#IndustrialAgeDetox: Wiping away the residue of ‘some defunct economist’*
In The Wealth of Nations, published in 1776, philosopher Adam Smith identified three physical factors of economic production; land, labor, and capital. These three factors have formed the foundation of economic theory for past three centuries. So much so that the conflict between labor and capital is a core differentiating factor between capitalism and socialism. Capitalists believe that free markets will best take care of labor while socialists believe that governments must step in and ensure that labor is properly cared for.
The problem today is labor and people are no longer synonymous terms. Smith’s observations described a time where the ruling class of nobles and merchants were represented as capital and the laboring class of peasants and slaves were represented as labor. With the birth of the United States in the same year as Smith’s publication a brand new social experiment was launched. In this ‘great American experiment’ the ruling and working class would slowly and painfully over three centuries become increasingly synonymous while the ingenuity of those people to innovate would subsequently change the relationship between labor and people.
The current limited economic paradigm of people existing as labor in competition with automation is setting the global economy up for catastrophe. Labor today is a simple function of capital that may or may not be performed by people. People are being liberated by automation, not displaced. The proper identification of people as Smith’s factor of production allows for the resolution of this centuries-long conflict.
People as a factor of production play many roles in the economy–often simultaneously. People are parents, caretakers, students professionals, and artists. People own companies and people are shareholders. Sometimes, people may even provide their physical labor where automation is not yet proficient.
By differentiating between labor and people, capital can be invested differently in each. The industrial economy dependent on labor and the knowledge economy dependent on people are diverging. The knowledge economy of people, by people, and for people is based on social trust, accumulated social capital, and human creativity; it is a sustainable ecosystem of exchanges independent from industrial production that requires modern metrics that raises people to their full potential.
The Medium publication of #IndustrialAgeDetox continues wiping away the residue of ‘some defunct economist’* by examining dated economic beliefs that must be upgraded to meet the demands of contemporary society.
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* “The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.” John Maynard Keynes, The General Theory of Employment, Interest and Money (1936)