Back to 5.1.1
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It is not only as shoppers, or ‘consumers’, that most of us have experience of the private sector.
We might also have experience of being employed by a private company, or of running one ourselves. In this case we are involved, not in consumption, but in supply of products to the market. If we have been involved in this, what our company did would fit under one of three headings:
- Supply of primary products, those produced directly from the land – raw materials (like coal) or farm produce (like wheat or milk)
- Supply of manufactured or processed goods, made by using primary products
- Supply of services, in which someone does something for someone else, like cleaning their house or transporting them, rather than providing a material object.
Or we might have experience as a trader – perhaps as a street trader or stock market trader. In this case, we are selling, as well as first buying what we then sell. Indeed virtually all companies in the private sector are involved in trade – even one whose main activity is to farm or to manufacture products (cookers, for example) – because it has to buy the tools and materials it needs to do its work and then sell the products.
Possibly we have experience of investment, which basically means the use of financial resources we don’t spend on immediate ‘consumption’ to fund the setting up or growth of a business that supplies products. Such resources that are not used on consumption are known as ‘capital’.
Anyone who has a savings account or a private pension scheme is involved in investment. This is because the financial institution with which you have your account or policy uses your money to invest in other companies. So you are an investor, even if you make no decisions about what your money is used for – and have no idea what that is. Your money might be being used to finance pretty much anything from organic broccoli farming to high-tar cigarette manufacture.
These last few paragraphs have referred to the main activities that take place in the private sector. Putting them in order, according to where the activity fits in the whole picture, we can list them as:
1. Investment
2. Supply of (i) primary products or (ii) manufactured goods or (iii) services
3. Trade: buying and selling
4. Consumption: buying in retail markets
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As I’ve already implied, there isn’t a sharp separation between all of these. For example, consumption is not separate from trade, precisely because it is buying. Banks are involved in investment, but the main activity of retail banks is to provide services to consumers. Nevertheless those four kinds of activity are distinguishable. The investor can be separate from the supplier, who is in turn separate from the ‘middle man’ or woman who trades the products as these are on their way to customers in retail markets.
In a moment you’ll be asked to reflect on your involvement in these four activities. But it will be helpful first to explain further the distinction made in point 2 between ‘primary products’, ‘manufactured goods’ and ‘services’.
Everything that is sold in markets in the private sector comes under one of these headings:
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- ‘Primary products’ are physical things which are produced directly by working the land, for example by mining or farming or fishing. These are supplied to markets in the immediate state in which they are mined or harvested. They are not processed first. So eggs and broccoli are primary products, but broccoli quiche, which is partly made out of eggs and broccoli, is not. In economics, ‘primary products’ are also known as ‘commodities’. Globally some of the main commodities are: iron ore, crude oil, coal, salt, sugar, coffee beans, aluminium, copper, rice and wheat.
- ‘Manufactured or processed goods’ are physical things that are made by using ‘primary products’ as raw materials. Examples are: instant coffee, cornflakes, pens, cars, chairs, computers. The list could be endless.
- ‘Services’ are tasks that are done by a company for its customers, such as: transporting people from A to B, cleaning offices, providing home insurance cover, supplying a telephone connection, childcare.
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In fact there are some products that don’t fall neatly into just one category. For example, building a house extension is both manufacture of a physical good and provision of a service. So is supplying a mobile phone contract that includes a handset. Nevertheless, being aware of that distinction of three kinds of products supplied to markets is a basic part of the background needed for understanding private business.
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EXERCISE
List on a piece of paper your own experiences of each of those four main activities of private business. If you have worked in any private sector company, you will have some experience of production or supply of services, and perhaps of trade.
1. Investment
2. Supply of (i) primary products or (ii) manufactured goods or (iii) services
3. Trade
4. Consumption
If you have little experience so far of investment or employment, what about your family and close friends?
To what extent would you (or they) describe your experience of these aspects of business activity as positive or negative? For example:
- If you invested money, did you get a good return or lose money? Do you know if your capital was used to fund worthwhile things?
- If you were employed in, say, beef farming or making furniture, were the products high-quality or the cheapest possible? If you worked in providing a service, did your company do a thorough and competent job, or just the minimum it could get away before leaving a mess behind?
- If you were involved in trade, do you think that the trade was fair to all parties, or were some people ripped off?
- As a consumer, do you think retail salespeople (whether in a shop or on the phone) see you as a mere target for sales, or are they committed to supplying you will good quality products or services?
Having noted down your responses to these questions, keep the note to hand, so that you can have your own experience in mind and reflect on it as we go through the unit.
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THERE IS NO RESPONSE TO THIS EXERCISE.
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End of 5.1.2
Go to 5.1.3 Historical context: revision of Unit 2 historical outline
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