One of the aspects of the circle of life is the process by which we sow seeds, which eventually grow into plants and trees that bear fruit and vegetables, which we eventually reap once they are ripe, and eventually consume.
Unless we sow and we look after the trees and the plants to give us the produce we expect, we cannot really consume.
However, because there is a lengthy time period between the time of sowing and the time of eventual consumption, we do not always recognise this basic requirement.
The time of sowing and reaping is time of hard work as any farmer would tell you.
The time of consumption is the happy time – in fact, such is the level of happiness that at times, we forget the need to sow again in order to have enough food for consumption in the future.
We just assume that the fruit and vegetables keep coming with not much effort on our part. Until one day, we go and look for food and we find that there is none left.
The same principle applies to individual business and national economies. Both companies and national economies go through periods of sowing, reaping and consumption. However the sowing needs to continue for a company or a national economy to grow.
Let us first focus on the individual business. The sowing time is the period spent setting up the company, requiring investment of time by its founders and an outlay of cash to acquire the physical resources necessary to operate the company. Time is needed to organise the company and set the direction, recruit the first employees and win the first customers.
The sowing time is the period spent setting up the company
When that effort starts to pay off, the company starts to reap what it has sown. However a company cannot stop there.
It needs to seek new customers, penetrate new market segments and diversify its product or service portfolio. Unless it does that it would not be sustainable in the long run.
The time to consume is the period when the investors are paid back a return on their investment and possibly even be paid more than the amount invested.
However, unless new investment is put in, the company would die a slow but sure death. In fact this is the fear in several family companies. As the ownership moves from one generation to another, there is not always the required effort being made to regenerate the business like a plant or tree is regenerated.
The same analogy can be drawn about a national economy. A country needs to put in a great deal of effort in terms of investment as well as time, to develop the infrastructure, equip its human resources with the necessary skills, and promote business activities.
Eventually the effort starts to generate a return and the country starts to reap the benefits of that effort.
Employment, national income, remuneration of employees all start to increase at a faster pace. Eventually the economy moves into consuming mode, which is all very good because it makes everyone happy. However, unless the country continues sowing through continued investment in new activities, the economy will run out of steam.
This is why it is so critical that any government should not just generate economic growth but also enhance the growth potential of the economy.
Students of economics learn this principle when they study the theory of the accelerator. Students learn that whenever there is an increase in demand, this needs to be supported by an increase in investment, otherwise that increase in demand cannot sustain itself.
This increase in investment is when the country starts sowing again to regenerate itself.
Just as in agriculture there is a yearly sowing of crops such that there will be produce that can be harvested and consumed, so in business as well as in the management of a national economy, there needs to be a yearly effort that needs to take place to sow the seeds of new economic activity that will generate tomorrow’s wealth and jobs, and therefore tomorrow’s consumption.