How could high productivity be a problem for the economy; isnt it absurd?

Question

Some experts on the tv or papers talks about the high efficiency and productivity like a problem. They say that there are big amounts of surplus production in the world. And so the capital always needs and has to find new markets to survive; goes(comes) to different places, especially developing markets and rather poor countries.. They claim that this is a sort of exploitation!

But how being able to buy something (due to the competition optimistically ) in a cheap and easy way could be considered so! This could also be taken as an improvement of prosperity.

What do you think?

Answer 1

If productivity goes up without the increased demand for products and services, the economic system will incur a surplus. This is how this can happen. With higher productivity, a production firm can produce a certain product with lower costs. Therefore, the supply of that good goes up whether it's a product or a service. However, this shift does not necessarily occur simultaneously with shifts in demand. As a result, a product is produced at a higher quantity than it's demanded. This is a surplus. With globalization of business and market, firms that produce surplus goods can export these goods to less developed countries with lower prices. This may seem like a good result for consumers in those countries. However, the danger of this action is that the firms in those countries cannot compete with such low-price products and go out of business. Unfortunately, this happens too quickly for producers in a less developed country to increase productivity and compete. Instead of forcing those firms to grow stronger, this harsh competition forces them out of business. Foreign firms in more developed countries can take the production in hand, and the less developed country becomes very dependent on their product. This is a sort of exploitation that many producers in highly developed countries are guilty of.

Even if there is no exportation of goods to less developed countries for legal reasons, the surplus created will not be consumed, and this results in waste of resources.

I hope my answer have made this issue a bit clearer for you.

Answer 2

If they supply of a product outweighs the demand, then prices will drop.  While this may be good for consumers, as prices are lowered so are profits.  Lower profits will mean cutbacks and usually jobs are the first to go.  As more and more people lose their jobs they can no longer afford to buy as many products leading to a poor economy.