Community Economics and the Quality of Managers
Fundamental reports relevant to today's problems and to a better future
Purpose of any Enterprise
The purpose of any enterprise is to satisfy the community's needs by providing high quality goods and services at reasonable prices.
The community attempts to ensure that its needs are satisfied by persuading those who can satisfy its needs to do so. It does so by providing reward.
Those who can satisfy its needs are motivated by the community towards doing so by the reward, that is by the resulting profit. We refer to this process as 'profit motivation'.
The way in which profit motivation is intended to function is straightforward, as follows:
Someone sees a need for a certain product or service, sees that there is a demand for it, and that a profit can be made by providing it. He then provides the product or service and as he is the sole provider he makes a good profit as a result.
Then other people see that a good profit can be made from providing the same goods or services. They do so and this process continues until the supply of these goods or services exceeds the demand at the prices being charged.
Unhindered competition between suppliers then results in prices being reduced which in turn results in demand increasing at the new lower price.
Lower prices mean lower profit margins but the increase in demand can maintain and even improve profits by increasing the sales volume.
At the same time enterprises which may be badly managed or which offer inferior products, would become uncompetitive and cease to trade in this product or service.
In this way the community attempts to ensure that its needs are satisfied at reasonable prices, that it gets good value for money.
Different kinds of enterprises are thus formed for satisfying the needs of the community by providing high quality goods and services at reasonable prices.
What matters is the value of the service to the community. The measure of success is not the 'profit' or financial gain taken by owners, no matter whether private or state, but is the 'gain to the community'. The real profit or gain any enterprise achieves is the gain which the community obtains as a result of the enterprise's operations. Thus the social costs, that is the costs to the community of any operation, have to be taken into account.
We have enterprises being formed which are generally managed by directors who are appointed by the owners. It is the directors who generally take the key decisions on behalf of the owners. At times owners may appoint themselves as directors.
Enterprises are not only formed by people who care for other people and who are motivated by the intensity of the need, but also by those who care only for personal gain in wealth and power over others and who are motivated by this.
Problems arise when owners, directors or managers are either unaware of, or ignore, their purpose which is to satisfy the needs of the community with profit resulting from giving good value for money.
To them profit then becomes an overriding and sole objective and they concentrate on maximising profits regardless of the cost to others, regardless of the cost and consequences to the community.
Profits can be increased by reducing labour costs, for example. Those wishing to increase profits regardless of the cost to others, will thus aim to reduce the standard of living of the working population, will aim to increase the needs of the working population so that people will work for less.
The material quoted here was first published in Manfred Davidmann's report Community Economics: Principles. This report includes guidelines as well as controls required to prevent misuse and to protect people.
Manfred Davidmann is an internationally well-known and respected scientist and author of a number of books and reports which have had and are having considerable impact. His work usually breaks new ground and opens up new understanding and is written in meaningful and easily understood language. Outstanding is that his work is generally accepted as factual, objective and unbiased.
More than 5 million copies of his reports have been downloaded from the Solhaam website so far (April 2011).
The Site Overview page has links to all individual Subject Index Pages which between them list the works by Manfred Davidmann which are available on the Internet, with short descriptions and links for downloading.
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