The most significant factor that contributes to the erosion of our economy is ignorance—ignorance of the simple facts we’ve talked about in this series.

Does everyone who works hard earn their pay? Not really, unless their work contributes in some way to the creation of more assets and more money, or at least produces something of value for the person or company that pays him.

Whoa! Does that imply that the person who fixes your car or mows your lawn or gives you a massage doesn’t earn his or her keep? Of course not! They, of course, earn their money. But the money to pay them is available only because those who were involved in actually making the money—adding the value or creating the assets—made enough to pay someone else to perform the service and earn theirs.

That surplus is called “profit.” And it is those profits, made and accumulated by the manufacturers and other creators of the valuable things we share, that provide the money to pay for those services. Whether we work for a manufacturing company and actually perform the work that adds value, or we perform a service that makes that company operate more efficiently, or we are just the person that that mows the lawn of someone else higher up in the food chain, all of us who don’t directly add such value to resources are benefiting from the efforts of those who do.

When a company is profitable—meaning it produces goods or services that are valuable enough that there is a market for them and spends less than it takes in to do so—it creates a surplus of income over expense. As most companies do that desire to grow, they can reinvest that surplus in additional assets. For example, it can buy more machines or other tools with which it can turn out yet more goods or services. It takes more people to run those new machines, creates more jobs for more people who will produce yet more of the company’s output. This is called the “cycle of growth” and is what enables a company—and our economy—to grow.

Suppose either the employees who run those machines cut back on their production, or the supervisors who manage those employees make poor decisions that result in a reduction in the productivity of their departments?

The result would be an increase in expense and a reduction in output. Of course, this means less growth, no growth, or even a decline in profitability. And the result is the loss of job opportunities and, if not corrected, the failure of the company and the loss of jobs for its employees.

Unfortunately, all too often, the problem is both. It’s management’s failure to respect and properly motivate its employees that results in less than optimal productivity. And the result is a disaster.

The moral of this story is, of course, the recognition that the source of money is the output and not the input. Only when we do something of value for someone else are we actually making money or earning money from those who do make it. If we are not productive, we are not only not making money, we’re costing someone money that no one can show anything for. In the case of the hole we dug, we did everything we were asked by our boss to do, so we really earned our money. He, as your manager, did not.

This is the root of the perpetual argument between labor and management and a story for another day.