Suppose there is a society of ten thousand people. If this society is closed off from the outside world, everything necessary for life must be produced and procured by the ten thousand people, shared among the ten thousand people, and consumed by the ten thousand people. In other words, production, distribution, and consumption are one and the same. This is the concept of three-sided equivalence. However, as division of labor evolves and becomes more organized, the way people engage in production, distribution, and consumption changes. Suppose this society consists of two thousand families, each with five members. And suppose it consists of forty companies and one government. Each family provides one worker from among its members for productive activities. Thus, two thousand people share the burden of production activities. The goods produced are sold in the market, and the revenue obtained is shared. The money earned from working is used to buy the goods they produced, and with those goods, they support their families. Those who work for the government live on the taxes imposed and collected.
What I want to say is that fundamentally, producers are also earners and consumers. If we consider these as separate entities, we lose sight of the context of production, distribution, and consumption, as well as the relationship between people, goods (production goods), and “money.” Without understanding the context, structure, and relationships, balance cannot be achieved. However, the population directly involved in production and distribution differs from the population involved in consumption. This makes fair distribution difficult.
Out of the ten thousand people, two thousand are engaged in production activities, of which four hundred are in administration, four hundred in finance, and twelve hundred in companies. The goods produced by the twelve hundred people are sold in the market, and the income from this supports the lives of the ten thousand people. In other words, twelve hundred people are involved in production, but the income is distributed among two thousand people, and this income supports the living expenses of ten thousand people. The problem is that military expenses are not directly linked to productive activities. For example, if four hundred out of the two thousand people become soldiers, only eight hundred can engage in direct production. Military expenses do not contribute to income through market transactions. Therefore, they become taxes or debts.
It is a matter of mechanism. The issue is how to achieve appropriate distribution, and if we are distracted by immediate financial phenomena, we lose sight of the reality. Money is a means of distribution.
The economy should not be viewed solely from the perspective of production efficiency. It should also be considered from the perspectives of distribution efficiency and consumption efficiency. For example, it might be easier to understand if you think of building your own house with your own earnings. Building a house, earning money by building a house, and living in a house are not unrelated. The relationship is whether the house built (production) is worth the reward for your work (distribution), and whether you can buy that house with the reward (consumption expenditure). Production, distribution, and consumption. Labor, income, and living. These are interrelated, and the economic issue is whether these three elements can be balanced. Working to produce goods, selling the produced goods to earn money, and obtaining goods with the earned money. Working to produce televisions, selling the produced televisions to earn money, and buying a car with the earned money. Working to produce cars, selling the produced cars to earn money, and buying a television with the earned money.
Selling and buying. Income and expenditure. Deposits and withdrawals. Revenue and expenses. Lending and borrowing. Production and consumption. Selling is buying from the perspective of the trading partner. Buying is selling from the perspective of the trading partner. The economy is established with this symmetrical relationship.
Quantitative growth and expansion of the market bring about qualitative changes. Changes in the market appear as changes in consumer demands. Consumer demands vary from person to person, and qualitative changes mean diversification. As a result, producers are required to shift their products and production systems from quantity to quality.
Is it something you want? Or is it something you need? Is the goal to provide what you want, when you want it, and as much as you want? Or is it to emphasize providing what is needed, when it is needed, and as much as is needed? At first glance, it seems like the same thing, but the fundamental philosophy is different.
Should a diabetic patient be given unlimited sweets just because they want them? It is necessary to determine what a diabetic patient needs and sometimes restrict their diet.
Releasing desires and responding to demands without limits does not necessarily benefit the other person. It is important to pursue what is necessary.
Mass production is based on the idea that as long as everyone’s stomach is full, it is sufficient. However, many people are not satisfied with just having a full stomach and begin to seek taste, that is, quality. In response to consumer demands, production systems need to shift to small-lot production of various products. This requires high income and high prices. It is a shift in values to using good things for a long time, even if they are expensive. This can only be realized with a system that can maintain high income. This signifies the maturity of the economy.
Modern Japan is going against the shift from quantity to quality. Despite the market being saturated, it is trying to increase production efficiency by seeking low prices. This is like prying open the mouth of a person who is already full and forcing food into it. Meaningless production efficiency, mechanization, and rationalization do not lead to high profits or high income. A price war leads to a decline in profits, which in turn deteriorates quality and suppresses labor costs. Instead of valuing low prices, we should pursue fair prices.
As a result, modern society is excessive in everything. Excess means creating waste. Despite the excess, distribution is not functioning. As a result, while there is an abundance of food, the number of people suffering from hunger is increasing. While there are many unsold houses, the number of homeless people is increasing.
The idea of viewing costs as a sin is wrong. Costs, when examined closely, are labor costs and a means of distribution. Fair costs should be based on fair distribution. It is competitiveness on that basis.
Prices are correlated with income and profits. If regulations are relaxed indiscriminately, the balance between prices, income, and profits cannot be maintained. Deregulation is not a panacea.
“Money” is a means of distribution. However, what should be particularly noted about the function of “money” is its long-term and short-term functions. In particular, the long-term function involves the time value and generates interest. The important aspect of the long-term function of “money” is that it forms liabilities and assets, with the fundamental basis being claims and debts. In terms of profit and loss, it is the basis for depreciation, but it behaves differently from actual cash flow. This point needs attention. Liabilities carry the obligation of repayment, but the repayment of liabilities is not recorded in profit and loss or in the balance sheet. However, if the repayment of liabilities is delayed, the company will go bankrupt. A company does not go bankrupt immediately just because it is in the red, but if the repayment of loans is delayed, it will lead to immediate bankruptcy.
“Money” unifies value. Unifying value means that economic value can be quantified and calculations can be performed. For example, it allows for the combination of time, people, and labor. It also makes it possible to add the value of apples, boxes, and juice.
This has made it possible to calculate all economic values.
Quantification has made it possible to securitize claims and debts. A security is a right, and it has become possible to divide, lend, borrow, buy, and sell these rights.
The economic value of goods, in isolation, is difficult to divide, lend, borrow, or sell. For example, land. By converting the value of land into money and securitizing it, liquidity can be provided or enhanced.