Benefits of Efficiency – A Study by Artur Victoria
By Artur Victoria, 20th Mar 2011 | Follow this author
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Posted in WikinutBusinessAnalysis
Efficiency benefits the following people in the following ways:
- Investors, through greater profits;
- Workers, through higher wages and salaries;
- Consumers, through cheaper, better, and more abundant products through successful competition with cheaper labor from abroad
- The world, through teaching better methods and making available more products for all the world
A benefit for the investor
Too often, efficiency has been thought of strictly as a benefit for the investor. Obviously, if something can be done more efficiently, this should result, under the capitalistic system, in greater profits. There is no need to belabor this particular point. But, it is often forgotten that efficiency, in the long run, raises wages. This is no attempt to dodge the issue of whether or not labor agitation and strikes have not also been greatly instrumental in improving the condition of the worker. Such improvements could not be realized unless it were possible to make available greater wages for the worker through more efficient methods. It may be true that labor unrest has spurred industrialists on to greater efficiency. It is also true that as the cost of labor goes up, the tendency to develop automatic equipment becomes greater. For example, telephone operators today receive wages that seem fantastic in comparison with those paid 25 years ago. The telephone company has spent a great deal of money and time in developing more and more automatic switching equipment.
One fundamental economic concept
One fundamental economic concept that should be remembered is that the wealth of the people depends primarily on only two things: the natural resources available and the productivity of the people. Many countries are blessed with many natural resources; therefore prosperity depends mainly upon the productivity of the people. This has been high in comparison with the rest of the world, and the people of the United States do enjoy greater prosperity.
As we develop more labor-saving methods and more machinery to do our work for us, it is not necessary for us to work so hard to gain creature comforts. This point is stressed and repeated because many people seem to feel that the way to protect a job is to prevent the introduction of certain modern methods of equipment. Unfortunately, we have one industry where this has been practiced to some extent, and that is the building industry. Not only have the building trades unions often rejected modern methods, but the employers also have not been too enthusiastic in using new techniques. The result today is that a house which sells for Euros: 15.000 is no better than a house that could have been purchased for Euros: 4.000 ten years ago. This represents a greater inflation than in many other costs. Despite many new developments, the average house is still being built according to all the old traditional methods, using traditional supplies and materials, and using traditional hand labor. While it is true that through these methods the unions have managed to get very high wages for their workers, they also discourage building to such an extent that continued full employment may be possible only by restricting the number of people entering the union. This is not efficiency, nor will it in the long run do the building industry or the workers any good. It certainly does not benefit the public in general.
The benefit of efficiency to the consumer is just as obvious as that to the investor. He receives cheaper and better products through improved methods. Despite the cheaper labor available in other countries, companies still make many products more cheaply through our machine methods than they can be made with cheap labor and hand methods. In the long run, this is also of benefit to the world, since much of the world is dependent today for its standard of living upon manufacturers.
Comments
21st Mar 2011 (#)
Yes being efficient saves money, and that can only be a good thing. Many thanks
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