In economics, the idea of eating the seed corn is how you describe the desperate act of forestalling starvation. It is a last resort. It is terminal. People avoid it with considerable passion. It denies the very existence of a future.
Would you be concerned about a society or people who do it voluntarily?
A seed represents future wealth. In some ways it is the future. While farming is just a single part of our society and its economy, there is a parallel to how society will play out financially and also to how individual financial plans will work.
In all cases you cannot today consume the resources you need for future prosperity.
Wealth of a society or an individual comes from the harvesting of their inputs and effort. In this sense, wealth is not accumulated riches, but the resources to live and develop as one wishes. That includes a portion to move to the future to support future wealth.
We should understand financial seeds. In a financial model and in a business, there are several varieties. These include:
- money capital,
- organizational skills,
- training, and
Other than money, and then only briefly and in limited quantities, none of these can be acquired on credit. If you want to build a future, you must cultivate the seeds and carry them forward to the future.
Effort and caring and empathy is not enough to overcome missing inputs. No matter how carefully and diligently a farmer tends his fields, if he has no seeds to plant, he gets no harvest.
Societies seem not to consider the nature of seeds and sometimes they make it harder to carry forward seeds from this year’s harvest. High taxes reduce money capital and the ability to repay debt. Mindless regulation and reporting cuts into productivity. Time and money devoted to these reduces time and money for training and expanding skills. As the futility of it all becomes overwhelming the drive to innovate and manage resources disappears.
People stop working or stop running businesses. Eventually they stop creating businesses. When that happens, society has effectively eaten their seeds. Future crops will be less bountiful. Governments create no value, they merely reallocate value created elsewhere. Everyone will suffer.
In a personal plan, people must recognize that the future will be similar to the past in some ways. They will prefer shelter, eating, safety, recreation and transportation. Each of these is available for a price. Having to spend money is not a problem if you can make the deposit to cover the expenditure. Having saved no seeds from this year’s crop means no resource to consume later.
Some debt works the same way as eating the seed corn. If debt does not acquire something that earns money or reduces other expenses, it limits your ability to carry forward seeds for yourself. The interest you pay will be seeds for someone else, but it will reduce your stock. Creating a debt is the same deal as agreeing to take a pay cut for the term of that debt. How many pay cuts can you afford?
People succeed with retirement and other financial plans when the plans are simple, easy to operate, and efficient. Fewest drags and disincentives.
Sometimes it is as simple as gardening.
Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
Please be in touch if I can help you. firstname.lastname@example.org 866-285-7772