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Production Inflation and Free Trade

An economy should not ignore the problem of production inflation. Production inflation may occur in two ways. First, owing to the application of scientific methods, the production of certain commodities may increase in excess of the demand. Then it becomes a problem how such excess production or overproduction can be marketed or consumed. Secondly, it may also happen that all of a sudden under certain circumstances the production of commodities increases, then it becomes difficult to find a market for such production.

Now a question arises whether or not such production will increase purchasing power as well as elevate the standard of it. In general circumstances such production is not a big problem, but if no measure is taken to find a market for such overproduction, then it may take the form of an acute problem. This problem can be tackled by taking following measures.

First, In case of overproduction of goods, there should be no duties places on export of goods and free trade should be established between two countries such that overproduction of goods could be consumed by other underproducing countries. However, These practices of free trade should not permit import of cheaply manufactured goods from other countries if they contribute to trade deficits for a developed country. For example, some countries produce abundant milk and some countries suffer malnutrition from underproduction of milk. If under these circumstances free trade is allowed among different countries, the countries having overproduction or underproduction can make respective adjustments among themselves so that the overproduction of commodities may be consumed by under-producing countries. In that case the concerned countries will be benefited.

Here free trade means that there should not be any imposition of export or import duties, and thus the prices of these commodities will benefit the consumers when they reach the market for actual consumption. It should be noted that as much as possible, every country should have a balanced economy and practice fair trade to avoid any kind of trade or budget deficits.

Secondly, there should be proper arrangement everywhere for the preservation of products which are in excess production.

Thirdly, new diversified styles of consumption should be invented. That is, consumption should be of a progressive nature and the style of consumption should be diversified. In the existing world structure geo-sentiment is an obstacle to the implementation of such kind of selective free trade. Because of global trade in terms of USD as global trade currency, free trade system in US has resulted in relentless trade deficits and has threated the surival of the USD. But there are some free trade zones in the world which are very bright examples of the success of this sort of system. Singapore is one such example and the reason for Singapore’s success is the preservation of its core manufacturing industry by Singapore. In case of US, Free trade acted as incentive to offshore manufacturing jobs but this is not true with free trade performed by Singapore.

Here is the solution – If there are no import or export duties imposed only on overproduction of CONSUMABLE commodities, then such kind of a free trade around the world could truly convert earth into a golden earth. In case of communism, there is an acute problem of chronic shortages of food products. Hence, communist countries have always imported food products from capitalist countries, in spite of all sorts of hue and cry against capitalism

In case there is overproduction of NON-PERISHABLE goods or RAW MATERIALS, these raw materials must not be allowed to be exported to other countries without imposing any export duty. Instead, raw materials must be immediately converted into manufactured goods at the place where they are available. This way poor people would be able to live an affluent life when factories are set-up in the areas where raw material is converted into manufactured goods.

The export of raw materials is a sign of an unhealthy economy. If overproduction is caused due to the scientific application of improved methods in industry and agriculture, such as good manuring and use of machines, then consumption may be adjusted through different methods as suggested above. This will also increase the purchasing power of the people. In such a stage the bountifulness of mother nature will ultimately prove to be a boon for the common people. This way Mass Capitalism envisions solving the problem of production inflation.

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