now got a lot of things we couldn’t have made for ourselves.<br />
MAN: What we discovered was: the division of labor by process has created more surplus…<br />
WOMAN: …and by trading that surplus, we’ve taken another step along the path to prosperity. Oh, the<br />
cooking I can do with this!<br />
MAN: Oh, just look at that!<br />
There are still quite a few places in the world today where division of labor by process is still at much the<br />
same point as in our village community. Some people spin, some people weave, some people finish off<br />
the goods. In the modern industrial world, it all looks very different, and so it is in a way, but if you<br />
follow manufacturing through, you’ll see that it’s still divided by process in just the same way- even if it<br />
is on a massive scale.<br />
WOMAN: The shearing and cleaning of wool is carried out on huge commercial sheep farms. The raw<br />
wool is spun into thread on enormous machines, with two hundred spindles that turn out twenty-three<br />
miles of yarn a minute.<br />
MAN: The yarn is woven on gigantic electrically-powered looms that produce almost an acre of cloth a<br />
day. It’s dyed in special machines, and then made into goods like these, which are sent off to the docks<br />
for export.<br />
WOMAN: And in return…we get other people’s surplus – beautiful fruit, tea and coffee – things we<br />
cannot produce ourselves. We don’t swap it directly the way our villagers did. We sell our products and<br />
use the money to buy the tea, but it comes to the same thing.<br />
MAN: And it’s made possible only because we’ve created a trading surplus, and created it through<br />
division of labor by process, one of the foundation stones of the modern industrial world.<br />
15
Mechanization<br />
MAN: Why am I sitting here<br />
WOMAN: Why I don’t know, to keep warm, I suppose.<br />
MAN: No-o.<br />
WOMAN: Mmm. So you could daydream and carve on a piece of wood<br />
MAN: No, no, no, I mean, how am I sitting here<br />
WOMAN: How You’re squatting on a stone. You have been ever since you came back from collecting<br />
the firewood.<br />
MAN: No, no, no, no. You’re really not trying to understand me. I mean, how come I’ve got time to<br />
spare to sit here at all It wasn’t so long ago that we had to work from dawn to dusk just to keep<br />
ourselves alive. In those days there was never any question of idling the odd half-hour away in front of<br />
the fire…<br />
WOMAN: … like now. Ah, you’ve been thinking again.<br />
MAN: That’s right, I’ve been thinking. I’ve been thinking that once upon a time we lived in a<br />
subsistence economy. Then we could never have spared the time to do nothing in particular. Now we can<br />
spare a bit of time. Why<br />
WOMAN: Well, that’s not difficult. Just think back for a few minutes.<br />
MAN: Right. I’m thinking.<br />
WOMAN: Well, we got out of the subsistence trap by creating a surplus.<br />
MAN: That’s right and we got that surplus by inventing division of labor.<br />
WOMAN: Right. First we divided the labor by product. We changed from each family doing a bit of<br />
everything, to one family specializing in only one thing – say sheep, or fishing and so on.<br />
MAN: Then we invented another kind of division of labor. Instead of one person making a shawl for<br />
themselves we divided the process between the families – shearing and spinning, dying and weaving. We<br />
all made twice as many shawls as we were able to before.<br />
WOMAN: Yes, we made a surplus.<br />
MAN: And we traded our surplus for somebody else’s surplus.<br />
WOMAN: Now we’re all better-fed.<br />
MAN: The children are healthier.<br />
16
WOMAN: And we even managed to put something by for a rainy day.<br />
MAN: And…<br />
WOMAN: Yes<br />
MAN: …it’s your turn to fetch the firewood. Ha, ha!<br />
WOMAN: Oh. I wouldn’t mind if he did something useful while I did the hard stuff, but all he does is<br />
make toys for the children. Hoops, indeed!<br />
OH, Oh. Six trips to the forest that lot took me! Well, it’s his turn now. And what use has a hoop been to<br />
anybody<br />
MAN: Hoops. Come on, kids. Hoops. Hoops, hoops – ha, ho, ho – hoops. Ho-o-ops, ho-o-ops, hey,<br />
hey, hoops. Look at this. Wheels.<br />
WOMAN: Hmmm. My pile took me six trips to the forest.<br />
MAN: And mine took one.<br />
WOMAN: Hmmm….um-hum. Hmm Yes. I’ll show him. Yes. Yes!<br />
MAN: Well; I’ll be blowed - another revolutionary idea!<br />
Unh, urgh, urgn, oh. It’s all very well for you. All you have to do to earn your keep is to turn grass into<br />
milk. How would you like to push a plow, eh Look at me while I’m talking to you. Well, how would<br />
you like to push a plow, or even pull a plow Hey, kids, over here! Good girl. Walk up<br />
WOMAN: Oh, you’ve got to hand it to him. First he invents the wheel; then he gets the animal to do the<br />
work for him. What next Hey, what about the really important jobs, like grinding corn that makes the<br />
bread, that gives him the energy to make more toys for the children Oh. Hmm, yes, what next indeed.<br />
MAN: Oh, oh. I think she’s thinking again.<br />
WOMAN: Yet another machine.<br />
MAN: And yet more surplus.<br />
WOMAN: In fact, we only had one reason to invent anything. We wanted to cut down the effort we<br />
need to do a job. Then we’d have more energy to spare to make more surplus.<br />
MAN: More time, too!<br />
WOMAN: Hey, then we could even take time off – have a holiday!<br />
MAN: That’s why we invented machines. After all, they are nothing more than devices which make the<br />
energy from our muscles more effective, therefore more productive. Every machine, no matter how<br />
complicated it looks, is made up of very basic parts; for example, a wheel, an axle, a lever, bits of wood<br />
17
put together with one purpose in mind. And that purpose is: To reduce the amount of human muscle<br />
needed to do any particular job. The next step was to eliminate it altogether by using animal muscle.<br />
WOMAN: One horse or one ox has the strength of twenty men. It can do twenty times more work and<br />
create twenty times more surplus. But it’s possible in the end to do away with all muscle power<br />
altogether – animal or human.<br />
MAN: And that’s by harnessing the forces of nature. Water power can grind corn…<br />
WOMAN: …it can also power spindles and looms.<br />
MAN: But there are more powerful and more useful sources of energy in nature…<br />
WOMAN: …the wind…<br />
MAN: …coal…<br />
WOMAN: …oil…<br />
MAN: …uranium.<br />
WOMAN: It isn’t all that long since we were using simple machines combined with animal power to<br />
produce surpluses.<br />
MAN: Even today in some parts of the world animal muscle is still the main source of surplus. There are<br />
places where animals are still used for freight, or carrying passengers…or for machine power.<br />
WOMAN: Until the railways in the 1830s- a horse was still the fastest means of travel on the land, just<br />
as it had been for tens of thousands of years. But in time, the way the machines were applied became<br />
more complicated; but no matter how sophisticated they got, they were still a combination of very simple<br />
machines.<br />
MAN: The wheels and axles on this modern tractor enable it to tackle ground farmers would once never<br />
have dreamed could produce any crops. And the gears that make it possible to go up and down steep<br />
slopes are operated by levers.<br />
WOMAN: Basic machines- combined together make it possible for us to turn nature’s energy into huge<br />
surpluses. But it’s only possible to produce surpluses like these- when you can draw the energy you need<br />
from one of nature’s great resources.<br />
MAN: Until the end of the nineteenth century wind powered the fastest method of travel over water. But<br />
there was something much more effective than either wind or water. That was the power of fire.<br />
WOMAN: Fire transformed the world. First it boiled water for steam engines…then it ignited petrol in<br />
combustion engines and generated power for steam turbines.<br />
MAN: And more recently the controlled energy from nuclear reactors has been converted to electrical<br />
energy. And what does it add up to – all this application of different forms of energy<br />
18
WOMAN: It adds up to a surplus. The creation of a surplus means that the time saved by the wheel on a<br />
car or the lever on an engine can be used to make more goods.<br />
MAN: You can either use these goods or you can exchange them, or you could use them to provide<br />
services: nurses or teachers, or postmen or firemen – or you could use them to provide leisure for<br />
yourself.<br />
WOMAN: So when we take advantage of a combination of mechanical devices, natural resources and<br />
our own efforts, we create a surplus. And that surplus provides us with the standard of living we have<br />
today in our modern world.<br />
19
A Life Worth Living<br />
MAN: You know, I’ve been thinking…<br />
WOMAN: Oh, yes, and what have you been thinking<br />
MAN: Well, I’ve been thinking… that it’s thinking that got us where we are today.<br />
WOMAN: Hmm, I followed the first bit about your having been thinking again, but I got lost on the<br />
second bit of thinking<br />
MAN: Well, just look at our village today.<br />
WOMAN: Yes, so I’m looking…<br />
MAN: What can you see<br />
WOMAN: Well, I can see a group of people who aren’t exactly living off the fat of the land- but who are<br />
doing very nicely, thank you.<br />
MAN: Right…and how did this happen when not all that long ago, we lived in a subsistence economy<br />
WOMAN: Oh, I see what you mean – you mean which pieces of thinking- which ideas took us from one<br />
level of prosperity to another<br />
MAN: Right!<br />
WOMAN: Right. Hmmm. It’s quite simple, really. Subsistence is the economy we started out withand<br />
a surplus is what we’ve got now. And the way we got from one to the other was by specialization and<br />
by mechanization, sometimes a bit of one, sometimes a bit of the other, and sometimes a bit of both.<br />
MAN: Do you remember what it was like living in a subsistence economy<br />
WOMAN: Oh, how could I ever f<strong>org</strong>et<br />
MAN: We used to spend all our time and energy just getting ourselves enough food to say alive. And<br />
there was never anything left over. And then we discovered division of labor by product.<br />
WOMAN: Oh, yes, what a day that was!<br />
MAN: It certainly was! We divided labor by product which just meant that instead of every family doing<br />
everything for itself: one family specialized in sheep, one in cattle…<br />
WOMAN: …and another specialized in fish…<br />
MAN: …another in tailoring and cloth-making…<br />
WOMAN: …uh-huh…that was us.<br />
20
MAN: Yes, and as a result: eight families produced enough to feed ten, which left two families with<br />
nothing to do. So, they built the bridge which took our cattle across to new pastures, and then they had<br />
time to dig the irrigation channel, which took the water to more of our crops. Do you remember what<br />
happened then<br />
WOMAN: Yes, then came division of labor by process. Until then, to make anything one person had<br />
always done everything. I used to do everything: from shearing the sheep, to weaving the cloth – one<br />
process after another. It was slow…and I wasn’t very good at all of it.<br />
MAN: So, we decided to specialize in one process each.<br />
WOMAN: Hmm. One did all the shearing…<br />
MAN: …another- the washing…<br />
WOMAN: …yeah… another- the spinning…<br />
MAN: …another did the dyeing…<br />
WOMAN: …another- the weaving…<br />
MAN: …another- the finishing.<br />
WOMAN: And the result was: that the same amount of people produced twice as many shawls by<br />
working together-one process each, as they would have done making complete shawls by themselves.<br />
MAN: And, what’s more, the shawls were much better-made.<br />
WOMAN: Oh, thank you very much! Anyway, that’s how we left our subsistence economy behind to<br />
produce our surplus. It was our first great idea – we specialized…we specialized by product, we<br />
specialized by process – and our second great idea was- we mechanized.<br />
MAN: We had ideas for new devices, and we had ideas to harness horses and oxen. In our family’s caseour<br />
greatest idea for mechanization, and our most useful device was the wheel.<br />
WOMAN: Oh yeah, you can say that again! The wheel meant that the children could bring home in one<br />
go what would previously have taken you or me six journeys. Do you remember that day when you<br />
thought of saving your own strength by letting the animals do the work for you<br />
MAN: Oh, ho, ho, yes! What a great day that was!<br />
WOMAN: Yes!<br />
MAN: Animal muscle power - but it was nothing compared to what’s happened since we discovered how<br />
to harness the forces of nature.<br />
WOMAN: Yes, there was the energy of wind…<br />
MAN: …and the energy of water…<br />
21
WOMAN: …and eventually there was the energy of coal…<br />
MAN: …and the energy of oil…<br />
WOMAN: …and linking these sources of energy to our mechanical devices meant that we could till soil,<br />
draw water, grind corn and produce all kinds of things far more quickly- than by simply using our own<br />
muscles.<br />
MAN: Mechanization was the second step out of the subsistence economy. We mechanized by inventing<br />
devices, and by using natural forces to add to our own efforts. And it was specialization and<br />
mechanization that gave us our surplus.<br />
WOMAN: But what is the surplus What is it that specialization and mechanization gave us<br />
MAN: First, we now have stores of food that will last us through the winter. We have a few luxuries to<br />
tide us over until the harvest.<br />
WOMAN: Second, we have surplus food and manufactured goods that we can exchange for other things<br />
we want when the trader brings them.<br />
MAN: Third, we built a bridge and a barn and a waterwheel, we dug irrigation channels. We made<br />
spinning wheels and plows- and they help us protect or even increase our prosperity.<br />
WOMAN: Fourth, we can spare one or two people from the field to serve the rest. Parts of the surplus<br />
food can go to someone who teaches the children, and somebody who looks after the sick.<br />
MAN: And fifth, we have a bit of time to spare. We can play games occasionally, paint beautiful<br />
pictures on our crockery, or make beautiful clay figures or decorate our huts. So, we applied our surplus<br />
to five different things: reserves (in this case food), trade, capital, services and leisure.<br />
WOMAN: All this may not seem much if you don’t remember how they started out in a subsistence<br />
economy.<br />
MAN: I’ll never f<strong>org</strong>et it – days of cold, sickness, hunger – days of backbreaking toil…<br />
WOMAN: It all seems a long way away now.<br />
MAN: Yes, we have come a long way.<br />
WOMAN: Yeah. Of course, I don’t really have to tell you that our community is imaginary. A valley<br />
like ours never really existed.<br />
MAN: Not exactly, anyway. But everything we’ve seen, everything we’ve talked about, really happened<br />
through the ages in some community or another. Let’s take a look at reality for a minute.<br />
WOMAN: This is how men once tried to set down their own reality. These are the actual pictures drawn<br />
by primitive men showing their own lives as hunters and wanderers.<br />
22
MAN: And for all but a few thousand of his one or two million years on this planet, this is how man<br />
really lived –hand-to-mouth, day-to-day and place-to-place. He followed the herds, eating any wild<br />
animals he could kill, and gathering whatever wild fruits and vegetables he could manage to find.<br />
WOMAN: But for most people… life began to change dramatically about ten thousand years ago, when<br />
human beings found the secret of staying in one place.<br />
MAN: The secret was farming, domesticating animals – pigs and cattle, sheep and goats – and<br />
cultivating crops. By finding that secret- man had stumbled on the path to prosperity.<br />
WOMAN: The first prosperous civilizations grew up in four great river valleys – the Yellow River in<br />
Northeastern China, the Indus in Pakistan, Tigris and Euphrates in modern Iraq and ancient Babylon and<br />
the Nile in Egypt.<br />
MAN: And yet, if you look at those great fertile valleys today you’ll find a strange thing. They are now<br />
among the poorest of the world’s nations, often unable to provide even enough food for their inhabitants.<br />
WOMAN: Until two or three hundred years ago, the richest countries were often the ones with the best<br />
land. But today, great industrial communities have been built up in the world using resources imported<br />
from other places. In other words, some of their wealth comes from foreign trade.<br />
MAN: There will always be strong disagreement about why some countries have followed the path to<br />
prosperity, and others haven’t.<br />
WOMAN: But of one thing there is little doubt. Those who have achieved it, have done so by creating a<br />
surplus…a big surplus, using exactly the same method as we did in our community. This factory, like all<br />
factories, is the result of division of labor by product…and the product is television sets.<br />
MAN: It produces them in a whole lot of different stages: Division of labor by process.<br />
WOMAN: It’s mechanized, and the production is achieved through devices like wheels, levers, gears,<br />
hinges and pulleys. Most of the energy comes from electricity supplied by harnessing the resources of<br />
nature: like water, coal, oil and uranium.<br />
MAN: As a result, a thousand people working in a factory like this turn out half a million sets a year –<br />
five hundred a year each. Since they don’t need them all for themselves- they’ve created a massive<br />
surplus of television sets to exchange.<br />
WOMAN: So in effect, they’ll be swapped for other people’s surpluses. For his share of the exchange a<br />
worker in a factory gets: food, clothing, heating, a house and a car- from other workers who produced<br />
more of those things than they needed.<br />
MAN: He also gets roads, street lighting, a teacher for his children, a doctor and a policeman as well.<br />
WOMAN: And after all that, he still has his evenings free to watch a television.<br />
MAN: Of course, he still has his problems and frustrations.<br />
WOMAN: But when you consider the subsistence level where it all started long ago, is there any doubt<br />
about which sort of life you would prefer<br />
23
The Market<br />
WOMAN: You know I can’t believe it sometimes!<br />
MAN: It didn’t come easy. It took a lot of hard work!<br />
WOMAN: Mmm…it certainly did!<br />
MAN: The idea of each family in a community producing something different, dividing up the labor,<br />
mechanizing – that’s what made the difference.<br />
WOMAN: We make really wonderful clothes now.<br />
MAN: Oh, yeah.<br />
WOMAN: We’ve got a right to be proud.<br />
MAN: And the Farmers produce terrific wheat and barley!<br />
WOMAN: The Cowherds are turning out the best beef and cream I’ve ever tasted!<br />
MAN: Pity about the Shepherds.<br />
WOMAN: I’m getting a bit fed up with the Shepherds.<br />
MAN: Though you’ve got to admit their mutton is better than anything we could produce, dear.<br />
WOMAN: When we manage to get any of it.<br />
MAN: Anyway, don’t f<strong>org</strong>et the Fishers. That trout of theirs yesterday…oh! And our idea of putting<br />
everything we all produced into common stores, so that every family could take what it needs, works<br />
really well… well, up to a point, anyway.<br />
WOMAN: We’d have had salmon yesterday- if the Shepherds hadn’t gotten to the barn first. We had to<br />
have the Fisher’s trout instead. Still, it was better than anything we could have caught.<br />
MAN: Better food isn’t the only advantage, you know.<br />
WOMAN: That’s true enough. There’s more food for everybody now. After all, when you spend all<br />
your time at your one job, you become more skilled at it.<br />
MAN: Our looms are the most efficient this valley has ever seen.<br />
WOMAN: We get ten times the amount of cloth from this beauty, and it doesn’t take any more effort,<br />
either. You’ve got to admire the Fishers, though.<br />
MAN: Yes, that boat they made to get down the stream to fish in the lake – brilliant idea!<br />
24
WOMAN: And they spent all those evenings making a huge trawling net, beautifully designed – floats<br />
and everything.<br />
MAN: They must have increased their catch twenty times over with that net.<br />
WOMAN: The Masons increased their productivity in just the same way.<br />
MAN: So have the Farmers and the Shepherds.<br />
WOMAN: I know all about the Shepherds, thank you very much.<br />
MAN: You do go on about the Shepherds, dear.<br />
WOMAN: Yes, and with reason. There they are, look… at it again!<br />
MAN: No, not again.<br />
WOMAN: This week all they’ve put in the barn is one mangy lamb, and what have they taken out of the<br />
common food, you may ask<br />
MAN: It does look a bit suspect…<br />
WOMAN: Would you believe it<br />
MAN: And they’ve got three times as many sheep as the Cowherds have cattle.<br />
WOMAN: I know.<br />
MAN: Mrs. Cowherd knows what they’re up to. They’re cheating and salting away all her beef for a<br />
rainy day.<br />
WOMAN: Mind you, Mrs. Cowherd doesn’t have much right to complain. She walked off with all the<br />
best raspberries last week.<br />
MAN: We’ve got to face facts, you know. This idea of a common pool hasn’t worked out as well as you<br />
thought it would.<br />
WOMAN: Yes, and we’re not the only ones who think so.<br />
MAN VILLAGER: This business of sharing doesn’t work. It’s not fair. By the time our family gets to<br />
the barn the best stuff is gone. The share out is far from equal.<br />
WOMAN VILLAGER: And it’s not only that. Look what’s happening now. Just because of the glut in<br />
vegetables that nobody wants we have to throw away all those turnips – after all that work, too.<br />
ANOTHER MAN: And don’t f<strong>org</strong>et that terrible row over the raspberries. Disgraceful behavior!<br />
MAN: After that, Mr. Mason thought we should put him in charge of everything.<br />
WOMAN: Oh that man makes me so mad! Look at him showing off!<br />
25
MAN: He said because he is the strongest person in the valley he guaranteed he would make sure<br />
everybody puts everything into the barn. He said he would personally divide it all up and issue everybody<br />
with their own share.<br />
WOMAN: Yeah, I’ll bet he would.<br />
MAN: Anyway, we all knew what that would mean: Having your head knocked in by Mr. Mason.<br />
WOMAN: Well, you had a bright idea.<br />
MAN: Nope, I had an inspiration. I suddenly had the notion of nobody putting any produce into the barn<br />
at all, and everybody keeping everything they made for themselves.<br />
WOMAN: Hah, hah, hah! Mrs. Fisher immediately said that would mean they would eat nothing but<br />
fish for the rest of their lives, and Mr. Carpenter asked if you expected him to eat hammers and nails for<br />
his supper.<br />
MAN: Yes, he did, as a matter of fact, and Mrs. Farmer said: Where was she supposed to get new clothes<br />
when the old ones wore out<br />
WOMAN: Well it did seem a reasonable question in the circumstances.<br />
MAN: But it was – I-I-I mean, it is. Don’t you see We can’t possible wear all the clothes we make. But<br />
we do need corn and milk, and we do need fruit and fish, and we do need all the other things everybody<br />
else makes and grows.<br />
WOMAN: So<br />
MAN: So, we swap.<br />
WOMAN: An inspiration!<br />
MAN: That’s what they all said. Mr. Fisher immediately noticed that if the Shepherds didn’t produce<br />
any sheep- they wouldn’t have anything to exchange.<br />
WOMAN: And Mrs. Carpenter said, “Right, no mutton from the Shepherds, and they don’t get the<br />
fences from me for their lambing pens.”<br />
MAN: And if the Shepherds didn’t like the new plan- they could lump it and leave.<br />
WOMAN: It would just mean more grazing for the cattle. We’d have just as much meat as before, but it<br />
would be beef instead of mutton.<br />
MAN: It’s a way of making the Shepherds behave, without having to put Mr. Mason in charge of<br />
everything. Everybody was delighted. Although he’s not that bright sometimes, even Mr. Mason began<br />
to see how he would benefit.<br />
WOMAN: That’s how we all agreed to have a swapping day every week- in the square in front of the big<br />
barn<br />
26
MAN: Remember that first day The Fishers brought an enormous load of beautiful fresh salmon –<br />
beautiful it was! Everybody swapped their cloth, their milk and their fruit, and even a stool from Mr.<br />
Carpenter for the fish.<br />
WOMAN: Swapping worked so well, we began to do it every day for things like raspberries, and milk<br />
and fish that don’t last but we want every day. There was no end to what we could swap if someone else<br />
wanted it.<br />
MAN: Even Mr. Mason promised to build a jetty for the Fishers, if they would supply him with one<br />
salmon a week for the whole year.<br />
WOMAN: Yes, everybody thought it was a wonderful system except the Shepherds. They brought<br />
practically nothing to swap.<br />
MAN: When anyone made a bargain it was marked on the wall for everyone to see. That’s why we<br />
called our square the “mark it place,” it became the busiest place in the village – in fact, it became the<br />
village center.<br />
WOMAN: Oh, dear! The Shepherds had a pretty thin time that first day, especially as the Fishers had<br />
brought along masses of salmon which made up for the shortage of mutton. That night, the Shepherds<br />
went home practically empty-handed. But the next week was a different story. The Shepherds came back<br />
with an enormous supply of sheep. Mrs. Shepherd said that last week she had lost her sheep and didn’t<br />
know where to find them ‘til this week. And if you believe that you’ll believe anything.<br />
MAN: Well, as time went by- the market became the best family outing of the week. Not only did<br />
everyone discover the value of their produce for everyone else that day, they saw all their work rewarded.<br />
WOMAN: They discovered other things, too. They found out what was happening in the village. They<br />
found out what people needed so that they knew what to provide next time.<br />
MAN: Of course, the word “market” didn’t really originate from the mark on the wall of the barn, and<br />
the world we’re living in these days is very different from the kind of life you saw in our village. But,<br />
from time to time, people do try to live without markets. The famous example is the kibbutz in Israel.<br />
Here everyone works for the community, but the most successful depend on growing or producing things<br />
which are then exported and sold in the markets of the world to provide money for the kibbutz’ common<br />
pool. In return for their work- people get food and shelter but few of the kibbutzes are really selfsufficient.<br />
WOMAN: In the 1960s, many groups of hippies tried to make new lives for themselves, by getting<br />
together to grow their own food, make their own clothes- and even build their own villages. Their idea<br />
was to share everything equally, but not many of their communities flourished. Some people found life<br />
too hard; there were personality clashes and people walked out; others needed doctors or medicines and<br />
when there weren’t any they left, too. But hippie communes that survived tended to specialize in crafts,<br />
leatherworks, gem works, and jewelry. But to sell their work, and to buy what they needed to live, they<br />
had to take their wares outside to the markets. Like the people in a kibbutz, they quickly realized the<br />
undeniable advantages of a market to the survival of their chosen way of life.<br />
MAN: Markets just spring up spontaneously. Look at car boot sales – nobody launched them, they just<br />
happened. Now tens of thousands of people go there every week<br />
27
WOMAN: And when the internet arrived it became a world-wide market in cyber space.<br />
MAN: There are markets for everything – big things, small things – even markets in ideas like leisure<br />
and holidays. Perhaps the commonest, everywhere in the world, are the markets for the food we eat.<br />
They are important meeting places, too. People may go to buy and sell, but they don’t miss the chance to<br />
catch up on the local news and discuss local issues. But along with all the swapping, there is an<br />
information system at work – information about what there is to sell and what there is to buy, information<br />
about what is scarce, and what is plentiful, information about what is not worth much, and what is<br />
considered valuable.<br />
WOMAN: Markets that flourish do so because they work. If they didn’t, they would soon go out of<br />
business because voluntary transactions that don’t work tend not to be repeated. People are like thatregardless<br />
of the control and politics of the society in which they live. They come away from the market<br />
immediately satisfied with what they have acquired, and what they’ve learned. And that’s the nature of<br />
every market in the world.<br />
28
Money<br />
MAN: It worked very well at first.<br />
WOMAN: What did<br />
MAN: The market.<br />
WOMAN: A bit too well if you ask me.<br />
MAN: Right. I will ask you. What do you mean the marked worked “too well”<br />
WOMAN: Well, look what happened to the Fishers!<br />
MAN: What did happen to the Fishers<br />
WOMAN: You remember their catches<br />
MAN: Oh, of course I do. They catch salmon one night, perch the next, all lovely and fresh… two lots<br />
of wonderful fish on offer on their stall at the same time.<br />
WOMAN: True, and what did they exchange their salmon for<br />
MAN: Ah. They did very well out of that. For each load of salmon they were guaranteed to get a dozen<br />
eggs, twelve bags of corn and a leg of lamb.<br />
WOMAN: Yeah, and what did they get for each load of perch<br />
MAN: Well, they didn’t do as well from that, did they Maybe only half a dozen eggs, three bags of<br />
corn and a couple of chops if they were lucky.<br />
WOMAN: Yeah...but they’d spent the same amount of time fishing for the salmon, as they had for the<br />
perch.<br />
MAN: True, but most people prefer salmon to perch any day. And you can understand why. It was the<br />
same with the turnips and the carrots.<br />
WOMAN: Oh…Mrs. Farmer you mean<br />
MAN: Yes.<br />
WOMAN: She soon found that Mrs. Shepherd would only give her a leg of lamb for turnips.<br />
MAN: But for a load of carrots she could get a leg of lamb, a couple of chops and a skein of wool.<br />
What’s more, Mrs. Farmer didn’t have to work any harder to grow carrots rather than turnips.<br />
WOMAN: It’s weird, isn’t it<br />
29
MAN: Not really. Mrs. Shepherd just happens to be partial to carrots…that’s all. It’s another example of<br />
a market giving people information. It tells you what people want, and it tells you what people don’t<br />
want.<br />
WOMAN: Same thing happened with those shawls I used to take to market. People seemed to get tired<br />
of the old favorite designs. Then as soon as I started to take some of our jazzy new designs they went like<br />
hot cakes, even though I was asking twice as much in exchange for them.<br />
MAN: Variety. That’s what people want and that’s what the market gave them: Choice.<br />
WOMAN: And that’s where the trouble began. The more choice people had, the more complicated the<br />
market became.<br />
MAN: Complicated. I’ll say it was complicated! Do you remember the time when we needed a dozen<br />
eggs<br />
WOMAN: Oh, yes, do I not It seemed the simplest thing in the world, didn’t it We’d just made a<br />
lovely new red cloak.<br />
MAN: Nothing seemed simpler than to take it along to Mrs. Farmer’s stall in the market, and swap it for<br />
her eggs.<br />
WOMAN: I know. But Mrs. Farmer didn’t want our nice new cloak that day. “No, thank you very<br />
much,” she said, “I don’t need a new cloak. What I want in exchange for my dozen eggs is something for<br />
our supper, like a nice fat salmon.”<br />
MAN: Well, the Fishers have a nice fat salmon, so we go along to the Fishers with our lovely red cloak.<br />
“Very nice indeed,” says Mr. Fisher, “but what I actually want is butter.”<br />
WOMAN: But of course it’s the Cowherds who have butter, and do they want our red cloak in exchange<br />
for it<br />
MAN: Not on your life. What they need is a beautiful kitchen stool…and who makes stools<br />
WOMAN: Mr. Carpenter.<br />
MAN: Ah.<br />
WOMAN: And does he want our beautiful red cloak in exchange for it<br />
MAN: Of course he doesn’t want our beautiful red…he does He does He really does want our<br />
beautiful red cloak in exchange for his rotten old stool…quick!<br />
WOMAN: So, by swapping our cloak for the stool, the stool for the butter, the butter for the salmon and<br />
the salmon for the eggs, we got what we wanted in the first place.<br />
MAN: What a hassle for just a few eggs! Whoops! Oh, oh…more hassle.<br />
WOMAN: I know. I’m worn out. Sometimes you spend most of the day just finding out who wants<br />
what. It’s such a waste of…<br />
30
MAN: …time and energy which we ought to be spending on making the clothes we need, to exchange for<br />
food.<br />
WOMAN: There must be a better system.<br />
MAN: There must.<br />
WOMAN: Yeah…but, but what You remember last winter, when everybody was short of corn<br />
MAN: Hmm…<br />
WOMAN: Well, if you had corn you could swap it for anything. You never had to go round and round,<br />
from one person to another, collecting things you didn’t want, to swap for other things you didn’t want,<br />
till you finally got the things you did want. You just swapped everything for corn. You could even keep<br />
it till next week or next month, if nobody had what you wanted that market day.<br />
MAN: That’s all very well. You didn’t have to lug those things to market and back when you couldn’t<br />
swap them, and when harvest time came…you could hardly give the stuff away.<br />
WOMAN: Hey…but, but wait a minute! But suppose there’s something someone always wanted!<br />
Suppose there’s something we could use like we used corn last winter. Something like water, for<br />
example<br />
MAN: (Spits out water)<br />
WOMAN: What<br />
MAN: But they’ve got as much as they want of it…and if they haven’t- all they’ve got to do is drop a<br />
bucket into the river. It’s theirs for the taking.<br />
WOMAN: Hmmm…strawberries<br />
MAN: They go bad after a couple of days.<br />
WOMAN: So, it’s got to be something everybody wants, and nobody ever has enough of. It mustn’t be<br />
too heavy… and it mustn’t ever go bad.<br />
MAN: There ain’t no such thing, my dear.<br />
WOMAN: Yes, there is!<br />
MAN: What<br />
WOMAN: These! (Giggles)<br />
MAN: The colored stones I sometimes find by the river!<br />
WOMAN: Yes, everybody wants them for rings and bracelets and necklaces, and there aren’t too many<br />
around.<br />
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MAN: What a great idea! Why don’t we…hold on…I thought of a snag…<br />
WOMAN: What<br />
MAN: Suppose one of these is worth a dozen eggs.<br />
WOMAN: Then you simply swap it for a dozen eggs.<br />
MAN: But suppose you only want half a dozen eggs<br />
WOMAN: Oh, I see what you mean… can’t break it into smaller pieces. I’ve got it, that’s it!<br />
MAN: What<br />
WOMAN: Gold! We could use gold! Nobody ever has enough of it. You could swap a very small<br />
amount of it for an awful lot of meat, or eggs or cloth. It keeps forever, it doesn’t even rust, and you can<br />
divide it up really small!<br />
MAN: Brilliant! Absolutely brilliant!<br />
WOMAN: So, that’s what we persuaded everybody who used the market to try out. Every family got all<br />
the gold it could spare and took it round to Mr. Smith. Then he melted it down, and made it into small<br />
round pieces for them. Some were bigger than others, and some were small enough to carry in your<br />
pocket or your purse…see<br />
MAN: Oh, shiny, aren’t they Then, of course, shopping in the market place became so much simpler.<br />
If you couldn’t do a straight exchange, say a new shirt for Mr. Cowherd’s butter because Mr. Cowherd<br />
didn’t need a new shirt, you could give him some of your gold in exchange tokens for the butter instead,<br />
and he would use them to buy the salmon he did want.<br />
WOMAN: And the nice thing was that in the end, the person who did want your shirt would arrive with<br />
exchange tokens, swap them for the shirt, and you would be back where you started- with the same<br />
number of exchange tokens you started with, and with the butter you wanted instead of the eggs you<br />
didn’t want.<br />
MAN: In history, all sorts of objects have been used for money and still are: iron rings, shells, even<br />
tobacco- though precious metals have been the most popular, because they can be easily divided into<br />
smaller pieces, and because they don’t corrode or rust.<br />
WOMAN: Eventually, less-precious metals, such as copper and bronze, were to take the place of gold<br />
and silver.<br />
MAN: However, there used to be a problem, because any metal could be debased by mixing it with a<br />
cheaper metal. To stop that- they used to test the purity of the metal, and then stamp it with a special<br />
mark - an animal, or the head of the king or queen to authenticate it.<br />
WOMAN: …also people used to clip small pieces off the edges of their coins.<br />
32
MAN: To stop that, they specially milled the edges to make it obvious if somebody cheated. The system<br />
in similar form can be seen today.<br />
WOMAN: These days, printed paper money has mostly replaced coins as a medium of exchange. Today<br />
everybody uses money, without having to think about either its origins, or what it consists of. But the<br />
important point to understand about it is that: of itself, it has no special value. Its value lies only in what<br />
you can do with it. Money itself is simply a mechanism for making it easy to exchange things, like the<br />
people are doing in this market now.<br />
MAN: But, of course, money has other advantages. It’s very hard to swap say- a pound of strawberries<br />
for a pound of peaches, for instance, because strawberries are finished by June, and peaches don’t ripen<br />
until August. But if you sell the strawberries, the money will store their value until August, when you can<br />
buy your peaches.<br />
WOMAN: And money is also a useful measure of worth. If everything has a money price you can<br />
compare the values of a piece of land, a flock of geese or six months hard work by a carpenter- which<br />
otherwise are very hard to compare.<br />
It’s funny to think that although money itself might be worth almost nothing, it happens to be one of<br />
mankind’s most powerful- as well as most fascinating inventions.<br />
33
Supply, Demand and Price<br />
1. Price and the Consumer<br />
MAN: Best steak again<br />
WOMAN: Best steak again. I mean what else<br />
MAN: I know. Who’d have thought it<br />
WOMAN: Who would have thought what<br />
MAN: Well, all that time ago who would have thought we’d be doing well enough today to eat steaks<br />
WOMAN: …or to be able to count the profits.<br />
MAN: Exactly. Do you remember the day things were so bad, we began to think we might take a break<br />
from making clothes to sell in the market, and turn to something else They were hard times. There was<br />
no steak in those days. Best end of bone if we were lucky. Alright, dear, off we go then.<br />
WOMAN: Oh, it’s true. I remember it just like it was yesterday. I had a feeling it was a dreadful<br />
mistake to give up on the weaving business- even if it was only for a short time.<br />
MAN: Well, nobody was buying your shawls. Things looked black. It was either starve or change.<br />
WOMAN: So we changed. Oh, it had been a dreadfully hard day in the woods that day, looking for<br />
mushrooms and plums.<br />
MAN: Well, that’s why I gave you the mushrooms to pick. Mushrooms are lighter than plums.<br />
WOMAN: Yeah, but there were 10 times more mushrooms than plums.<br />
MAN: Ha! Ha! Odd that, wasn’t it<br />
WOMAN: Uneven, I’d call it!<br />
MAN: But what a time I had in the market that day! Who would have thought a few plums would cause<br />
all that trouble “Get your lovely plums! Here they are; they’re lovely! Oh, well done, thank you very<br />
much. Have a nice day. Thank you. Well done….lovely. Oh…hey…hold on! Hold on!” How was I to<br />
know, everybody was sick and tired of the glut of apples, and that mine were the only plums on the<br />
market “Ow!”<br />
WOMAN: Get off him, you bully!<br />
MAN: Wasn’t as though I was overcharging. Oww, oww! Mine were exactly the same price as Mr. and<br />
Mrs. Farmer used to charge when they had lots of plums. Oww…oww!<br />
WOMAN: You could have heard a pin drop at my end of the stall- it was so quiet. Everybody seemed<br />
sick to death of mushrooms. You’d have thought they had a bad smell- the way people kept away from<br />
them. But they were lovely mushrooms.<br />
34
MAN: Trouble was they were just like everybody else’s mushrooms - the Shepherds’, the Masons’, the<br />
Cowherds’ and the Farmers’… particularly the Farmers’.<br />
WOMAN: Trust their luck to turn up the year’s first tomato crop when everybody is fed up to their teeth<br />
with mushrooms. Oh dear!<br />
MAN: Oh, what a day!<br />
WOMAN: Oh … I know! I wouldn’t have cared if I’d never ever seen another plate of mushrooms.<br />
BOTH: Oh, no!<br />
MAN: They were all rotten by the next day anyway, so we ended throwing them all away. At least that<br />
was one advantage.<br />
WOMAN: Disadvantage is what I called it. Something else could have been stored for a rainy day, but<br />
not mushrooms!<br />
MAN: No, not mushrooms!<br />
WOMAN: Then I suddenly had another thought. Why don’t we use things the other way round Why<br />
don’t we only spend an hour or so collecting mushrooms, and the rest of the time collecting masses and<br />
masses of plums That would please our customers.<br />
MAN: And make us a fortune. What a brilliant idea! It really made sense.<br />
MAN: Mushrooms were getting harder to find anyhow, and the plum crop was getting better and better.<br />
WOMAN: So that’s exactly what we did, but it’s funny how things don’t turn out how you expect.<br />
MAN: I remember that day calling out, “Get your lovely juicy plums! Roll up, then, roll up here they are<br />
now, the fruit to tingle your taste buds. Roll up, and please form an orderly queue. Roll up! Roll up!<br />
Plums, all fat and juicy! Every one a winner. Come on, ten cents a bowl- all fresh-picked with my own<br />
fair hands this morning. Straight from the…”<br />
WOMAN: Hello! Alright, one at a time, please. Sorry, can you just be patient<br />
It wasn’t what I’d call one of the most successful of days. Even though it was a slack time, I’m sure we<br />
could have earned more money on either day by weaving cloth and selling clothes. Just as last time we<br />
had a load of mushrooms we didn’t know what to do with- this time we had a mass of overripe plums.<br />
MAN: Too true - rich man, poor man, beggar man, bankrupt. You know, I remember thinking that- the<br />
first time people would have paid three times as much for my plums.<br />
WOMAN: And I remember thinking, “I’d have sold all my mushrooms, if only I’d been charging half<br />
the price”<br />
MAN: Right, and at half the price- I’d have sold all my plums the next day.<br />
35
WOMAN: And the next day, I could have sold all my mushrooms at three times the price. “Oh, well,”<br />
we said, “That’s life.”<br />
MAN: And then we suddenly had a thought. Why should it be for life<br />
WOMAN: We’d always done things in the same old way.<br />
MAN: But why should we always charge 10 cents a bowl<br />
WOMAN: True, we always had. Everybody always had.<br />
MAN: Why couldn’t we change it<br />
WOMAN: We couldn’t.<br />
MAN: We could, there was no law against it. This is what we said to ourselves: “Look, how much did<br />
we make on the first day”<br />
WOMAN: Well, 10 bowls of plums at 10 cents that’s 100 cents, 10 bowls of mushrooms, another 100<br />
cents – so 200 cents altogether.<br />
MAN: And how much could we have got by adjusting the prices Let’s see. I could have got 30 cents a<br />
bowl - 300 cents.<br />
WOMAN: And if only I’d cut the mushrooms down to 5 cents, I’d have sold the lot!<br />
MAN: And you had 60 bowls worth.<br />
WOMAN: That’s right. Hey, that makes 300 cents!<br />
MAN: Right, so just by changing the prices we could have made 600 cents instead of 200 cents.<br />
WOMAN: And today we could have done just the same. We took 200 cents today, but we could have<br />
got 300 cents for 10 bowls of mushrooms at 30 cents, and 300 cents for 60 bowls of plums at 5 cents.<br />
MAN: So we said to one another, “Why don’t we try it”<br />
WOMAN: “After all,” we said, “…they can’t kill us for trying.”<br />
MAN: And so we did. Next time we managed to find lots of ripe apples, but we also found the season’s<br />
first peaches, so we charged 30 cents for the peaches, and 5 cents for the apples. When they saw what we<br />
were doing- people were surprised. At first, they were a bit angry at the high price of the peaches. So I<br />
told them they didn’t have to buy if they didn’t want to. But some people, who’d had a very good week,<br />
could afford it. Others wanted them so much- they were prepared to do with less of something else. And<br />
between them they bought up all the peaches despite the price. “There we go, they’re lovely!”<br />
WOMAN: And at my end of the stall people were really pleased to find such good cheap apples. It’s<br />
true; the Farmers were selling nice apples, too but at 10 cents a bowl. 5 cents is a very different matter.<br />
They didn’t buy all of them mind, so I offered the last lot at 2 bowls for 5 cents - 2.5 cents a bowl is a<br />
bargain some people couldn’t refuse. See<br />
36
MAN: And there we were at the end of the day. There’d been no fights or scrambles for peaches, no<br />
apples left to rot. And instead of the 200 cents we’d probably have made if we’d not adjusted the prices,<br />
we got nearly 600 cents to show for our troubles.<br />
WOMAN: It’s an unavoidable fact of life that goods have to be allocated somehow. And we’d<br />
discovered for ourselves that the price of goods can prevent fights or long queues on the one hand, and<br />
huge surpluses on the other. Am I right, or am I right And it all goes towards demonstrating a general<br />
principle that applies to marketing anywhere. It makes no difference whether it’s fish or furniture, kettles<br />
or computers, boots or books. Nothing has an absolute price or an absolute value. Take any commodity<br />
you care to mention- no matter how ordinary. Its value always depends on the circumstances.<br />
MAN: Take water, for example. In a country near the equator it can be very expensive, because it’s<br />
difficult to come by. And in the middle of the desert near an oil well in a country like this, a barrel of<br />
water can cost more than a barrel of oil. This chap is selling water and he’s doing very well. But in these<br />
same places dates can be so common, have so little value, that scarcely anybody bothers to pick them.<br />
WOMAN: On the other hand, there are some countries where dates are rare and expensive delicacies.<br />
Yet in these same places, water might cost next to nothing, because it’s so easy to come by.<br />
MAN: However, water is as essential to life here as it is anywhere on earth. If you live on the edge of a<br />
lake you might have thousands of times more than you need, so its price isn’t high. Just because<br />
something is high in demand doesn’t automatically mean it’s expensive. The balancing point is price. It<br />
regulates on the one hand - supply - and on the other hand – demand.<br />
WOMAN: The fascinating thing is: that if you go to any market or any shop, every price you see on<br />
every single thing that’s for sale has a story to tell. It tells you, for example, how plentiful or how scarce<br />
something is in relation to the number of people who are not only able to buy it, but are willing to buy it.<br />
MAN: Comparing prices can tell you a great deal about different things with similar characteristics. An<br />
avocado can weigh the same and may even have the same nutritional value as a potato, but the different<br />
price of each can tell you how much more difficult one was to produce than the other, or how far it had to<br />
travel and how much people want it.<br />
WOMAN: Changing prices make another interesting story. The way the price of cherries and of salmon<br />
changes between early May and late June can tell you a great deal about when cherries grow best, or<br />
about how easy it is to catch salmon or when the season is open or closed.<br />
MAN: But what price tells you about something has nothing to do with its absolute value. Price can only<br />
tell you about value relative to a particular place at a particular time - it’s the relationship between supply<br />
and demand.<br />
WOMAN: It’s like a pair of scales. The price pointer is in the middle if demand is on the right and<br />
supply on the left. When demand is great and supply is small, the pointer will move to a higher price, but<br />
when supply increases and demand decreases, the pointer moves to a lower price. And this tells us the<br />
first simple but important law of demand.<br />
MAN: The higher the price, the smaller the quantity that will be demanded.<br />
WOMAN: Or, if you prefer…<br />
37
MAN: …the lower the price, the greater the quantity that will be demanded.<br />
WOMAN: It’s a law that applies to this and every other market you can think of.<br />
38
Supply, Demand and Price<br />
2. Price and the Producer<br />
MAN: “Lovely plums, lovely juicy plums. Get your lovely juicy plums, roll up then, roll up!” We’d<br />
learned a lot from the market; in particular we learned how the price of what we had to sell affected the<br />
behavior of the people we were trying to sell to, the consumers. We’d found that raising the price reduced<br />
the amount people wanted to buy. It acted as a sort of rationing system.<br />
WOMAN: Yeah, and on the other hand we’d also found something else. Lowering the price of an item<br />
increased the amount people wanted to buy. It acted as an incentive. But the truth is- it isn’t only the<br />
consumer whose behavior changes as the price goes up and down. The producer’s behavior changes, too.<br />
And our behavior certainly changed, “Alright, come and get it, come and get it! Oh…f<strong>org</strong>et it.”<br />
MAN: It all began that day. I’d been out with the children. We’d walked further into the hills than I’ve<br />
ever been in my life before. And just guess what we found<br />
WOMAN: Hmmm, it really wasn’t the time for guessing games.<br />
MAN: A cave!<br />
WOMAN: A cave Who wanted to talk about caves when the meal they’d been cooking all morning<br />
was stone cold- and the shawls they’d been making all week had to be got ready for the trader.<br />
MAN: I asked you if you knew what it was made of. Well Well<br />
WOMAN: Who cared what a rotten old cave was made of If you knew that unless we sold the shawls<br />
to the trader we’d have no money left for food, hot or cold.<br />
MAN: It was made of salt, dear!<br />
WOMAN: Oh, what was<br />
MAN: The cave! The cave made of salt, I explained, that we could sell salt on the market. I felt sure that<br />
we’d do very nicely from it.<br />
WOMAN: Oh, who could possibly be so stupid! We already had enough salt to last us for a month.<br />
The trader brings sacks full every time he comes. It only costs 10 cents a bowl. We couldn’t possibly<br />
compete with his prices. You see, we’d starve unless we could think of something better than that. It was<br />
much better to make clothes and blankets. That way we got a decent amount of money for a decent day’s<br />
work. You’ve got to admit I’m right!<br />
MAN: Yes, but all the same I thought it was worth a try. After all, soon everybody would be wanting to<br />
salt down meat and fish for the winter. So, I took my salt to the market next day. But nobody took any<br />
notice of my salt. They said it was crazy to try and sell it at that price. I should have known, of course.<br />
My wife was quite right. She usually is.<br />
WOMAN: Yeah, and since one of us had to earn some money, I took the shawls to the trader. And<br />
although we couldn’t sell our salt at our asking price, people needed it badly. There was a crowd waiting<br />
39
to buy it from the trader, so they could preserve their fish and meat for the winter. But, do you know<br />
what There was a shock in store for everybody! The trader didn’t have any salt, and he told us why.<br />
MAN: His village salt mine had caved in. It had been terrible, the whole tunnel was blocked. They<br />
didn’t even have any salt for themselves, let alone enough for trading. Now, if we only knew where we<br />
could get some…<br />
WOMAN: Yes, if only we knew where…<br />
MAN: If we only knew where…<br />
WOMAN: Just a minute.<br />
MAN: Where’s she off to<br />
WOMAN: Look! Why ‘scuse me, ‘scuse me, look!<br />
MAN: Oh, that’s good stuff!<br />
WOMAN: Yes! Oh, yes! Yes! Ooh, that’s lovely!<br />
MAN: Well, we got the message soon enough.<br />
WOMAN: You see the whole of the village needed salt badly.<br />
MAN: No salt for the fish and meat surplus would mean that by next spring, there’d be nothing left to<br />
eat.<br />
WOMAN: It was a long hike to the cave and hard work when we got there.<br />
MAN: But it was wonderfully clean, high-quality salt.<br />
WOMAN: Yes, but the question was: Would we be able to sell it at a price high enough to make all that<br />
effort worthwhile<br />
MAN: And the answer was, could we not! Oh, ho, ho! Here they come!<br />
WOMAN: Yes! Even at that price we could have sold 10 times as much.<br />
MAN: So, naturally, we decided to get a whole load more of it. The trouble was, of course, we weren’t<br />
the only people to realize that if you were onto salt, you were onto a good thing. We had company.<br />
WOMAN: That awful Shepherd family had caught on. They were all there, digging away at our salt.<br />
MAN: But even at 40 cents a bowl, salt was still well worth selling.<br />
WOMAN: But the trouble was- everybody else realized it.<br />
MAN: It soon began to look as though our whole village had turned to salt mining.<br />
40
WOMAN: Yet, the surprising thing was: That the price of salt still made it worth our while to go through<br />
the trouble of fetching it from the caves.<br />
MAN: And another interesting thing was- that now we’d stopped weaving, there were fewer shawls<br />
about, and their price had got higher and higher. Things continued like that for a few days. Then, the<br />
market seemed to have settled down.<br />
WOMAN: Prices didn’t go up much.<br />
MAN: And they didn’t go down much.<br />
WOMAN: The price of salt stayed at 15 cents a bowl.<br />
MAN: Stayed at 15 cents, that is, until our salt bubble burst.<br />
WOMAN: Yes, it was that trader again.<br />
MAN: They’d re-excavated their salt mine and what’s more, they’d found a rich new seam. Now he was<br />
offering it cheaper than ever.<br />
WOMAN: You want 5 cents a bowl<br />
MAN: And there’s plenty more where that came from.<br />
WOMAN: Oh, so there was only one thing left for us to do.<br />
MAN: Reduce the price yet again. Again, salted fish<br />
WOMAN: Yes, salted fish again.<br />
MAN: Who wants to struggle five miles to a salt cave, to dig for salt which scarcely brings in enough<br />
money to keep the children fed<br />
WOMAN: Well, was there any alternative<br />
MAN: Was there any alternative<br />
BOTH: And there it was!<br />
WOMAN: The price of shawls had made it worthwhile thinking about starting weaving again. So, I sat<br />
down at me loom and I began to work hard. Oh, I’d f<strong>org</strong>otten how much I enjoyed this! What happened<br />
on that occasion was this: When the supply of salt ran short the prices rose, and that encouraged more and<br />
more people to produce it. This increased the supply- and as more and more salt appeared on the market,<br />
its price dropped but soon it reached a stable level.<br />
MAN: Then when the supply rose yet again, the salt miners found that it wasn’t worth the effort and they<br />
stopped mining, and went back to their previous job- because it brought in more money than mining.<br />
WOMAN: Ah, I’ll soon have this one’s finished. We saw in the last program how the market was full of<br />
messages for the customer about the present state of supply. These are scarce here today, but those are<br />
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plentiful. These are expensive and difficult to produce and distribute, but those are cheap and easy. And<br />
we saw how high prices ration scarce goods, while low prices clear plentiful goods.<br />
MAN: But the market place is simultaneously sending messages back to the producer about the present<br />
state of demand. A busy stall tells the producer people want more of these than they can get. On the<br />
other hand, a slack period in the market tells him people don’t want these very much, with the result that<br />
high prices stimulate increased production, and low prices cause reduced production.<br />
WOMAN: So, price is always acting to encourage producers to produce the right balance of what<br />
customers want to consume, and to keep adjusting to every change in supply and every change in demand.<br />
It happens everywhere. Behind every price in a store there is a volume of information, experience,<br />
calculation and judgment. The manufacturer has worked out his production costs, estimated how many he<br />
could sell at various prices, and picked the price that gives him the biggest profit.<br />
MAN: But he’s competing with all the other manufacturers, and if his sales volume starts to drop, the<br />
message will get back to him fast. If it’s a big change- it may mean a big rethink, and a big change in the<br />
price.<br />
WOMAN: It might even put him out of business. A lot of manufacturers of hand-wound watches had to<br />
do big rethinks when electronic watches came onto the market at a fraction of the price.<br />
MAN: But it also works the other way. In the 1970s, during the UK bread strike, bread prices shot up.<br />
But people still wanted to buy bread. This stimulated others to hire trucks and import loaves from<br />
Holland. At the normal price, transport costs were too high to make bread importing worth anyone’s<br />
while. But when scarcity doubled the price, it was a very different story.<br />
WOMAN: In the same way, the quadrupling of world oil prices in 1974 made other kinds of energy<br />
production more attractive to producers. Offshore oil, coal, nuclear power, wind power, they all had been<br />
rated too expensive, but that only meant compared with oil. So, when oil prices shot up, it became worth<br />
people’s while to pay the extra production and distribution costs, because they could now charge pricesthey<br />
never could have charged when oil was cheap.<br />
MAN: The high oil price did what high prices always do-- discouraged and rationed the consumer, but<br />
encouraged and stimulated the producer.<br />
WOMAN: What happens is this: When the price is high, people are encouraged to produce a lot.<br />
MAN: But after the first rush, you won’t get many customers, because the high price puts them off.<br />
You’ll have a lot of unsold goods. As the price drops, fewer people think it’s worth producing. But more<br />
people think it’s worth buying, and so it goes on.<br />
WOMAN: About here, you reach a point of balance, a price which stimulates the production of just<br />
about the amount that customers will buy at that price. If the price goes on downwards, more and more<br />
producers will be discouraged, but at each falling price stage- more and more people will want the goods.<br />
MAN: That’s when you get fights, queues and black markets. This price, the one in the middle, is called<br />
the equilibrium price, the price most goods settle down at.<br />
WOMAN: So, just as we saw in the last program that there’s a law of demand. There’s an equally<br />
important law of supply…it’s this:<br />
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MAN: The higher the price offered, the greater the quantity supplied…<br />
WOMAN: Or if you prefer…the lower the price offered, the smaller the quantity supplied.<br />
MAN: And like the law of demand, the law of supply applies to this and every other market you can<br />
think of.<br />
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The Mixed Economy<br />
MAN: Do you remember that day we set out on our great journey<br />
WOMAN: Oh, I certainly do. And all because somebody started a rumor that there was a hidden<br />
village- where people made a kind of cloth entirely different from the sort we make.<br />
MAN: We discovered that it was more than a rumor. There really was a hidden community, and it was<br />
quite unlike ours. Hello there! (Echoes)<br />
WOMAN: Hello (Echoes)<br />
MAN: Hello there (Echoes)<br />
WOMAN: Hello (Echoes). We had a surprise, I can tell you. They were strange.<br />
MAN: I hope they’re going to be friendly.<br />
WOMAN: I do, too. Look, they’re coming our way!<br />
MAN: Just stand and smile.<br />
WOMAN: Hello, we brought these… (Uhh, say hello.)<br />
MAN: I’ve got one, too.<br />
WOMAN: …to greet you, lots of you have come to greet…oh-- they’re for me<br />
MAN: Oh, that’s nice!<br />
WOMAN: Oh, lovely.<br />
MAN: Oh, I get one too! Oh, look at me! I look like a…<br />
WOMAN: You with flowers around your neck!<br />
MAN: Lovely. But they were wonderfully friendly.<br />
WOMAN: Would you believe it They didn’t use any wool at all to make their cloth; they used this<br />
fiber. It grew on plants. Cotton, they called it.<br />
MAN: The amazing thing was that their cloth-making machinery was very like ours.<br />
WOMAN: It’s true they didn’t have such an efficient foot treadle on their spinning machine. But the<br />
turn shuttle on their weaving machine was twice as fast as ours was. It’s amazing!<br />
MAN: Look at that! And the finished cloth – oh, that’s really something!<br />
WOMAN: Yeah…so we had an idea – we decided to offer to buy some of their cottonseed.<br />
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MAN: But would you believe it They didn’t understand what money was. They’d never even heard of<br />
it.<br />
WOMAN: So I asked them how they managed without money on market days.<br />
MAN: And the funny thing was: They didn’t even know what a market was. Would you credit it<br />
WOMAN: They didn’t seem to want anything to do with our money, did they<br />
MAN: Not at all. I checked to make sure they didn’t all produce small amounts of different things<br />
inefficiently like we did in the bad old days. They agreed that they did specialize. Some produced cotton,<br />
others pots, wheat, others sheep…and so on. “It’s more efficient that way,” they said.<br />
WOMAN: But the big question was: How did they share everything out<br />
MAN: They explained.<br />
WOMAN: It starts with a council of elders. They decide how much of everything the village is going to<br />
need next year: how much beef, how much cotton, how much fish…and so on. Then they produce a plan<br />
for the whole village, saying how much of what product each family has to produce each year. When the<br />
produce is ready- it all goes into the village store.<br />
MAN: “Aha,” we said, “People like your Fisher family must be honest as anything, but some people<br />
cheat you know, like those awful Shepherds in our village.”<br />
WOMAN: Oh, they’re shocking they are!<br />
MAN: Horrible!<br />
WOMAN: Can’t trust them for a minute. “No,” they told us, “the guardians see there is no cheating.”<br />
They allocate so much of each product to each family, the ration they’re given is the basis of the original<br />
plan.<br />
MAN: “But,” we said, “supposing you don’t grow what you’re told to, or don’t like what you’re given”<br />
WOMAN: “Well,” they said, “you can apply to the elders for a change next time. And in any case, most<br />
people have their own private patch where they grow things they especially like. And if they exceed their<br />
production quota, they can keep some to swap with other families.”<br />
MAN: That does make a certain amount of sense, you know.<br />
WOMAN: Yeah, it does.<br />
MAN: But we explained to them that that was the way we once ran the whole village, and that now we<br />
have an even better system, and we don’t have to do what we’re told.<br />
WOMAN: “How” they asked.<br />
MAN: “Come and see,” we said.<br />
45
WOMAN: So they did. And this is our village.<br />
MAN: …and that’s Mr. Mason.<br />
WOMAN: Oh, yes, hello!<br />
MAN: …and the Shepherds are over there.<br />
WOMAN: Umm.<br />
MAN: We explained how everybody grows what they like, and brings it here to the market. We used to<br />
swap our goods, but that became too complicated. We solved that problem with money. It’s the price of<br />
the goods that keeps the balance between supply and demand. Nobody tells anybody what they have to<br />
produce or what they have to consume. Simple, you see<br />
WOMAN: “Yes, but…” They weren’t fools, our new friends, they could see problems.<br />
MAN: “Is it possible,” they said, “for one person to pay another to do a job”<br />
WOMAN: “Yes,” we said.<br />
MAN: “Well, in that case” they said, “then the employer must tell the employee what to produce. That’s<br />
right, isn’t it” And you’ve got to admit it’s a fair point.<br />
WOMAN: “And who,” they asked, “took the decision to build the road”<br />
MAN: “And who is responsible for building this bridge to the meadow Who is going to build that<br />
watchtower we’ve been talking about”<br />
WOMAN: “And what happens when there is a wheat blight or a fowl pest, and one family has nothing to<br />
take to the market”<br />
MAN: We explained that we sorted some of these things out at the village meeting. Everybody who<br />
turns up has a right to a say. We eventually come to an agreement how much everybody will chip in to<br />
pay for things like that.<br />
WOMAN: “Ah, but supposing you don’t agree” they asked.<br />
MAN: Well, we just do. We have to.<br />
WOMAN: “You have to” they said, “In that case, it’s just like how our council of elders plan. You<br />
contribute what they decide, and they distribute it how they choose.”<br />
MAN: The truth is we both work the same way, both of us have some voluntary exchanges, and both<br />
have some planning and allocation. The only difference is we do things in different proportions.<br />
WOMAN: What we have seen is an imaginary illustration of the two principle economic systems. This<br />
village is an example of a market economy – a system based on voluntary exchanges with a price<br />
mechanism taking care of many allocation problems. But even the best markets can’t take care of<br />
46
everything. And we saw how hardship and public amenities were taken care of by central direction and<br />
compulsory contribution. And that will take care of the tower!<br />
MAN: The cotton-growers’ village was the opposite – a planned economy based on central direction and<br />
control; but even there planning couldn’t take care of everything. And a simple voluntary exchange<br />
system had grown up side-by-side with the planned economy.<br />
WOMAN: There you are.<br />
MAN: Oh, look at that! That’s a prize winner!<br />
WOMAN: Oh! Thank you very much!<br />
MAN: It’s the same in the modern world. The old Soviet Russia was one of the most extreme examples<br />
of the planned economy. The government set a 5-year plan and every industry had quotas and targets.<br />
The farms were collective farms- producing for the state to a plan laid down by the state. And everybody<br />
had a job allocated to them. But even in Soviet Russia, people were allowed to produce their own food<br />
when they met their state quota, and there were free markets where they could sell it.<br />
WOMAN: Equally, most people would point to the United States as a prime example of the free market.<br />
But the U.S. takes billions of dollars in compulsory taxes from the citizens to provide them with centrally<br />
planned and controlled services: roads, police, schools, health, public housing. Curiously, a lot of these<br />
are also provided by the market: commercial security guards, turnpike roads, private schools, private<br />
hospitals, private homes. They exist side-by-side.<br />
MAN: The truth is: that although the market economy and the planned economy are two opposite<br />
solutions to the problem of allocating scarce goods and services, there is nowhere in the world where you<br />
will find either in it’s full state. Every economy is a mixed economy. What makes systems so different is<br />
the balance each one strikes between central control and market forces.<br />
For a list of additional resources to use with this video go to<br />
www.izzit.<strong>org</strong> and click on The Foundations of Wealth video.<br />
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