Creativity always leads to activities that lead to increasing returns. The terms “increasing returns” and “decreasing returns” are used in the world of industry and business. It is very helpful to understand these terms as they throw a lot of light on the causes of poverty and riches. Rich and prosperous countries specialize in “increasing returns” activities whilst poor countries, and poor people specialize in “decreasing returns” activities.
Can you imagine what a country we will have if our efforts are put into increasing returns activities?
What Are Decreasing Returns?
An activity which has “decreasing returns” is often an activity like farming, mining or fishing.
A lack of creativity gives rise to decreasing returns activities that consist of activities from which the profit gets less and less as the years go by.
Usually, decreasing returns are caused by the nature of the work itself. For instance, farming, which is a typical decreasing returns activity, can only yield less and less as the years go by because the land gets worn out and no more as fruitful as it used to be. Also, there is only a certain amount of investment you can make into a piece of land. Pouring more investments to what you have already put in, will not cause the land to give any more yield.
If, for instance, you have ten plots of land and you have two tractors that are working the land, buying a hundred more tractors will not make the land yield any more produce. In fact, investing like that will make you lose even more money on your already diminishing returns farm.
The same thing goes for an activity like mining where the minerals that are being mined get finished as you continue to mine. Putting more and more investments into the same mine will not make the mine more profitable. Therefore, generally speaking, the owners of the farms and the mines can only expect diminishing profits, less money and less prosperity as the years go by.
What Are Increasing Returns?
So what are “increasing returns” activities? An activity which has “increasing returns” is often something like running a factory or some kind of industry. On the other hand, “increasing returns” activities are borne out of creativity and consist of things like manufacturing, running factories, etc., that continue to give higher and higher profits every year (if they are run efficiently). When you spend a great deal of money to set up a factory, you will not require such monies in the coming years when the factory is running. This is because the same investment that was made to set up the factory will not need to be made again every year.
For example, if two million dollars was used to set up the factory, the investors may have paid back their bills by the fifth year. This means that from the sixth year onwards they will make more and more profit because they will not have those initial expenses any more. They will continue to make ever-increasing profits from their industry because of this reality.
So whilst the farmer and the miner are experiencing reduced or “diminishing returns” from their farms, the operators of the factories and industries will be experiencing increasing and higher profits from their activities.
Leadership and Creativity
Creativity is a form of godliness. Creativity depicts the traits of God in us. This is because God is first and foremost a creator. Some leaders of this world have used this principle of creativity and it has caused rich countries to get richer. The leaders who have not used this principle of creativity have caused their poor countries to get even poorer.
Rich and creative countries actually specialize in wealth creating activities (what the economists call “increasing returns” activities) and poor countries actually specialize in noncreative poverty-causing activities (what the economists call 'decreasing returns' activities).
Rich countries have all become rich in exactly the same way, through policies steering them away from diminishing returns activities and into increasing returns activities like manufacturing.
Rich countries have become superior and dominated poorer countries through creativity.
Those who sell iPods and iPads have risen up to dominate those who harvest oranges and groundnuts and tomatoes for a living. Like God, they lead, they rule and they dominate the world because creativity makes you rise and operate in higher and superior dimensions.
When you hear leaders of third world countries declaring their principal economic goals to be agriculture, you realise that they are actually making their countries specialize in poverty.
We have a task to pray for our leaders so that they will be directed into increasing returns activities so that we can have a greater yield for our efforts. “Increasing returns” activities fights poverty and helps with innovation and creativity. May God help us to progress on “increasing returns” activities!
By Dag Heward-Mills