RELEVANCE OF PHYSIOCRATS IN OUR TIME
To what extent would you agree with the physiocrats that land and agriculture are the only sources of economic property? Discuss using the extent of the evolution of the global economy and how this can impact Ghana’s economic growth.
INTRODUCTION
Etymologically, physiocracy comes from the French word “physiocratie†which means “government of nature†from the Greek. Physiocrats are a group of economists in the 18th century that believed in the natural order. They were mostly from France and they held the view that government should not influence the natural economic laws. The physiocrats espoused a professional service ethic and in the interests of societal welfare, sought to establish laws of political economy and social relations. Physiocracy was pronounced to be the first school of thought since it established general principles underlying economic phenomena and a theoretical system. Physiocracy emerged as a revolt against the mercantilist; corrupt, inefficient and unjust system of taxation in France, the finance of the French government was in a bad condition, exploitation of French farmers by nobles and landlords, the unfavourable general economic condition of France and external agitation for change. This school of thought was founded by Franҫois Quesnay. Other contributors include: Pierre Samuel Dupont de Nemours, Pierre Franҫois Mercier de la Riviere and Anne Robert Jacques Turgot.
The global economy on the other hand is a system of trade and industry across the world and this has grown rapidly due to globalization. The history of the evolution of the global economy is a record of economic activities such as production, distribution and consumption of goods and services. The world has since experienced a lot ranging from the Old Stone Age (Paleolithic) through to the Great Depression of the 1930s up to today.
Over the years, the world has developed and evolved in the technological, industrial, financial and human capital sectors. The world has become a global village in recent times and development in these thematic areas aforementioned affect countries all over the world and Ghana is no exception. Since we form part of the world, any evolution and development affect our economic growth. This write-up aims at looking at the extent of agreement with the physiocrats while touching on the extent of the evolution of the world economy over the years and how this can impact Ghana’s economic growth. The areas to be looked at include, the technological sector, industrial sector, human capital education and health and financial security.
ARGUMENT OF THE PHYSIOCRATS ON AGRICULTURE
The physiocrats made a lot of arguments in favour of agriculture. They claimed that the only productive sector within the economy is the agricultural sector. They supported their argument by the use of the circular flow model. They argued that Agriculture is the source of growth of a country. For instance, the other sectors only recycle what they get from agriculture and hence create no value but agriculture do create value. The wealth of a nation hence comes from the land. From my point of view, these arguments and propositions work in their time maybe because the world had not really evolved in the other sectors yet. But in recent times, it cannot be strictly said that land or agriculture is the only source of wealth of a nation though contribute to GDP significantly especially in developing countries. Other sectors of an economy contribute to GDP. In Ghana, for instance, the leading contributor to GDP is the service sector. So from my perspective, my argument may not go in favour of the physiocrats that land is the only wealth of a nation looking at the extent of the evolution of the world in other sectors.
TECHNOLOGICAL SECTOR
The pre-technological era was characterized by much human efforts in carrying out activities, but consequent discovery and evolution of technology have made humans effortless in carrying out those activities. The creation of machines took the place of part of or all of the human physical effort though they still needed human control. Examples of these machines include computers, tractors, mills, trains, cars etc. The final stage of technological evolution brought about automation. The automated machines eliminated human control with an automatic algorithm. Examples of such machines include digital watches, automatic telephone switches, computer programs etc. Since then, there has been a lot of improvements. In recent years, we cannot underestimate the effect of technology on the world economy as it has contributed immensely. Technological developments have significantly enhanced operations and lowered the cost of doing business; with the press of a few buttons, a whole manufacturing factory’s machines can be operated by robots. Advancements in the computer industry, coupled with advancements in telecommunications, has increased job opportunities and strengthened economic growth all over the world. The physical communication barriers have also been eradicated due to the emergence of technology. In Ghana, the improvement in technology has helped to increase our productivity. New technologies have also helped the nation to add value to the products brought about from the land and this contributes more to the GDP.
INDUSTRIAL SECTOR
The industrial sector is another evolutional area that has boosted the wealth of the world economy as well as Ghana. The industrial revolution started in England in the 18th century where the economy became dominated by industrial activities and machine manufacturing. The industrial revolution was in three areas viz; the technological, socioeconomic, and cultural areas. As time went by, it spread across the globe and it has become one of the main determinants of the GDPs of many nations. The industrial sector adds value to the primary goods that are produced and this increases the revenue of that particular good. In Ghana, there were agendas by various governments in the past to build a lot of factories to process the primary goods of the nation. Dr. Kwame Nkrumah after gaining independence launched an industrialization drive that increased the manufacturing’s share of GDP from 10 percent in 1960 to 14 percent in 1970. Some of the factories include the Volta Aluminum Company (VALCO), cocoa processing plants, smelter, sawmills, timber manufacturing operations, etc. Most of these factories were neglected by his successors. However, Ghana can boast of some manufacturing industries which contribute about 25.3% to our GDP annually. In recent years, the government is embarking on a “one district, one factory†policy and I think this will go a long way to help the industrial development of Ghana. With the world emerging as a global village, Ghana depends on the manufactured goods of other countries to produce its goods, and also our produce from our industrial development is exported. This contributes to the GDP of the nation.
HUMAN CAPITAL EDUCATION AND HEALTH
Another area worth noting is human capital education and health. All the machines manufactured will be useless without human capital. The technical know-how enables the manning of the machines making human capital education imperative. The human capital must also be in good health to contribute to the development of a nation. Hence the education and health of human capital have become vital to most nations across the world. The World Bank for instance has an index for human capital which measures the countries that are best in mobilizing the economic and professional potentials of their citizens. The index looks at the amount of human capital that a child born today can expect to attain by age 18 given the risks of poor health and poor education that prevail in the country in which he/she lives. Countries with higher human capital index (HDI) have higher GDP and higher per capita income because productivity is high and the illiteracy rate is low in countries with high HDI. However, the low human index is associated with developing countries that have inadequate facilities for the education and health of their human capital. In Ghana, the introduction of progressive free education and national health insurance scheme will go a long way to improve the education and health of the human capital. The global situation has helped Ghana as we import technicians from outside to man our various machines.
FINANCIAL SECURITY
The global financial system has become a worldwide framework that smooths investment and trade financing. The evolution brought about the establishment of central banks, multilateral treaties and inter-governmental organizations to improve transparency, regulations and efficiency of international markets. The world experienced substantial changes in the late 19th century which created a favourable atmosphere to increase and develop international financial centres. Main among such changes were outstanding growth in capital flows and the resulting rapid financial centre integration, as well as faster communication. This also led to the creation of reserves by central banks in case of crises and also commercial banks that engage in financial transactions to add to the wealth of a nation. The impact on Ghana is very huge as Ghana has signed up to several international financial organizations and seek help from them in times of financial and economic crises. Some of the organizations include the World Bank, International Monetary Fund (IMF) etc.
CONCLUSION
In conclusion, the physiocrats’ proposals about agriculture been the only source of wealth for a nation may be accurate but not in recent times where there is an evolution in other areas that contribute hugely to the wealth of a nation. Their assertion may therefore hold during their era but not in recent times.
Bibliography
history.com editors. (n.d.). Industrial revolution. Retrieved from History: https://www.google.com/www.history.com/amp/topics/industrial-revolution/industrial-revolution
Lamey, D. (2018, January 05). Retrieved from DiscoverTec: discovertec.com/blog/evolution-of-techology
Robert, A. C. (2007). The Industrial Revolution: A Very Short Introduction. Oxford: Oxford University Press.
Lanrdreth H.& Colander D. (2004): History of Economic Thought (4th edition), Houghton Mifrrssfflin Company, Boston.
Vaggi G.& Groenewegen P. (2003): A Concise History of Economic Thought. Palgrave Macmillan Ltd, New York.
Rutherford, M. 1994: Institutions in Economics: The Old and the New Institutionalism. Cambridge, UK: Cambridge University Press
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