Investment and Societal Productive Capacity

Investment and Societal Productive Capacity
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Investment and Societal Productive Capacity
Authored by Thorstein Veblen in 1904, The Theory of Business Enterprise stands out
among publications discussing the capitalistic effects of mass investment in production on the
society. Signified by the rise of the industrial era, Veblen explained that the emergence of
machined industries through investment competitively led to the decline of preexisting small
scale production by disjointed firms. By investing in industrialization, small firms lost the
productive capacity which shifted to larger industries. Listing essential business processes as
production, purchase, and sale, the author indicated that the last two highly depended on the first
(Veblen, 1965). This is because every good or service that is purchased or sold must first be
produced. If someone owned all the production processes, they would have much say over the
way products are purchased and sold. This can only be achieved through investment; hence,
Veblen’s claim that investment gives owners control over the productive capacity of a society.
By investing substantial capital, investors obtain the control of agents, methods, space, time, and
objects of production; all of which constitute societal productive capacity.
Understanding fixed income investment, variable income investment, and investing
activities can better elucidate the link between investment and societal productive capacity. The
first defines the commitment of money in ventures like fixed deposits and bonds. The best
examples of variable income investment are business and property ownership. All investing
activities are financial expenditures carried out with the motive of gaining future income
niewski, 2016). To this effect, all investors target different sectors with a unified expectation
for the future. Those investing in the banking industry will earn the interests produced by the
banks. Similarly, business owners will earn profits while those training professionals will remain
in charge of the services offered by the trained persons.
The elements of the production process include objects, agents, methods, space, and time
of production. The objects are the materials in the production system. They include finished
products, semi-finished products, and raw materials. Agents of production are the elements that
act on the materials. They encompass human employees and the assistive equipment used on
materials. Methods of production are the means, procedures, and work instructions by which
production takes place. Space and time describe the location and timing of production. Both
fixed income investment and variable income investment target one or more of the elements of
production (Clark & Monk, 2017). For example, spending on the education of a doctor and an
engineer signifies investment on an agent of production. So does the purchase of land to build a
water processing plant signify investment on a production location. Basically, investors get to
own all production processes.
The consequences of control over societal productive capacity by investors are realized in
the two business processes of purchase and sale. In a free investment economy, the capitalistic
elements of profit motive, competition, and minimal government intervention guide business
activities. Such trends lead to monopoly as only a few people may afford the capital to institute
industries and other elements of production. It is at the discretion of such investors to define the
terms of engagement in purchases and sales of the objects of production (Andrews, 2017). They
may set very low wages for employees because they are sure that no other jobs are available.
They may also produce goods of inferior quality, lower payments for raw materials, increase
prices of products, and engage in other practices of their choices because they are in control.
In conclusion, Veblen’s claim that investment gives owners control over the productive
capacity of a society is true. Investment defines the act of partaking in business for future gains.
On the other hand, the production process manufactures goods and avails services for utility. The
elements of production include objects, agents, methods, space, and time. As someone invests,
they acquire ownership or control of one or more of these elements. In the end, investors own
and control the productive capacity of the society. This comes with capitalistic consequences
characterized by competition, profit drive, consumer exploitation, poor remuneration, and
monopolistic tendencies. These confirm the fact that investment gives owners control over the
productive capacity of a society.
Andrews, M. (2017). The vision of a real free market society: Re-imagining American freedom.
New York: Taylor & Francis Group.
Clark, G. L., & Monk, A. H. B. (2017). Institutional investors in global markets. Oxford: Oxford
University Press.
Veblen, T. (1965). The theory of business enterprise. New York: A.M. Kelley, Bookseller.
niewski, J. W. (2016). Microeconometrics in business management. Hoboken: John Wiley &

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